First and foremost, there is no profit range or limit required to register a business in Rhodes Island or anywhere in the United States. Rhode Island does not even have a statewide basic business license. Businesses may need to register with the Secretary of State, or the Division of Taxation for sales tax or payroll taxes.
In Rhodes Island, business licenses are issued at the local level and it depends on the type of business you engage in. Several different state agencies oversee the many professional and occupational licenses in Rhode Island including the Department of Business Regulation and the Department of Health.
Why Start a Business in Rhode Island?
Rhode Island is presently at the bottom when it comes to providing an enabling business environment for small businesses.
Nevertheless, hope is not lost as the current Rhodes Island government is working tooth and nail to amend its taxation system, form new industries, fix the transport system, and improve its state regulations. However, Rhode Island is still home to many major companies including CVS Health, Textron, Lifespan, Applied Bio-Systems, and Citizens Bank.
According to reports, the largest and most profitable industry in Rhode Island is the healthcare industry. Tourism, with over 40,000 jobs and sales exceeding $4.5 billion, comes in second.
If a Rhode Islander is not working in health services or tourism, they are likely employed by a manufacturing business that makes metal products, ships/boats, electrical equipment, and various types of machinery.
When you are looking to register a business license in Rhode Island, you may also have to obtain one or more of the following permits, depending on the type of business you want to own: building, health, signage, occupational, liquor/tobacco, zoning, and alarm.
Note that researching the complex rules and regulations governing how Rhode Island registers businesses or issue licenses is time-consuming. That is the more reason why most entrepreneurs hire professionals knowledgeable in registering businesses in the state so they don’t have to spend any of their valuable time stressing over complicated regulations.
9 Practical Steps on How to Register and Start a Business in Rhodes Island
The information below describes key, initial steps and decisions regarding legally registering and starting a business in Rhodes Island. Nonetheless, two or more of these steps may occur simultaneously.
1. Have a Business Plan
The importance of a detailed business plan cannot be overemphasized in this age. Aside from being needed to secure funding, a professional business plan also supports growth; helps manage cash flow and distinguishes unserious business from the ones who are serious.
Writing a business plan gets the ideas out of the entrepreneur’s head and helps to create a roadmap for where they want the business to go. Business planning is an important element to creating a successful business.
2. Choose a Business Structure
Note to legally register your business in Rhodes Island, you have to figure out what type of business structure you want to form: an LLC, S Corp, C Corp, or Sole Proprietorship. Many entrepreneurs in Rhodes Island form an LLC because it has all the advantages of a Corporation without the disadvantages like double taxation, board of directors or corporate officers.
Nonetheless, if you’re looking to take your company public or raise substantial outside capital, you should probably form a Corporation. If you choose not to register your company as a business entity, you will be held personally responsible for the debts and liabilities of your business.
3. Name Reservation
When registering a business in Rhodes Island, it is often advisable to think of a name well in advance to ensure that your filing will be up to the standards of the filing jurisdiction. It often takes a while to consolidate all the necessary information, so it is wise to ensure that the name you have chosen for your business will not be taken by another entity.
Howbeit, the use of the Name Reservation filing will do exactly what it is meant to do; it will effectively reserve the rights to the name for a period prior to registration. In this State, a reservation costs a total of $50 and lasts for no more than 120 days.
Experts recommend you perform a Business Entity Search before committing as it will ensure that the name you’ve chosen hasn’t already been used.
4. Know Your Tax Obligations
Reports have it that navigating the Rhode Island tax code is smooth and invigorating unless you’re starting a solar energy company or something along those lines. Don’t forget to investigate incentives, credits, and kick-backs because some may apply!
Head to the State of Rhode Island Business Taxes, Division of Taxation section, and sign up to get your tax ID number. Bookmark their Online Services page as well because it’s going to come in handy.
- Acquire Business Licenses and Permits
To start a business in Rhode Island, certain licenses and permits will be needed. Depending on the activities and location of the business, licensing may be needed from federal, state and local agencies. Some common registrations include:
- Business Licenses: The state of Rhode Island doesn’t have a general business license; however, many cities require a business license in order to operate.
- Sales Tax Permit: Businesses selling products and certain services will need to register for a Sales Tax Permit with the Rhode Island Division of Taxation.
- Professional Licensing: Some services such as accountants, landscapers, auto body repair and brewpubs require licensing in Rhode Island. While this isn’t a license on the business, licensing is required in order to operate.
6. Certificate of Good Standing
In Rhode Island, the process of acquiring a Certificate of Good Standing is simple. You will be expected to search for the name of your company using the Business Entity Search, and then you can navigate to your business details page where you will be able to click on the option to purchase your entity’s certificates.
Note that this document is used to show legitimacy when requesting financing. It is also necessary if you intend to expand your entity to a neighbouring state or jurisdiction.
Certificate retrievals vary in price; those corresponding to profit-oriented organizations will cost $22 while certificates associated with non-profit entities will only cost $7. These prices will be reduced by $2 if you visit the offices and make the purchase in person.
7. Employer Identification Number
When registering a new business in Rhodes Island, it is very crucial that you apply for an Employer Identification Number to ensure that the federal government is aware of your existence when it comes to tax purposes. This number is typically issued by the IRS and can be used to open bank accounts, hire employees, and apply for credit cards and the like.
Your EIN is like your Social Security Number for your company. It’s required for Corporations and LLC’s and optional for DBA’s (if you don’t have any employees, then it’s required).
However, if you are a DBA and don’t obtain an EIN you will be forced to use your Social Security Number on many documents so it’s typically recommended you obtain the EIN to prevent identity theft.
8. Agreements
In the State of Rhode Island, just like in most states in the United States, it is not mandatory for new businesses to register with the use of a corporate bylaw, an Operating Agreement or a partnership agreement.
However, these documents remain internal to your organization; in other words, they will at no point be filed with the Department of State. As an internal document it is necessary that each signing member receives a copy, as it will delineate the rules and regulations by which your entity is to function.
Also note that any logistical or financial bylaw to be administered that has not already been stated in the original formation documents can be relayed here to ensure that there are no misunderstandings in regards to the company’s internal affairs.
You will have to click on the agreement which matches the entity type you’re planning on forming to investigate exactly what might go into one of these documents should you decide to have one drafted.
9. Annual and Ongoing Requirements
- DBA: Your Fictitious Business Name should be valid for 2 years, with option for renewal.
- LLC: Rhode Island corporations are required to file a Periodic Report with the Rhode Island Secretary of State by November 1 each year, in addition to general taxation. Information on your business’ taxes can be found here.
- Corporation: Business in Rhode Island should file a report annually by March 1 to the Division of Corporate and Consumer Services. LLCs and Corporations will pay a filing cost of $52.
Conclusion
Even with the slow economic growth in Rhode Island, the state has the potential to improve its startup environment. Currently, some of the major industries in Rhode Island are biomedicine; shipbuilding, manufacturing, and data analytics.
It still possesses a young market that is open to more exploration. Any willing entrepreneur with the mind that tap into a new and improving markets can do well in Rhodes Island.