How to Form a Professional Corporation in Rhode Island


Steve Bennett
Steve Bennett
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Form a Professional Corporation in Rhode Island

Are you considering starting a professional corporation in Rhode Island? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Rhode Island can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Rhode Island, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Rhode Island!

What is a Professional Corporation in Rhode Island?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Rhode Island. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Rhode Island.

– LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Rhode Island if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Rhode Island

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Resident Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Rhode Island, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Rhode Island

After you have decided on the idea to form a professional corporation in Rhode Island, deciding the name for your corporation is significant. There is a complete guide on Rhode Island LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Rhode Island, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. To keep the name, you must file a name reservation application with Rhode Island Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Rhode Island Resident Agent

The next step in forming a professional corporation is hiring the Rhode Island Resident Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Rhode Island. Forming a professional corporation for your service will be easier if you have Resident Agent in Rhode Island.

Alternatively, you can serve as your own Rhode Island Resident Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Rhode Island.

Step 4: File the Articles of Incorporation in Rhode Island

After you hire a Rhode Island Resident Agent to form a professional corporation, the next step is to file the Rhode Island Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Resident Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Rhode Island may be done with three methods that are online, by mail and in-person. The Articles of Incorporation fee may vary from different states. However, in Rhode Island, it costs $230 for online, by mail filing or in person filing.. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to or drop it off in person at Division of Business Services, 148 W. River Street, Providence, RI 02904.

Step 5: Write an Operating Agreement in Rhode Island

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Rhode Island operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Rhode Island

The next step is to appoint the initial board of directors in your PC in Rhode Island. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Rhode Island SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Rhode Island

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Rhode Island can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Rhode Island might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Rhode Island

Before your professional corporation operates in Rhode Island, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Rhode Island, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Rhode Island

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Rhode Island classification of taxes for the taxes an LLC in Rhode Island has to pay.

Important Information

Maintaining Professional and Business License in Rhode Island

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Rhode Island

In Rhode Island, you will be required to submit a report each year. The owners’ and Resident Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Rhode Island, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Rhode Island

