If you plan to start a Rhode Island-based corporation but are not yet very familiar with how the formation processes work, you are on the right page. You will have to take the following steps to form your dream Rhode Island Corporation.
In this guide, we will discuss the regulations and rules that will outline the entire formation process.
#1. Decide on a name
Choosing a name for your corporation is never easy. This step is one of the essential aspects in the forming process as it entails plenty of considerations such as:
In thinking of a name for your corporation in Rhode Island, you have to consider putting abbreviations or words such as corporation, incorporation, company, limited, Co., Ltd., Corp., or Inc. Also, the name of your Rhode Island Corporation should not include any abbreviations or words that refer to other types of businesses like “LLC” or “Limited Liability Company.” Moreover, you will not be allowed to put words that refer to business types such as “law office” or “bank” unless the nature of your corporation fits the descriptions above.
- The name should be Explanatory.
There is a need to identify the nature of your business or the types of services you offer to avoid coming up with a misleading business name. Whether you are starting a small business or a big corporation, you may face legal cases due to deceptive advertisement slogans and names. But these cases are only filed by those clients or customers that are harmed.
Thus, never use a business or product name that is unrelated to its nature. For example, a business owner may use “green” or any other similar words only if your products or services are environmentally friendly.
- Is My Name Available?
You must check the Rhode Island Department of State’s Business Search Portal to know if your desired business name is available.
- A name that represents your business’s integrity
To get more customers or clients into buying your products and availing your services, an attractive (yet legal) business name might be crucial. This is an opportunity for you to customize or personalize your brand name. Thus, choose a business name that you can be proud of. Also, it is a plus factor to think of a word that can be a sales conversation starter to put you in a favorable position when selling your brand to potential customers.
You can find our detailed guide on registering your business name in Rhode Island here.
#2. Prepare your website
You should secure your business’s domain name to strengthen your business’ online foundation and embrace your company as a brand name. In that way, you can quickly build a website for your company.
And why do you have to create an official business website? There are plenty of businesses out there that are similarly named to yours. This possibility can lead to missed opportunities as clients who are supposed to visit your site might be misled to another similarly-named business. So, to ensure that no other company can steal your prospects, make an official site that is unique and free of plagiarized content. Yes, your business’s page should be memorable so that whenever clients click on the wrong website, they’ll immediately know that they’re led to an unofficial or fake website.
#3. Hire a registered agent
Forming a corporation in Rhode Island will require you to designate a business or a person responsible for receiving legal notices for your company. Yes, you may outsource these tasks, especially when you don’t have a whole internal department capable of processing your business’s legal papers yet. This essential contact point is termed a registered agent. As a business owner, you are responsible for noting the agent’s address and name when filing for the Incorporation Articles (discussed in the next step).
- Who is qualified for a registered agent?
Firstly, your registered agent should be a citizen in Rhode Island and should also be residing there. They have to serve during your daily business hours and should always be responsive in legal notices and mails. You can check our detailed guide on Rhode Island registered agents here. You may consider outsourced services to play the role of a registered agent, such as companies that offer accounting services.
However, if you think outsourcing this service is unnecessary in the meantime, you may hire your accountant to work with you during your regular business schedule. In that way, you would not have to deal with everything at once. As a business owner, you have to optimize your time through strategic delegation.
#4. Appoint Initial Directors and Hold First Board Meeting
Before you file the Articles of Incorporation in the next step, you will need to hold a board meeting to complete the following tasks:
- Fill out the Articles of Incorporation
- Execute an Incorporator’s Statement
- Create your organization’s bylaws
- Select your initial director/s
- Determine your corporate structure
As the incorporator, you are responsible for choosing the initial board of directors of your corporation. The incorporators must record director appointments through an official, signed document and compile it with all other corporate records. This officially signed document is the incorporator’s statement. Your initial directors will serve your business until new upcoming directors are selected through an annual shareholder election or meeting.
Your board of directors should consist of responsible, knowledgeable, highly qualified, and competent people. In the state of Rhode Island, your corporation should have at least one director or initial director, but the incorporator (you) may also serve as the director himself. Although it is highly advised to delegate your assignments to competent authorities, if you think you are qualified and able enough to own this responsibility, then it’ll be fine.
Create your organization’s bylaws
Your organization’s bylaws exhibit the procedures and rules for how your business should operate. There are several essential topics usually covered in your corporate bylaws. Here are some:
- The total number of initial directors
- How directors should be elected
- How shareholders should vote
- The officer roles that should be appointed
- How often board directors’ meetings should be held
- Processes required to resolve internal disputes
Corporate bylaws aren’t required in the state of Rhode Island; however, for the betterment of your business, these are highly recommended as it helps your organizations run smoothly. Also, bylaws are required by some financial institutions to acquire loans or open organizational bank accounts.
Either the directors or the incorporator should prepare the organizational bylaws and record them in a company document. First, a director or the incorporator should sign this company document; then, it must be compiled with other corporate records.
Gather all board members for your first meeting.
When your initial board of directors has already prepared your bylaws, the incorporator should call a first board meeting. He or she will arrange and attend the first meeting to ensure that the directors will be covering all of the following agendas:
- Reviewing and approval of corporate bylaws
- Choosing a bank
- Designate managers to take charge of daily business affairs
- Stock certificates issuance approval
- Know whether the organization should be taxed as an S corporation or a C corporation (this will be discussed in step eight).
Make sure to record the minutes of the meeting. After the meeting, you should distribute these notes to your board members for review and approval.
#5. File your Incorporation Articles.
Firstly, Articles of Incorporation is a set of files that identifies the existence of a particular company. Simply put, this refers to the collection of documents that officially registers your business or corporation with Rhode Island. You have 2 options to file the application.
Option 1. You can file online with Rhode Island Business Services Filing Platform.
Option 2. You are required to fill this form and submit it via mail. In filling out the form, you should remember that you are the incorporator and make sure you have entered accurate information before submitting it through mail.
Filing Fee: $230 (If the corporation is allowing $75 Million or less)
Division of Business Services
148 W. River Street
Providence, Rhode Island 02904-2615
Your Articles of Incorporation must include the following information:
- The corporation’s name and address, along with the statement of purpose defining the corporation’s goals and purposes
- The registered agent’s name, address, and signature
- The number of shares that the corporation can issue
- The names and addresses of the directors and the officers
- The name address of the incorporator (the person who signs the Articles of Incorporation)
Some states charge $50, while some also charge $500 for the articles of incorporation filing. The fee differs depending on how the incorporator files the articles of incorporation: either through the registrar’s website or by mail. However, in the state of Rhode Island, this process will cost you $230 only irrespective of the method you use in the filing.
Establish your corporate record
Under the law of Rhode Island, you are required to have a permanent, organized record of your critical business decisions. This official record of all your business decisions will be kept at the principal place of your establishment or should be stored safely elsewhere (in a safe locker, drawer, or cabinet). After doing this, you have to install security cameras and other equipment for safer record-keeping and ensure utmost security. If you have digital corporate records, make sure to store them with your confidential documents and lock them with a unique password.
#6.Manage your tax obligations
One of the essential requirements is your federal tax identification number or EIN. It allows you to operate a corporation in Rhode Island officially. You may obtain your EIN for free from the IRS, and it is a relatively simple and convenient process. Your tax identification number allows your organization to file business taxes, open bank accounts, hire employees, and more. Also, you have to determine whether your corporation will be taxed as an S corporation or a C corporation. Here are their differences:
- A-C corporation is subject to fewer restrictions compared to an S corporation. With C corporations, the owner’s profits are fairly taxed at a corporate level and on the personal returns of the company’s shareholders. It results in what is commonly known as double taxation.
- An S corporation can only be considered an option if the organization has less than one hundred shareholders, isn’t owned by other business entities, only issues a single class stock, and doesn’t have foreign stockholders. So, if your company has met these criteria, you may choose the S corporation’s pass-through taxation. It helps you eliminate double taxation issues.
Rhode Island corporations are always subject to a corporate excise tax. Since the difference between corporate excise tax and corporate income tax is confusing, we will further explain this. Simply put, Rhode Island-based businesses pay excise tax while companies that are not based in Rhode Island, but profit from a Rhode Island source, should pay income tax. The tax depends on the income your business generates.
