Doing Business In Rhode Island
Rhode Island has made some significant business tax law changes over the last few years in an effort to improve its business and tax climate.
Dedicated to stimulating economic growth in Rhode Island, the Commerce Corporation is a customer service-focused agency that invests in Rhode Island’s businesses. By helping to navigate the public sector, providing financing vehicles, deploying state incentives, and investing in networking opportunities, the Commerce Corporation is in the business of helping businesses.
Small Business and Startup Environment
Rhode Island has 95,390 small businesses, according to the most current federal data available. Of those 95,390 small businesses in Rhode Island, 32,098 have employees. The remaining 63,292 are Rhode Island small businesses that have no employees.
Rhode Island’s business and tax climate has not received high marks from national statewide rankings, or from steps to improve the business climate over the past several years. The state has lowered various tax rates and offered tax incentives to new businesses.
Rhode Island SCORE’s mission is to assist startups and existing businesses in Rhode Island. With locations throughout the state, Rhode Island SCORE provides free business consulting with 35 counselors, including accountants, attorneys, prior corporate executives and experts in technology, sales, marketing, etc. During 2016, Rhode Island SCORE counseled over 900 clients and conducted 40 workshops.
The Center for Women & Enterprise (CWE) is a regional organization with an office in Providence. CWE provides opportunities for women entrepreneurs and women in business to increase professional success, personal growth and financial independence. CWE’s expertise is in training and education programs.
The Rhode Island Small Development Center provides comprehensive business assistance services to both existing and prospective small business owners and entrepreneurs. The Center’s primary service is to provide one-on-one confidential no-cost business counseling in a wide range of areas.
Rhode Island is the first state to offer qualifying young people help with repaying student funding debts if they’re pursuing careers or starting businesses related to technology, engineering or design. The program has a fun name: the “Wavemaker Fellowship.” The state also offers $2,000 tax credits for qualified buyers to purchase first homes in particular areas. Thirty regulatory barriers have been removed, and many more incentives and tax credits introduced that will move behavior on the ground.
Step 1: Choose A Business Structure
The most common business structures are sole proprietorship, partnership, limited liability company (LLC), and a few different types of corporations—the standard corporation (often called a C corporation or “C corp”), the small business corporation (often called an S corporation or “S corp”), and the benefit corporation (often called a B corporation or “B corp”).
The most common business structures are:
Happens when you operate your business as yourself. There is no separate legal entity created; the law treats you and your business as one person. You are responsible and personally liable for all business activities or wrongdoing.
The same thing as a Sole Proprietorship, but just with 2 or more people. Like a Sole Proprietorship, a Partnership doesn’t create a separate legal entity and the partners are responsible and personally liable for any business activity or wrongdoing.
A more complex legal structure that requires a board of directors, corporate officers, and shareholders. Corporations don’t usually work for most small business owners since they face double taxation. Corporations can be beneficial to companies that are looking to raise capital investment, take the company public, or have large healthcare expenses for their employees. The most common types of companies that form Corporations are high-growth technology and startup companies.
Unlike a Sole Proprietorship or a Partnership, a Corporation is a separate legal entity from its owners (called shareholders). It provides them with personal liability protection.
A legal entity that combines the benefits of a Corporation and a Sole Proprietorship/Partnership.
An LLC in Rhode Island is a separate legal entity under the law. And like a Corporation, it provides personal liability protection for the owners. If the LLC is sued, the owner’s personal assets – like their home, cars, and bank accounts – are protected. And like a Sole Proprietorship/Partnership, an LLC has pass-through taxation (so there’s no double taxation).
A Rhode Island LLC is the most popular option and a good choice for people who want to run a small business for two reasons:
- Personal liability protection (personal assets are kept safe)
- No double taxation
Unlike a Sole Proprietorship (and a Partnership), your Rhode Island LLC’s assets are separate and distinct from your personal assets. In the event your LLC gets sued, your personal assets are protected.
And unlike a Corporation, your LLC is not subject to double taxation. Instead, your LLC’s profits will “pass-through” to your personal tax return and federal taxes are paid just once.
Step 2: Choose The Right Business Name
Choosing a business name is important, you want to make it easier for your customers to remember it, here are some tips:
- Avoid hard-to-spell names.
- Don’t pick a name that could be limiting as your business grows.
- Conduct a thorough Internet search.
- Search and purchase a domain name.
- Use a name that conveys some meaning.
- Conduct a trademark search.
Step 3: Register Your Business
Step 4: Obtain an EIN Tax Number
With limited exceptions, most businesses require an Employer Identification Number (EIN), also known as a Tax ID Number. An EIN is used to identify a business in its federal tax filings. Without an EIN, you can’t hire employees or open a business bank account.
Step 5: Open A Bank Account
– Open a business bank account:
- Separates your personal assets from your company’s assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
– Get a business credit card:
- Helps you separate personal and business expenses.
- Builds your company’s credit history, which can be useful to raise capital later on.
Step 6: Licenses & Permits
Now that you’ve registered your business name you need to obtain a business license for your company – this authorizes your company to do business in your city or county. Typically this also involves registering for state taxes and permits (the city may require them as part of the business licensing process).
Here are some links for Rhode Island Businesses:
Selling products? Check Rhode Island Resale Permit
Step 7: Branding & Marketing
Your brand is the image customers have of your business, so it’s important to determine who is your audience and what is the message that you want to project. That way, your company’s image will be what you intend it to be. It should be strategic and intentional.
Step 8: Establish a Web Presence
Creating an optimized website helps you to gain important visibility for the right terms. A website is a powerful sales tool and one that allows you to address your customers’ concerns, give them the information they need to make a decision and create compelling calls to action.
In addition to a website, you should also consider other avenues for promoting your business online: