Rhode Island is a beautiful place to live — and a great place to do business! The state offers excellent access to business funding and a highly skilled workforce.
Do you want to start your own business in Rhode Island? This guide will walk you through how to start a business in Rhode Island, from the initial planning stages through to the day-to-day operations of growing your business. Let’s get started!
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your Rhode Island business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
Deciding what to name your new business is the first step in this process. And it’s not a step that should be taken lightly — it’s very important to take your time and choose the right name for your company.
You’ll want to find a name that is relevant to your industry, and that hopefully is memorable for your customers and clients. Equally important is the ability to find a unique name that’s not already in use by another business in RI. This is one of the main Rhode Island business name rules (although there are others to consider as well).
Rhode Island requires that newly registered businesses use a name that is distinguishable from all other business names already registered in the state. This means that if a name is already in use, you cannot use that name (or any name that is too similar). To confirm if a name is taken or not, use the online RI business name search portal.
In addition to finding a unique name, there are other rules to be aware of, including:
- Names for LLCs need to contain “limited liability company”, or select approved abbreviations such as “LLC” or “L.L.C.”
- Names for corporations need to contain “corporation”, “incorporated”, or select approved abbreviations such as “corp” or “inc”
- Other rules may apply – see the full LLC naming rules here and corporation naming rules here
Rhode Island trade names
Rhode Island allows businesses to use “trade names”, otherwise known as fictitious names or DBAs. Once your company is formed, you can register additional fictitious names that can be used in the course of your business (and the name does not need to be directly related to your formal business name). For instance, “ABC, LLC” could register a trade name for “Bob’s Pies” and then do business under either name. This is useful to keep in mind, as it opens up more possibilities for how you brand and market your business.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans.
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers, and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited Liability Company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in Rhode Island
Now you’ll need to actually register your new business entity with the state of Rhode Island. This process is handled by the Rhode Island Department of State. You will need to submit paperwork, either online or through the mail, and pay the appropriate filing fee.
Alternatively, you can save time and hassle by using a paid business formation service. There are many companies out there that specialize in the business formation process, and that can help walk you through the entire process.
Three great options are Northwest Registered Agent, ZenBusiness, and Incfile. All three offer great service, low prices, and an efficient, accurate business formation process. They can also serve as your Registered Agent (and you’ll need to have a registered agent regardless of whether or not you use a service).
Using a company formation service is optional, but it can definitely help save you time and hassle.
If you do decide to complete the process on your own, the basic steps typically include:
- Naming your company
- Choosing a statutory agent (this individual/company is responsible for receiving legal documents on behalf of the business)
- Filing paperwork with the state
- Obtaining business licenses and permits if necessary
- Applying for an EIN from the IRS
The specifics vary depending on the type of entity you are forming. Specifics for each popular business entity are listed below.
Form a Rhode Island sole proprietorship
Follow these steps:
- Decide if you will operate under your legal name, or use a trade name
- If you use a name other than your own, you may need to register a trade name/assumed name
- Apply for a business license and/or other necessary permits from local governments (city/county), as needed
- More information here
Form a Rhode Island LLC
Follow these steps:
- Name your new LLC (see notes above)
- Choose a Rhode Island Registered Agent (or use a service such as Northwest Registered Agent). This RI statutory agent will be in charge of receiving legal documents, notice of lawsuits, and more on behalf of your company
- File the LLC Articles of Organization online or by mail, and pay the $150 filing fee
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form a Rhode Island corporation
Follow these steps:
- Decide on your desired corporate tax structure (S corp or C corp)
- Name your new corporation
- Choose a Registered Agent for your business (or use a service)
- Hold an organizational meeting and appoint directors
- File the Rhode Island Articles of Incorporation online or by mail, along with the filing fee (minimum $230). The filing fee is based on the number of shares issued, and will be calculated during the filing process.
- Apply for an EIN from the IRS
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: Rhode Island may require additional permits and/or licenses in order to operate legally in the state. Check the Rhode Island Professional Licensing page for more information.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).
There are state-level requirements for new employers, as well. Whenever you hire someone new, you’ll need to report the new hire to Rhode Island within 14 days of the initial hire date. You’ll also need to ensure that they hold all the appropriate licenses and permits needed for their position (restaurant workers will need health permits, for example).
Employers will also need to register for and pay the appropriate Rhode Island employer taxes. This includes unemployment insurance tax, and income tax withholding accounts.
At this point, businesses also should look into setting up their payroll system – whether you handle it yourself, or use a payroll service.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
Rhode Island business FAQs
Still have questions about running a business in Rhode Island? Here are some answers to frequently asked questions.
What are some business resources in Rhode Island?
Rhode Island entrepreneurs have access to a wide variety of helpful business resources, incubators and consultancies. Perhaps the best place to start is the Rhode Island Small Business Development Center (SBDC), which is run through the University of Rhode Island. The SBDC offers free business consultation, coaching and tons of other useful resources. SCORE Rhode Island is another great resource, as is the Rhode Island District Office of the US Small Business Administration (SBA).
What is the minimum wage in Rhode Island?
The Rhode Island minimum wage is $11.50 per hour. There are a few exceptions, such as a lower wage for part-time workers aged 14 or 15, and for workers receiving tips. The full rules can be found here.
Keep in mind that it is possible for individual cities or counties to impose their own minimum wage laws that may exceed Rhode Island’s minimum wage. Check with local government officials in your area to ensure your business is compliant with all local rules.
What business taxes does Rhode Island have?
There are a variety of business taxes that Rhode Island firms will need to pay. Businesses selling taxable goods or services will need to collect Rhode Island sales tax, which is currently 7%. Companies with workers will need to register for and pay Rhode Island employer taxes. There are a variety of other industry-specific taxes, as well – check the Rhode Island Division of Taxation website for details.
How do I dissolve an LLC or Corporation in Rhode Island?
To close a Rhode Island company, you’ll need to file voluntary dissolution paperwork with the state. You’ll also need to close down your tax accounts, file any outstanding tax returns, pay your employees, settle your debts, etc. See this page for more information.
The process of closing a business can be complex; it’s recommended to work with a CPA or attorney.
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