How to Start a Business in Rhode Island
Thinking of starting a business in Rhode Island? It’s not a bad idea. The Ocean State may be small, but being located along the Northeast corridor means you’ll have easy access to new markets and a larger talent pool when looking for new hires. Starting a business is as easy as selling something, but how can you protect your business, your profits, and yourself from potential risk? We created this in-depth guide to break it down for you.
Ready to Start a Business in Rhode Island?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Rhode Island Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File the Rhode Island Annual Report
Apply for Trademarks
1. Pick a Business Structure
From hardware to caricature drawings, selling anything in Rhode Island—if you haven’t registered as a business with the state—means you’re a sole proprietor. Working with a partner? You’re operating a general partnership. Unfortunately neither of these business structures come with any liability protection. This means that if someone sues your business, they’re really suing you. That’s right. All of your personal assets are also considered the company’s, and it’s all fair game.
Creating a separate business entity is the best way to protect yourself from being liable. As a separate entity, your business will be independent from you and have its own liability. LLCs and corporations are the most common business entities, and either is a good choice if you’re looking for liability protection.
Rhode Island Limited Liability Company (LLC)
An LLC is a business entity you can run by yourself or with several members or managers. This business structure offers more than just strong liability protection. Operating an LLC also means getting to choose between several tax classification options. This flexibility combined with strong liability protection make it popular with small business owners. In order to create a Rhode Island LLC, you’ll need to file paperwork with the Department of State.
Rhode Island Corporation
Corporations also provide liability protection, but they’re not as flexible as LLCs when it comes to tax classification, management structure and record keeping. However, if a corporation can stick to the rules, that accountability is more likely to attract investors. Interested in forming a Rhode Island corporation? You’ll have to file the right paperwork with the Department of State.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a Rhode Island nonprofit?
If your company is actively working to provide benefits for a collective, public, or social cause, you might consider registering as a Rhode Island nonprofit corporation. In order to do this, you’ll need to file the Articles of Incorporation for a Non-Profit Corporation with the Rhode Island Department of State, Business Services Division.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
One of the most important steps to starting your business is naming your business, but this may not be as straightforward as you’d think. Unless you’ve filed to create an independent business entity (like an LLC or corporation) with the Department of State, your business’s name will be your first and last name. You can also register a DBA for your business if you’d like to operate with a name that better explains what your business does.
When it comes to naming your LLC or corporation, Rhode Island has a list of dos and don’ts you need to consider. The name you choose needs to:
- Be “distinguishable upon the record” in the state of Rhode Island, meaning it cannot be identical to or indistinguishable from an already-existing name.
- Include the correct identifier (i.e. “LLC” for a limited liability company, or “Corp” for a corporation).
- Avoid using any words that imply you’re offering a professional service that needs a license, like a chiropractor or dentist.
- Avoid suggesting a false business purpose, like calling your business a charity when it’s not.
- Avoid suggesting or implying that your company is a government agency or is connected in any way.
Find out if your desired name is available in Rhode Island by searching the Rhode Island Corporations Database.
Can I reserve a business name in Rhode Island?
Absolutely! If you already have a business name you’d like to use, you can reserve that name for up to 120 days. All you need to do is file an Application of Reservation of Entity Name and pay the $50 filing fee.
What is a DBA?
A DBA is any name your business uses other than its legal name.
The name you include on your LLC or corporation’s formation paperwork is the legal name of your business, but if you’re a sole proprietor, the name of your company will be your human name. Rhode Island requires all businesses to operate under their legal name unless they register a DBA with the Department of State.
If your business needs a specific business license to operate, apply for the business license first. Once that’s done, complete and file a Fictitious Business Name Statement ($50) with the Rhode Island Department of State. You can register more than one DBA for your business, but make sure to file a separate form for each name you plan on using.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
There’s no need to file any formation paperwork if you’re running a sole proprietorship or general partnership because they’re not considered separate business entities. But if you’re starting an LLC or corporation, you’ll need to file the right paperwork with the Rhode Island Department of State before you can start your business.
