How do I form a corporation in Rhode Island?

How do I form a corporation in Rhode Island?

One of the biggest things you’ll do as a business owner is to decide which structure will benefit you the most.

The business structure you choose will affect every corner of your company, so do your research. Consider how you plan to raise capital, how much personal financial liability you want to shoulder, and how you’d prefer to be taxed.

You have different business structures to choose from, including a sole proprietorship, a limited liability company (LLC), or a corporation.

If you’ve landed on a corporation, you likely seek more personal liability protection for the shareholders involved. You might also be drawn to the ability to issue shares of your company to raise capital. It’s also easier to create retirement plans and transfer ownership of the business as a corporation.

Now that you’ve decided on your business structure, here’s everything you need to know about forming your Rhode Island corporation.

To start a corporation in Rhode Island, you must file the Articles of Incorporation with the Secretary of State. To simplify the process of forming a corporation in Rhode Island, we’ve put together 10 easy steps to form your business:

Step 1: Name Your Rhode Island Corporation

What’s in a name? Well, everything. As a business, your name is essential to your success. Many clients will base their first impression of you on your name, so you’ll need to choose one that best suits your brand.

When naming your Rhode Island corporation, you’ll need to choose a unique name distinguished from other business entities in the state. Check your top names against the state’s database of businesses to ensure your top pick is available for use. You can also use our Business Name Checker Service so we can do the work for you.

Once you’ve selected a name, as you’re preparing your paperwork to incorporate, you have the option to reserve it for up to 120 days. For-profit companies must pay a $50 filing fee, while the cost is just $20 for nonprofit organizations. You can choose to mail the form with payment or file online. 

Check your name for Trademark at State and Federal Level

Like checking your name against the state database, you may also want to check if any part of it has been trademarked at the state and/or federal levels. This is not a requirement, but it’s wise to make sure your desired name isn’t going to be the subject of a trademark infringement lawsuit later. If a trademark is available, consider registering it for your own use. There is a $50 filing fee for a Rhode Island trademark (this applies only within the state’s borders), and a federal trademark costs $225 or $275, depending on how you apply. 

A designator is a word in the name of a business signifying what type of entity it is. In Rhode Island, your corporation’s name must include one of the following words or their abbreviations as a designator: “Corporation” (Corp.), “Incorporated” (Inc.), “Limited” (Ltd.), or “Company” (Co.). 

An incorporated business means that an entity, one separate from those forming the company, has been created. In this scenario, shareholders are less liable for the corporation’s debt and other legal matters.

Something else to think about when coming up with your Rhode Island corporation name is whether you want to use a fictitious business name, commonly referred to as a “doing business as” (DBA) name in other states. This is another name under which you can operate your corporation in Rhode Island. To use it, you will need to submit a Fictitious Business Name Statement by mail or online with a $50 fee.

Step 2: Appoint Directors

After selecting a business name, you’ll need to appoint your board of directors. It’s important to put some thought into your selections, as your board manages your company’s affairs.

In Rhode Island, your for-profit corporation must have at least one director. They’re not required to live in the state or be company shareholders.

Your corporation also needs to establish initial bylaws at its first organizational meeting. These bylaws provide direction on how your board and company will operate. They can be added to and amended over time by shareholders or directors. However, if they disagree, the shareholders can override changes made by the directors.

Your initial board of directors will approve the bylaws at an organizational meeting. At this same meeting, they’ll vote on other facets of your organization, including approving your share structure format and appointing officers.

Step 3: Choose a Rhode Island registered agent

Establishing your registered agent is another requirement. This registered agent — sometimes referred to as an “agent for service of process” on official paperwork — is the individual or entity you designate to receive important correspondence from the state and legal documents on your behalf. 

State law requires that you appoint someone to this role. Your agent must be an individual or entity with a Rhode Island physical address — not a P.O. box. 

You’re permitted to serve as your corporation’s registered agent, but it may be smarter to appoint someone you trust to the role or hire an outside company to handle the work. 

For example, the registered agent must be at their registered address during normal business hours and must be available to receive official paperwork. If you were to take on this role, you would not be able to work when you want. Additionally, you might be served in front of clients or customers, potentially tarnishing your reputation.  

Step 4: File the Rhode Island Articles of Incorporation

Once you have everything you need — your corporate name, the board of directors, and a registered agent — your next step is to file your Articles of Incorporation (sometimes referred to as a Certificate of Incorporation in other states) with the Rhode Island Department of State Business Services Division. This makes your corporation a legal entity in Rhode Island.

These are the pieces of information needed when filing your Articles of Incorporation in Rhode Island:

  • Your corporation name
  • Your business address
  • Information about your corporation’s authorized stock
  • Name and address of your registered agent
  • Names, addresses, and signatures of all incorporators
  • Additional provisions included by the incorporators
  • Effective date – The date you want the articles to go into effect. If you wish to choose a date after the date of filing, it must be within 90 days of filing the form.
  • Signatures – The form must be signed and dated by all incorporators.
  • Filer contact information: The person filing needs to provide their name and contact details in case the Division requires further information.
  • A filing fee 

In your list of information about authorized stock, you’ll need to include the number of total shares that will be issued, the classes of these stocks, and the value of each share. For-profit corporations pay a $230 filing fee provided they have fewer than 75 million authorized shares. See the Rhode Island Business Corporation Act or contact the Business Services Division if you’re planning to have more shares than this.

You can file your Articles of Incorporation online or by mail or in person using this form from the Department of State. You can mail the form to:

State of Rhode Island and Providence Plantations 

Department of State

Division of Business Services 

148 W. River Street

Providence, Rhode Island 02904-2615

Step 5: Create Corporate Bylaws

Rhode Island requires corporations to adopt bylaws in its first organizational meeting, and you’ll want to have them on hand throughout the life of your corporation.

Your bylaws are your corporation’s governing documents, defining how your company will be run. Each business should write bylaws tailored to their specific needs.

Among the items your bylaws might include are:

  • Defined operational guidelines
  • A list of rights and powers of shareholders and directors
  • The process for the election and removal of officers and directors
  • The process for scheduling your annual meetings
  • Plans for stock distribution, sales, and transfers
  • Rules for amending the bylaws

Step 6: Draft a Shareholder Agreement

Your shareholder agreement outlines the obligations and rights of your stockholders.

This legal document should lay it all out clearly. Who can be a shareholder? What is the value of a share when sold? How many shares have been issued? Are there any restrictions on the transfer of shares? What happens regarding the shares and shareholders if the company is sold?

These are all questions to ask yourself as you create your shareholder agreement. 

Step 7: Issue Shares of Stock

One of the requirements as a corporation is to issue shares of stock in your company.

As you plan your business, you determine the number of authorized shares you will issue and include that figure in your Articles of Incorporation. You also include the classes of these stock shares and their value in this document. In Rhode Island, unless you specify otherwise in the Articles of Incorporation, your authorized shares will have a par value of $0.01 per share. 

Public and private stocks issuance

You may choose to issue stocks privately or publicly. If you opt to keep your corporation private, all shares are typically owned by just a few individuals, usually, those who founded the company or invested in it. At a publicly traded company, a portion of your stock shares must be made available to the public.

All corporations are legally required to report stock transactions. At the federal level, you file this information with the U.S. Securities and Exchange Commission (SEC). You also track this information through Rhode Island’s Department of Business Regulation.

Step 8: Apply for Necessary Business Permits or Licenses

There is no general business license in Rhode Island. However, depending on your industry, you might need a specialized permit or license before you can begin operating your business.

There’s no one-stop shop to determine what you need, so your best bet is to start by contacting the Department of Business Regulation and take it from there. Depending on where your business is based, you should look for licenses or permits at the local, state, and federal levels.

Step 9: File for an EIN and Review Tax Requirements

If you’re a person, you get a Social Security number. As a business, you apply for a federal Employer Identification Number (EIN). This nine-digit number is used for tax purposes.

Apply for an EIN for your corporation by visiting the IRS website. This process is relatively quick and free. Your EIN is important because it’s used to track your staff’s wages and tax withholdings and other information. It’s also needed to file annual federal and state taxes. 

Similarly, you may need to register on the state level with the Rhode Island Division of Taxation via the Combined Online Registration Service. This will allow you to make retail sales and, if you have employees, create accounts for income tax withholding and unemployment insurance.

In addition to federal income tax, if you have a C corporation, it will need to pay the Rhode Island business corporation tax, which is generally 7% of net income; the minimum tax is $450 annually. Although S corporations don’t pay federal taxes on the corporate level, S corporations in Rhode Island must pay the state’s minimum business corporation tax of $450.

Step 10: Submit Your Corporation’s First Report

Maintaining your corporate entity in Rhode Island requires filing an annual report with the Secretary of State and paying a $50 filing fee.

In Rhode Island, a corporate annual report is a simple form that requires basic information about the business: name and business address, a brief description of your business, a list of directors, and the number of shares issued. 

This form must be filed between January 1 and March 1 of each year and doesn’t require you to submit information about finances or owners. Your corporation may file online, in person, or by mail. 

You will incur a late penalty of $25 if you file on or after April 1.

How much does it cost to start a corporation in Rhode Island?

There are various fees associated with forming a Rhode Island corporation. However, the big one is filing your Articles of Incorporation. If you’re a for-profit corporation, you’ll pay a minimum of $230 to file with the state.

Meanwhile, nonprofit organizations pay $35 to file theirs. Another cost you can anticipate is your annual report, which will run you $50 each year.

This doesn’t include additional costs that could go into forming your corporation, though. For example, reserving a business name costs $50 for for-profit companies, and if you choose to trademark your name, this will cost $50 at the state level.

And don’t forget the costs of additional licensing and permits that vary by business and industry.

ZenBusiness can help reduce the time spent deciding which items to prioritize by assisting small businesses in Rhode Island for an affordable annual fee with our starter package.

What are the benefits of a corporation in Rhode Island?

There are many benefits to forming a corporation in Rhode Island.

The corporate structure offers protection to shareholders by creating an entity separate from those who created the company. This means there are fewer personal financial and legal risks.

By issuing stock, corporations have an easier time raising funds needed for operation.

Despite its size, Rhode Island also boasts a robust economy favorable to small businesses. More than 101,000 small businesses — about 99% of all businesses ­— call the state home. And 74% of startups survive their first year in the Ocean State.

However, you’ll need to be mindful of the double taxation that comes with forming a C corporation.

How is a Rhode Island corporation taxed?

As stated above, Rhode Island’s flat corporate state income tax is 7% with a $450 minimum tax. This is in addition to federal income tax.

The different types of corporations are taxed a little differently, though. C corporations, the most common type of corporation, face a double tax essentially. It’s taxed first as a corporation on its annual income. Then, its shareholders are taxed on the dividends they receive. 

An S corporation operates as a flow-through entity where its profits go to its shareholders without first being taxed at the corporate level. The shareholders then pay any taxes owed to Rhode Island and the IRS on their personal returns.

The exception to this is that S corporations in Rhode Island still must pay the state’s minimum business corporation tax of $450.

Most nonprofit corporations are exempt from federal and state income taxes if they file the correct paperwork.

Consult Rhode Island’s Division of Taxation for more information about your specific tax requirements.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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