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Rhode Island has a rich history of business innovation, which persists today—from the colonial-era Providence Island Company to modern household names like CVS. This small state has benefits for fledgling entrepreneurs, including tax incentives, an educated workforce, and a high quality of life. Starting a business in Rhode Island is not as complicated as you might think. Here’s how to set sail in the Ocean State.
1. Choose a business idea
The first stop on your journey to business ownership in Rhode Island is choosing a business idea. This might sound simple, but it’s no small task. A solid concept forms the bedrock of your new venture. Determine what you’ll sell—perhaps a product, a service, or both. Then, make sure you can answer the following two questions before pursuing your project:
- Who is your customer? You can’t turn a business idea into a thriving enterprise without knowing your target customer. To identify them, analyze similar businesses in your market and marketplaces where similar products or services are sold (like Amazon or Wayfair), and research industry trends. Will you sell directly to consumers (B2C) or business-to-business (B2B) online, or through a traditional storefront?
- What is your projected profitability? Your Rhode Island business must make more than it spends to survive. There are several elements that affect profitability, including pricing, packaging, distribution, and bundling models. Will you offer subscription options? What’s your break-even point? How much must you sell—at a minimum—to cover costs?
2. Name your business
With an idea locked down, you can now name your Rhode Island business. Coming up with a name is one of the most important decisions you’ll make as a small business owner. A good name conveys your purpose and appeals to the right customers. Consider the following guidelines when settling on a business name:
- Be original. A business name in Rhode Island must be different from any other business name registered in the state. Use the Rhode Island Corporate Catalog to determine whether your preferred name is available.
- Include certain words. Abide by Rhode Island’s naming rules. Different rules apply to different types of business structures. For example, Rhode Island LLCs must include the term “Limited Liability Company,” “L.L.C.,” or “LLC” in their names. Rhode Island corporation names must contain “Company,” “Corporation,” “Incorporated,” or “Limited,” or an abbreviation thereof.
- Exclude certain words. Your Rhode Island business name cannot contain words that could confuse it with a government agency, like “controller” or “police.”
- Reserve your name. You can reserve your Rhode Island business name ahead of time online, which holds it for 120 days. The filing fee is $50.
- Adopt a DBA. If you want to operate under a different name than the business entity name you registered with the state, file for a DBA, or “doing business as”—essentially an assumed name. It must comply with the same name availability rules for legal business names. To adopt a DBA, file a Certificate of Assumed Business Name with your local city clerk (here’s Providence’s form, for example), pay the filing fee ($10 in Providence, but this varies depending on location), and have it notarized by a notary public. Find a complete list of city clerks on the state’s website.
- Secure a domain name and social media handles. A unique name is essential for doing business online. Potential customers should be able to find you easily. When deciding on a business name, check to see if a suitable domain name (URL) is available, then reserve social media usernames that align with your business name or DBA.
3. Create a business plan
A solid business plan is crucial to setting up a viable business. Your business plan should reflect your overall goals and give a sense of how you intend to run it in the near and long term. A good business plan includes the following:
- An executive summary and mission statement
- A detailed company description
- Market analysis
- Your organizational structure
- A list of products or services
- A customer segmentation report
- A marketing plan
- A logistics and operations plan
- A financial plan
4. Choose a business structure and get started
Before formally registering your business in Rhode Island, you must determine its legal structure. There are four primary structure types available in Rhode Island: sole proprietorships, general partnerships, LLCs, and corporations. Each offers different benefits for personal liability, ownership, taxation, and funding. Here’s how they differ:
- Sole proprietorship. Sole proprietorships are owned and run by a single person. There’s no distinction between the owners and the legal business entity with sole proprietorships. They’re taxed as “pass-through” entities, meaning earnings are assessed once at the owners’ personal-income tax levels. This also means the owner is liable for most debts or legal damages incurred by the business. Sole proprietorships and partnerships pay self-employment state taxes (15.3% in Rhode Island). There are no fees or registration requirements to set up a sole proprietorship in Rhode Island.
- General partnership. General partnerships are formed by two or more partners and function similarly to sole proprietorships regarding taxes. As with sole proprietors, there is no legal distinction between a general partner and their business.
- LLC. A limited liability company (LLC) is formed by one or more owners, known as “members.” Like partnership and sole proprietorships, Rhode Island LLCs can elect to be taxed as “pass-through” entities—i.e., to be taxed once at members’ personal income levels. LLC members also enjoy liability protection, because an LLC is considered a separate legal entity from its members. Because of this added layer of protection, LLCs are a bit more complex and costly to set up.
- Corporation. A corporation is a separate legal entity from its ownership, meaning owners’ personal assets are protected in case the company goes bankrupt or endures a lawsuit. Corporations can issue stocks to shareholders for an ownership stake in the business. However, because of this added layer of protection, corporations are subject to corporate taxation, meaning the government taxes business income and the personal income of the corporation’s owners and shareholders. Like corporations elsewhere, those in Rhode Island must file corporate income tax returns with the state.
