You’re about to embark on a long and exciting journey, one full of hard work and rewards: starting a new business. With wide eyes and big dreams, you’re about to enter the world of business ownership.
But beyond the initial thrill of the startup decision, there’s a lot to consider. In fact, if you’ve never done it before, starting a business can seem like an intimidating mountain of work. Out of all your responsibilities and tasks, you might not even know where to start.
But have no fear. The good news is that once you have everything planned out and understand the process, the formation process is smooth sailing. And this is your go-to guide.
Everything you’ve been wondering about, everything you need to do, every question you have – it’s all right here. By the time you’re through these 16 steps, you’ll be a bonafide business owner who’s prepared for sustained success.
1) Write a Business Plan
Jumping into this endeavor without goals, directives, or a sense of direction can lead to a scattered, unproductive business.
A business plan lays the groundwork for your future success. It helps you analyze key elements of your business and forge pathways to achieve your goals. Here are a few things you should consider including in your business plan:
- Executive Summary (a separate document that gives a complete overview of your business’ purpose, plans, goals, competition, opportunities, etc.)
- Company description
- Market Analysis (opportunities, competition, etc.)
- Managerial or organizational structure
- Products and/or services
- Marketing strategies
- Funding goals
- Financial projections
Business plans aren’t just great for internal operations, but they give your business legitimacy in front of potential investors, customers, partners, and more. Need help? Check out this guide from the U.S. Small Business Administration.
2) Decide on a Business Name
You might’ve come up with the perfect name right away. If so, consider yourself lucky.
Sometimes, deciding on a business can be difficult, requiring brainstorming meetings and late-night rap sessions. That’s because your name is your business’ identity and reputation. It should be something that’s unique and memorable but also defines your business purpose.
Before running with a particular business name, you’ll need to make sure it conforms to the necessary business structure requirements. For example, an LLC name must include the words “limited liability company,” or an appropriate abbreviation.
And you can’t use a name that’s already been taken, so you’ll need to search for your desired name to determine if someone else has already reserved or registered it. If not, you’re in the clear. Just file a name reservation or use it on your formation documents to lock it down.
3) Decide on a Legal Structure
There are only a few types of business structures, but each one dictates some important parts of how your business will run.
The most popular types are the sole proprietorship, general partnership, limited liability company (LLC), S corporation, and C corporation. Most small businesses go with the LLC because of its unique blend of flexibility and personal asset protection.
However, you shouldn’t make this decision without reading up on all of your options. We’ve done plenty of research on each business type and developed side-by-side comparisons. Check out our LLC vs. Corporation and LLC vs. Sole Proprietorship comparison guides for a closer look.
4) Choose a resident agent
The Secretary of State needs a point of contact for your business, someone who will be available at your registered office address during typical business hours – 9am to 5pm.
This person is called a resident agent, and they serve as an intermediary with the state, receiving all of your company’s important legal communications and relaying them on to you. The Rhode Island resident agent ensures that no important state documents, deadlines, or payments fall through the cracks, so you’ll want to choose a person or company you trust.
You can choose either an individual or a business entity as your resident agent in Rhode Island, but they must:
- Be an individual Rhode Island resident or a corporation authorized to do business in the state.
- Have a physical address in Rhode Island.
- Have a mailing address in Rhode Island (no P.O. boxes allowed).
If you plan on using an individual as your resident agent, remember that your business compliance responsibilities fall squarely on that person’s shoulders, so you may want to choose someone who understands business maintenance, like an attorney or manager. But if simply trust a friend or family member more, that works too!
Or, you can choose a resident agent service instead. These companies take care of all your resident agent responsibilities, and some will even handle your business formation and annual reporting as well.
Important: You must continuously maintain a resident agent on file with the Secretary of State. If your agent resigns or you appoint a new one, you’ll need to notify them by filing the appropriate documents.