- To form a Rhode Island LLC, file Rhode Island Articles of Organization.
- To start a Rhode Island corporation, file Rhode Island Articles of Incorporation.
These forms require you to list a Rhode Island registered agent to accept service of process. Once completed, the next step is to submit the form to the Rhode Island Department of State, Business Services Division. You can do this online, by mail, or in person.
Note: Keep in mind that all of the information you include on your form will be on public record. The name(s), address(es), and other details included on the form will be posted publicly in the Rhode Island Department of State database.
What is a registered agent?
A registered agent is a person or entity you appoint to receive service of process on your business’s behalf. They will also accept legal documents and other official notices for you, too. State law requires registered agents to be available during business hours at a physical address in Rhode Island. You can be your own registered agent, but being available at the same place all day, five days a week isn’t always possible. This is why a lot of businesses choose to hire a registered agent who is available to accept mail for them.
How can I keep my information off the public record?
Getting a registered agent is the best way to keep your information off public record. Especially if that registered agent will let you list their name and address on state filings instead of your own. (Hint: we do that!)
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Rhode Island Division of Corporations. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Rhode Island LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Rhode Island LLC Operating Agreement template that you can use as a solid foundation.
Rhode Island Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Just like operating agreements, corporate bylaws are not required by law in Rhode Island. But if your corporation does create bylaws, they have to be adopted at the organizational meeting by the incorporators or the board of directors (see Rhode Island stat § 7-1.2-203).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Rhode Island Corporate Bylaws template you can use to get started.
Starting a nonprofit? We also have Rhode Island nonprofit bylaws.
5. Get Rhode Island Business Licenses
Most businesses in Rhode Island don’t need to apply for a business license, but if your business is in a trade that requires a license, you’ll have to apply with the Rhode Island licensing department or board that governs your profession.
Rhode Island Business License
Rhode Island does not have a general business license. However, depending on the type of business you own and the services you provide, you may need to obtain a specialized license. For example, if you’re a doctor or dentist, you’ll need a professional business license. If you own a craft brewery that makes and sells beer, you’ll need a license from the Rhode Island Department of Business Regulation, Division of Commercial Licensing. But, if you own a taphouse that just serves beer, you’ll obtain a liquor license from the city or town where your business is located.
Rhode Island Professional Business Licenses
A professional business license is for businesses who offer any service that requires specialized training or education. The Rhode Island Department of Labor and Training provides a list of occupations that require a state license. From acupuncture to pipe fitting, if your business offers a professional service, you’ll need to make sure you get the correct license through the state department that regulates your profession.
Local Business Licenses
Even if your business doesn’t need a business license from the state, it may be required by the city or town where you’re located. Most towns in Rhode Island require businesses to obtain a license to operate within their city’s limits, but the specific licenses vary from town to town. Thinking of opening an antique store in Providence? You’ll need to apply for the city’s Junk License. Opening an all-night cafe in Warwick? There’s a special license you’ll want to apply for so that your business can operate between midnight and five in the morning.
Learn more about How to Get a Business License.
How do I get a Rhode Island business license?
It’s really just a matter of doing more paperwork. Make sure you find the correct forms for the licenses you need, fill them out, and submit them. It’s important to keep in mind that requirements vary between license boards, but most allow you to submit your forms online or by mail.
How much does it cost to get a Rhode Island business license?
Rhode Island doesn’t have one general business license, so the cost of applying for a business license will depend on the kind you need. The Rhode Island Department of Business Regulation’s website can help you find what business license you need and how much it will cost.
How do I get a professional license in Rhode Island?
The steps to apply for a business license depend on the industry in which your business is operating. In Rhode Island, professional licenses are usually issued by the relevant state department. For example, if you’re planning on opening a massage therapy business, you’ll submit your application to the Rhode Island Department of Health. If you’re starting a chauffeur service, you’ll apply for a license through the Department of Motor Vehicles.
How do I get a local business license?
Each town has its own requirements for local business licenses, but generally speaking you’ll find what you need with the City Clerk. This is the case in Pawtucket, where all business license applications are issued and accepted at the City Clerk’s office. The type of license you’re applying for will determine how much the application costs.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
Hiring employees or independent contractors? You’re going to have to set up payroll. In order to this, you need to:
- get an EIN
- register for a Rhode Island Employer Account Number with the Division of Taxation
- register for income withholding and unemployment insurance tax accounts with the Division of Taxation
- decide on hiring employees or independent contractors
- have the required paperwork ready for your employees to fill out
- shop around and decide which payroll service to use
- organize a payroll schedule
Choosing a good payroll service or software can make all the difference when trying to set up payroll. These services can make your life that much easier by automatically calculating and withholding payroll taxes, allowing you to issue payments to your employees, and even filing your state and federal tax returns.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I get a Rhode Island Employer Account Number?
You can register for a Rhode Island Employer Account number online through the Rhode Island Division of Taxation’s Business Registration portal.
You’ll also need to register for both an income withholding and an unemployment insurance tax account. This can be done online through the Rhode Island Division of Taxation Combined Online Registration Service. It will take 3 to 5 days to receive your unemployment ID in the mail.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
But is business insurance really something you need? The state of Rhode Island requires workers’ compensation insurance in order for your business to legally operate, but purchasing additional insurance is up to you.
Here are some of the most common types of business insurance:
Workers’ Compensation Insurance
Rhode Island requires all businesses with one or more employees to have workers’ compensation insurance. This insurance covers any lost wages or medical bills for an employee if they’re injured on the job.
If you are looking for ways to cut corners and save a little money, skipping out on workers’ compensation insurance is not the way to do it. Failing to display the Rhode Island state-issued workers’ compensation poster comes with a $250 fine, but failing to have workers’ compensation insurance altogether? The Department of Labor and Training can close your business, and you may also be fined $1,000 for every day you operate without insurance. Even worse: you may also be subject to a felony charge. If convicted, you could face a fine of $10,000 and up to two years in prison.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers' compensation insurance in Rhode Island?
It depends on what type of business you’re operating. State law requires workers’ compensation insurance for employees, LLC members, and corporate officers, but sole proprietors and partners are exempt. Rhode Island is one of the few states that doesn’t require sole proprietors or partners to purchase workers’ compensation insurance.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
All Rhode Island corporations must file a corporate net income tax. Currently, the tax is set at $400. Own an LLC? You don’t have to file corporate income tax, but you do have to pay an annual fee that is equal to whatever the minimum fee is for the corporate income tax. This means you’ll pay $400, too.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. The federal self-employment tax rate is 15.3%. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-corp instead.
- Corporations. Corporations are taxed as C-corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Rhode Island corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-corps, but LLCs can also apply for C-corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Rhode Island, the corporate tax rate ranges from 2 to 9.4%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-corp tax election.
Local Rhode Island Business Taxes
The sales tax rate is the same across Rhode Island at a flat 7%. Local jurisdictions don’t add sales tax, so that 7% is all you need to worry about.
9. Build Your Business Website
If you want Rhode Islanders to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“firstname.lastname@example.org”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File the Rhode Island Annual Report
All Rhode Island LLCs and corporations have to file an annual report with the state. This report is due every year between February 1st and May 1st, and costs $50 to file. The form is really just a way to confirm or update information about your business, like your principal business address and the name or title of your business’s contact person.
Still have questions? Read more about How to File a Rhode Island Annual Report.
What if I don’t file an annual report in Rhode Island?
Rhode Island gives you a 30 day grace period to submit your report and avoid the late fee. But after May 31st, your report is considered late and you may be required to pay the $25 penalty fee. If the report is never filed, the Department of State could decide to administratively dissolve your business.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Rhode Island or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Rhode Island is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Rhode Island.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in Rhode Island?
To register a trademark in Rhode Island, you’ll need to file an Application for the Registration of a Trademark and pay the $50 filing fee. You’ll also need to include 3 identical samples of the mark on 8 ½ x 11” paper and your notarized signature.
Registering your trademark with the Rhode Island Division of Corporations only protects your trademark in Rhode Island.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.