Obtain a federal employer identification number (EIN)
Once you’ve decided on a structure for your Rhode Island business, apply for a federal employer identification number, or EIN, through the Internal Revenue Service (IRS) website. An EIN is a nine-digit number assigned to businesses by the IRS for tracking tax obligations—think of it as a Social Security number for companies. An EIN also helps secure lines of credit and credit cards for business expenses.
Incorporating in Rhode Island
To formally launch your business, you may have to pay fees and file specific documents with the Rhode Island Secretary of State office. (Some structures, like sole proprietorships and general partnerships, don’t need to be formally incorporated.) Here’s how to incorporate in Rhode Island:
- LLCs. File your Articles of Organization with the Secretary of State office by mail or online. Articles should include your company name, your registered agent’s contact information, and the name and address of each LLC manager (which can be a member or someone hired by the LLC). The filing fee is $150.
- Corporations. File Articles of Incorporation with the Secretary of State office by mail or online. The articles should include your corporate name, contact information for a registered agent, the number of authorized shares the corporation will issue, and the incorporator’s contact information. The filing fee is $230 if authorizing a Rhode Island corporation with 75 million or fewer shares.
5. Obtain business licenses and permits
Rhode Island does not require business owners to purchase a statewide general business license. However, if your business sells goods or services typically subject to sales tax, you must register with the Secretary of State and the Division of Taxation for a seller’s permit. Local cities and counties may have their licensing requirements. You may also need specific licenses to operate in your industry, trade, or profession. Contact your local authority to determine what’s required where you’re based.
6. Examine business insurance options in Rhode Island
Unforeseen losses can be disastrous for new businesses. While some business structures like corporations and LLCs offer personal asset protection, you may still want to purchase business insurance to cover your products, vehicles, and other property from unforeseen mishaps. Standard insurance plans for Rhode Island businesses include:
- Workers’ compensation insurance. Rhode Island law requires all businesses with one or more employees to carry worker’s comp. This type of insurance covers injuries and illnesses employees may suffer on the job.
- General liability insurance. General liability insurance covers some financial losses (i.e., no-fault property damage) and injuries on the job (i.e., a customer slip-and-fall). While you’re not required to purchase this policy, if you want to rent an office or storefront, your lease may require it.
- Professional liability insurance. Professional liability insurance—also referred to as errors and omissions insurance—covers financial losses resulting from malpractice suits claiming that advice or services caused a customer financial harm. For example, a real estate agent who fails to note mold in a basement can be liable for damages.
- Business owner’s policy. A business owner’s policy (BOP) is a small business insurance package deal. The specifics vary based on your company’s needs and your insurance company’s offerings.
The federal Small Business Administration maintains a list of more insurance policies your new Rhode Island business may need.
7. Understand financial considerations
In addition to purchasing insurance, you’ll likely have to make other financial investments to get your Rhode Island business off the ground, including renting a brick-and-mortar retail space, getting a professionally designed business website, and purchasing ads, equipment, and software. You may also want to hire lawyers, accountants, or other professionals to support your endeavors. These costs can quickly add up. Luckily, there are accessible resources to help you get your hands on the necessary startup funding. Consider also setting up a business bank account to handle costs and cash flow.
8. Market your business
- Market research. Thorough market research is critical to better understanding your business’s target market and customers because it gives you a sense of how to compete and stand out in the existing marketplace.
- Advertising. You can design and purchase print or digital ads or hire an agency to do it on your behalf.
- Social media. Today, every successful business must maintain a solid social media presence across multiple platforms—including Facebook, Instagram, YouTube, and TikTok. Consistently post content that aligns with your brand to up customer engagement.
- Public relations. Identify and cultivate relationships with media outlets—both in Rhode Island and across the US—that can help organically increase your visibility.
- Customer retention. Build genuine relationships with customers that keep them coming back—and spreading the word to friends, family, and colleagues.
Starting a business in Rhode Island FAQ
How much does it cost to start a business in Rhode Island?
Do I need a business license in Rhode Island?
No statewide business license is required in Rhode Island, though specific industries and localities require permits.
Is Rhode Island a good place to start a business?
Rhode Island is a great place to start a business. It’s home to New England’s second-largest city, has a highly educated workforce, and boasts a high quality of life, which attracts skilled laborers.
Is there anything else I should know before starting a business in Rhode Island?
Before setting up shop in the Ocean State, consider whether your business goals align with local customer appetite and vendor capacity in the state. Research Rhode Island’s diverse demographics, business laws, and historic infrastructure to ensure your venture will fit seamlessly into the business landscape.