5) Register Your Business
This is the big one, the step that officially creates your business. No matter which business type you choose, you’ll need to register it with the Secretary of State.
LLCs: The document that puts your new limited liability company on the state’s official record is called the Articles of Organization, which you can submit online or by mailing/hand-delivering a paper form.
Forming your Rhode Island LLC is a big step, so the filing fee is $150 no matter which filing route you take.
Corporations: The filing procedures are pretty similar for starting a corporation, although you’ll need to file the corporation-specific Articles of Incorporation online or with a hard copy instead. The fee is slightly higher for this form – $230.
Sole Proprietorship/General Partnership: There are no official forms or fees to register as a sole proprietor or general partnership. Simply start doing business and that’s it! While this is obviously faster and easier, we recommend incorporating your business because of the personal asset protection LLCs and corporations provide.
Foreign Entities: Already-established businesses that come to Rhode Island from another state are considered “foreign entities” and follow a different process. Since they’re already fully-functioning businesses, they don’t need to go through the formation process again. Rather, they must foreign qualify in Rhode Island by submitting an Application for Registration (LLCs) for $150 or a Certificate of Authority (corporations) for $310, along with a Certificate of Good Standing the state of formation.
6) Get an EIN
The Employer Identification Number (EIN) is your ticket to doing state and federal taxes. It’s a nine-digit number, much like a Social Security Number, that identifies your business on tax documents.
If you’re forming an LLC, it will be considered a “pass-through” entity, so the business itself won’t pay federal income taxes. Instead, you and the other members will report income and losses on your personal tax returns.
But this doesn’t mean you can go without an EIN. If your LLC pays any type of business taxes – like Sales, Use, or Unemployment Taxes – or hires employees, you’ll need to get one.
Unsure if you need one? The IRS provides a useful “Do I need an EIN?” link on this page, where you can also apply for an EIN. If you go through the online application process, you’ll receive your number immediately.
Otherwise, you can submit a Form SS-4 by fax to (855) 641-6935 or by mail to :
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
7) Open a Business Bank Account
LLC and corporation owners are required to keep their personal and business finances completely separate, or they risk losing their personal asset protection. To do so, you’ll need a business bank account.
The good news is that opening a business bank account is pretty simple. Just pay a visit to your bank’s local branch and sit down with one of the bankers there. You will need to present your formation documents, an EIN number, and some personal information. Then, you can direct all of your business income and expenses to that account instead of a personal one.
It doesn’t really matter which bank you choose, whether it’s a national giant like Chase or Bank of America or a small, local bank. However, it’s usually easiest to go with the one where you have existing accounts.
8) Handle Any Tax Obligations
Ah, taxes. They’re always part of the picture, especially when you run a business.
Familiarizing yourself with your business’ tax requirements will help you establish a solid financial plan going forward. LLCs don’t need to file a corporate tax return and pay federal income taxes, so you’ll handle these taxes as part of your personal return.
Corporations, on the other hand, will need to file a Corporate Income Tax Return, while sole proprietorships/general partnerships will need to pay self-employment taxes.
There are no “franchise” or “privilege” taxes in Rhode Island, but your business may be subject to a few other taxes, depending on your circumstances:
Business Corporation Tax: This tax applies to all C corporations and amounts to 7% of the business’ net income. S corporations and LLC must also pay this tax, but only the minimum amount, which is $450.
Sales and Use Taxes: Any business that sells goods in Rhode Island must pay a Sales and Use Tax at a 7% rate.
For more information on Rhode Island business taxes, visit the Division of Taxation website.
9) Find an Accountant
Sometimes it’s easier to hand off your financial responsibilities to a professional. Not only will an accountant ensures that your taxes are filed and paid correctly, but they might also find a few ways to save your business money.
Bookkeeping and tax procedures are time-consuming and require some specialized knowledge. Balance sheets, financial reports, cash flow, audits, and much more – an accountant can ensure that your company operates smoothly and streamlines its expenses.