Additionally, there are several state-level registration requirements Rhode Island businesses need to pay, and it depends on your kind of work. To learn more about these registration requirements, don’t hesitate to visit the official online revenue, Rhode Island’s tax filing system.
Every city or country has unique requirements for tax registration. For example, in Multnomah County, state taxes and income taxes are separated.
#7. Obtain business permits and licenses
Rhode Island doesn’t issue general licenses; however, you’ll most probably have to obtain permits and approvals for your business activities. You can either obtain Rhode Island business licenses and permits yourself, or hire a licensing service to help you:
- Federal: For federal business licenses and permits U.S. check this SBA guide.
- State: For state-level licenses, permits, and registrations, check the Department of Business Regulation website in Rhode Island.
- Local: You may ask your local county clerk about local business licenses and permits.
#8. Get business insurance
Rhode Island-based corporations need to get business insurance, worker’s compensation, and unemployment insurance to abide by Rhode Island’s laws. You might have to get general insurance and all other industry-specific insurance types as well.
Business insurance helps not only your employees but also you as a business owner. Why? It is because it helps you, as the owner, shoulder the financial costs that are associated with liability claims and property damages. If you don’t have business insurance, you may be forced to pay these unforeseen damages using your pocket money— you wouldn’t want this to happen.
Also, if you have liability insurance, it helps you shoulder the liability claims costs filed against your business. So, if a client filed a case against your company because he has tripped and injured himself inside your business establishment, you don’t have to pay for all the costs the lawsuit entails. Business liability insurance will help you cover the claimant’s costs.
Yes, business insurance is not mandatory in some states, but you have to consider the financial losses you might face when not acquiring it. In the time of natural disasters and lawsuits, business insurances will cover a large portion of your expenses, and this can indeed lessen the negative impact these unfortunate events can have on your funds. However, if business insurance is not yet a priority in the meantime, you may acquire compensation insurance for your workers first. This covers injured employees’ lost wages, theft, and many more.
#9. Open a bank account for your business.
To receive the liability insurance required to operate your business, you must separate all personal assets from your organization’s assets. Because of this requirement, it is highly suggested that you, as the business owner, should acquire a corporate bank account for all your business transactions.
Also, having a bank account mainly for your business financial transactions will allow you to track your expenses a lot easier and faster. Separating your business and personal account will enable you to quickly sort things out in case of record discrepancies. For example, suppose you purchase something that should be tallied as one of your business investments. In that case, it shouldn’t be counted as part of your expenses to identify the exact amount of your business capital.
Lastly, opening a bank account for your business will help you streamline all your organization’s tax information and financial records. For example, finding deductions will surely be easier if you do not have to check every transaction in your account statement.
Get Help Forming a Corporation
Forming a corporation, no matter what state you’re in entails time-consuming and lengthy processes. So, if you think you need professional guidance and help to run a successful corporation, many companies can assist you throughout the formation process.
If you think hiring a budget-friendly business formation service is the most practical thing to do, then services like Incfile and ZenBusiness can help you sort things out. These top-rated service providers have handled many formation processes and have satisfied many clients throughout their years of doing business. The best thing about Incfile and ZenBusiness is that they offer lesser rates compared to a business lawyer’s fee.
Although the personalization level of these businesses cannot beat what an attorney can provide, they can still be of great help. Well, the only issue you might face with these online service providers is that they cannot give any legal advice; thus, you have to acknowledge that flaw ahead of time.
A business attorney in Rhode Island
Sometimes, hiring an attorney is the safest, most efficient, and most preferred routine to take when it comes to forming a Rhode Island-based business. Why? Corporation structures can indeed be very confusing; thus, if you prefer quality and peace of mind over budget, you should certainly consider contacting a highly qualified business attorney. In addition, the feeling is different when your case is being taken care of by an expert compared to searching for an online provider on your own.
If you want to pursue this decision, there are many convenient and quality services that you can avail of that allow you to pick the most suitable expert for your needs. For example, Avvo has extensive ratings and reviews from hundreds of Rhode Island lawyers. Thus, it would be easier for you to choose a lawyer who you think can answer your honest questions.
Forming a business in Rhode Island is not and will never be easy as it entails limitless hassles, lengthy processes, and costly requirements. However, with the help of the right experts, you will perceive these procedures in a less complex manner.