This can be expensive depending on the complexity of your finances, but the benefits an accountant offers can be well worth it.
10) Create an Operating Agreement
An operating agreement constructs a framework of procedures and standards for your business. This is where you can lay out processes for member conduct, asset allocation, compensation policies, voting procedures, dissolution, and much more.
While operating agreements aren’t technically required in Rhode Island, they are essential to your business’ stability and success. They provide a safety net in legal disputes and legitimacy in front of banks, courts, government agencies, and other businesses.
You can either draft one yourself using an online template, or you can hire an attorney or an incorporation service to take care of it for you.
Once you’ve drafted your agreement, it must be approved by each of your LLC’s members, then filed with the rest of your business documents. You do not need to submit it to the Secretary of State.
11) Acquire the Necessary Licenses
After filing your formation documents, your business is legitimate, but it might still need specific licenses before opening its doors in Rhode Island. These licenses depend on its specific activities and purpose, and may include:
Business Licenses: The Department of Business Regulation provides requires licensure for businesses in banking, securities, accountancy, design, real estate, automobiles, manufacturing, liquor wholesale, and insurance.
Professional Licenses: There are also particular occupations that must obtain licensure for state boards before commencing business activities in Rhode Island. You can find a complete list here.
Health Licenses: Rhode Island’s Department of Health has a long list of licenses as well, which you can find on their website.
Local Licenses: Your specific city, county, or municipality might have its own licensure requirements. Take a look at your local government’s website to find out.
12) Consider Business Insurance
Even though it’s not pleasant to consider, there’s always a chance that unforeseen events might take a toll on your assets.
While forming an LLC or corporation offers some personal asset protection, additional business insurance can also protect your business assets in cases of lawsuits, damages, etc. You can acquire insurance for your business products, vehicles, specific occupations and much more.
If you hire employees, you’ll also need to get workers’ compensation insurance. SBA.gov has a useful guide for determining which forms of insurance your new business might need.
13) Build a Website
Your company’s digital presence is just as important as its physical one. Like it or not, most potential customers will find your business online, and if you don’t exist online, you’re missing out.
But don’t worry, you don’t need to be an HTML or web design expert to build a website. Sites like WordPress and Squarespace make it easy to construct an elegant and responsive website, no coding necessary. But if you’re not comfortable or confident doing it on your own, you can always hire a professional web designer to take care of it for you.
14) Launch Social Media Accounts
Making your mark on the digital landscape doesn’t start and end with your website. Most successful businesses also have a robust social media presence on multiple platforms. Facebook, Twitter, and Instagram are all great ways to connect organically with potential customers and develop your brand voice.
Just don’t forget to publish consistent social media content, or you’ll have trouble building a base of followers.
15) Understand Ongoing Rhode Island Requirements
After you’ve launched your business, things will likely be moving at 100 miles per hour as you evolve and grow. But in all of the excitement, you can’t forget your state’s ongoing compliance requirements. Every state has its own annual or biennial business requirements.
Every Rhode Island business entity must submit an Annual Report each year to keep their information updated, although each business type has different due dates and fees.
- Corporations: Jan. 1 – Mar. 1, $50
- LLCs: Sept. 1 – Nov. 1, $50
- Non-Profit Corporations: Jun. 1 – Jun. 30, $20
If you miss your business’ designated Annual Report due date, you have a one month grace period to file. At the end of that period, you will incur a $25 penalty and you risk having your business administratively dissolved.
16) Check Out Rhode Island Small Business Resources
You’re not on this journey alone. There are plenty of free resources available to make starting and growing your business a smoother, easier process.
You can find a wealth of great information and support for your business on SBA.gov. Networking events, loan opportunities, counseling services, and more – you can find it all on the Rhode Island district office webpage. They even provide this helpful document that keeps it all in one place for you. It’s a great jumping-off point to put your business on the path to success.