A professional corporation takes a lot of time to process and pursue. However, with the help of the Rhode Island Resident Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Rhode Island.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What are the requirements to form a Professional Corporation in Rhode Island?
To form a Professional Corporation in Rhode Island, you must file Articles of Incorporation with the Rhode Island Secretary of State’s office. The articles must include the name of the professional corporation, the purpose of the corporation, the duration of the corporation, the name and address of the registered agent, the names and addresses of the incorporators, and the number of shares the corporation is authorized to issue.
How much does it cost to form a Professional Corporation in Rhode Island?
The cost to form a Professional Corporation in Rhode Island is $150. This fee must be paid to the Rhode Island Secretary of State’s office in order to file the Articles of Incorporation.
What is the filing time for a Professional Corporation in Rhode Island?
The filing time for a Professional Corporation in Rhode Island is typically 3-5 business days.
What documents do I need to form a Professional Corporation in Rhode Island?
To form a Professional Corporation in Rhode Island, you must file Articles of Incorporation with the Rhode Island Secretary of State’s office. The articles must include the name of the professional corporation, the purpose of the corporation, the duration of the corporation, the name and address of the registered agent, the names and addresses of the incorporators, and the number of shares the corporation is authorized to issue.
Does Rhode Island require an annual report for Professional Corporations?
Yes, Rhode Island requires Professional Corporations to file an annual report with the Rhode Island Secretary of State’s office. The report must include the name of the professional corporation, the name and address of the registered agent, and the names and addresses of the directors and officers of the corporation.
How do I file an annual report for a Professional Corporation in Rhode Island?
The annual report for a Professional Corporation in Rhode Island must be filed with the Rhode Island Secretary of State’s office. The filing fee is $50.
Does Rhode Island require Professional Corporations to hold annual meetings?
Yes, Rhode Island requires Professional Corporations to hold annual meetings. The meetings must be held in accordance with the corporation’s bylaws.
Does Rhode Island require Professional Corporations to keep records?
Yes, Rhode Island requires Professional Corporations to keep records. The records must include corporate minutes, financial statements, and other documents related to the corporation’s activities.
Are there any tax benefits to forming a Professional Corporation in Rhode Island?
Yes, forming a Professional Corporation in Rhode Island may provide certain tax benefits. For example, Professional Corporations are subject to lower corporate income tax rates than other types of business entities.
Does Rhode Island require Professional Corporations to register with the state?
Yes, Rhode Island requires Professional Corporations to register with the state. All Professional Corporations must register with the Rhode Island Secretary of State’s office.
Does Rhode Island allow Professional Corporations to conduct business outside the state?
Yes, Rhode Island allows Professional Corporations to conduct business outside the state. However, the corporation must comply with the laws of any other states in which it does business.
Does Rhode Island allow Professional Corporations to issue stock?
Yes, Rhode Island allows Professional Corporations to issue stock. The Articles of Incorporation must specify the number of authorized shares the corporation is allowed to issue.
Are there any restrictions on the transfer of stock in a Professional Corporation in Rhode Island?
Yes, there are restrictions on the transfer of stock in a Professional Corporation in Rhode Island. The corporation’s articles of incorporation and bylaws may contain restrictions on the transfer of stock.
Does Rhode Island require Professional Corporations to obtain a license?
Yes, Rhode Island requires Professional Corporations to obtain a license. The type of license required will depend on the nature of the business and the services the corporation provides.
Are there any special requirements for Professional Corporations in Rhode Island?
Yes, there are special requirements for Professional Corporations in Rhode Island. For example, the Articles of Incorporation must include the name and address of the registered agent, the names and addresses of the incorporators, and the number of shares the corporation is authorized to issue.
What are the reporting requirements for Professional Corporations in Rhode Island?
Professional Corporations in Rhode Island must file an annual report with the Rhode Island Secretary of State’s office. The report must include the name of the professional corporation, the name and address of the registered agent, and the names and addresses of the directors and officers of the corporation.
Does Rhode Island require Professional Corporations to obtain a surety bond?
No, Rhode Island does not require Professional Corporations to obtain a surety bond.
Can Professional Corporations in Rhode Island merge with other corporations?
Yes, Professional Corporations in Rhode Island can merge with other corporations. The merger must be approved by the Rhode Island Secretary of State’s office.
Can Professional Corporations in Rhode Island be dissolved?
Yes, Professional Corporations in Rhode Island can be dissolved. The dissolution must be approved by the Rhode Island Secretary of State’s office.
Does Rhode Island require Professional Corporations to obtain liability insurance?
Yes, Rhode Island requires Professional Corporations to obtain liability insurance. The amount of liability insurance required will depend on the type of business and services the corporation provides.
Are there any special requirements for foreign Professional Corporations in Rhode Island?
Yes, foreign Professional Corporations in Rhode Island must register with the Rhode Island Secretary of State’s office and obtain a certificate of authority. The foreign corporation must also comply with Rhode Island’s corporate laws and regulations.
What are the penalties for failing to comply with Rhode Island’s corporate laws and regulations?
The penalties for failing to comply with Rhode Island’s corporate laws and regulations can include fines and/or imprisonment.
Does Rhode Island allow Professional Corporations to purchase and sell real estate?
Yes, Rhode Island allows Professional Corporations to purchase and sell real estate. The corporation must comply with all applicable laws and regulations when buying or selling real estate.
Does Rhode Island allow Professional Corporations to borrow money?
Yes, Rhode Island allows Professional Corporations to borrow money. The corporation must comply with all applicable laws and regulations when borrowing money.
Does Rhode Island allow Professional Corporations to enter into contracts?
Yes, Rhode Island allows Professional Corporations to enter into contracts. The corporation must comply with all applicable laws and regulations when entering into contracts.
Does Rhode Island require Professional Corporations to obtain licenses for certain professions?
Yes, Rhode Island requires Professional Corporations to obtain licenses for certain professions. For example, Professional Corporations engaged in the practice of law or medicine must obtain a license from the Rhode Island Department of Health.
What is the process for forming a professional corporation in Rhode Island?
To form a professional corporation in Rhode Island, you must first file the Certificate of Incorporation with the Rhode Island Secretary of State. This must include the name and address of the corporation, the name and address of the incorporator, and the purpose of the corporation. You must also publish a notice of incorporation in two local newspapers and file a Statement of Professional Corporation with the Secretary of State.
What is the filing fee for forming a professional corporation in Rhode Island?
The filing fee for forming a professional corporation in Rhode Island is $90.
What are the requirements for naming a professional corporation in Rhode Island?
The name of the professional corporation must include a term indicating it is a professional corporation, such as “professional corporation”, “professional association”, “chartered”, “registered”, “incorporated”, or “limited”. The name must also be distinguishable from any existing Rhode Island business.
What is the Registered Agent requirement for a professional corporation in Rhode Island?
All Rhode Island professional corporations must designate and maintain a Registered Agent in the state. The Registered Agent must be a resident of Rhode Island or a Rhode Island-authorized business entity.
Is there a minimum capital requirement for a professional corporation in Rhode Island?
No, there is no minimum capital requirement for a professional corporation in Rhode Island.
Are there any annual report requirements for a professional corporation in Rhode Island?
Yes, all professional corporations in Rhode Island must file an Annual Report with the Secretary of State. The report must include the name and address of the corporation, the name and address of the directors, and any changes to the corporation since the previous filing.
How much does it cost to file an Annual Report for a professional corporation in Rhode Island?
The filing fee for an Annual Report for a professional corporation in Rhode Island is $50.
How can I get help with forming a professional corporation in Rhode Island?
The Rhode Island Secretary of State has resources available to help with forming a professional corporation in the state, including forms, filing instructions, and contact information. You can also consult a qualified attorney or accountant for assistance.

Also Read

Why Rhode Island Professional Corporation is So Important

Professional corporations, or PCs, are a type of business entity specifically designed for professionals in fields requiring a license to practice. This includes doctors, lawyers, architects, accountants, and other individuals who provide specialized services. By forming a professional corporation, these professionals can protect their personal assets from business liabilities and debts, while also enjoying the tax benefits associated with corporate status.

In Rhode Island, the formation of a professional corporation is not only a prudent financial decision but also a legal requirement for professionals seeking to operate their own practice. By establishing a PC, professionals can shield themselves from personal liability for the acts of their colleagues or employees, ensuring that their personal assets remain protected in the event of a lawsuit or other legal action.

In addition to liability protection, professional corporations also offer additional benefits such as enhanced credibility and professionalism. By operating as a PC, professionals can signify to clients, colleagues, and competitors that they take their business seriously and adhere to the highest standards of ethics and professionalism. This can help attract more clients and build a solid reputation within their industry.

Furthermore, forming a professional corporation can also facilitate growth and expansion opportunities. With a clear business structure in place, professionals can more easily bring on partners, investors, or additional employees to help scale their practice. This can lead to increased revenue and profitability, as well as the ability to offer a wider range of services to clients.

In today’s competitive business environment, the importance of having a professional corporation in place cannot be overstated. Not only does it offer legal and financial protection for professionals, but it also provides a solid foundation for growth and success. Without the structure and safeguards provided by a professional corporation, professionals may be at risk of personal liability, financial instability, and missed opportunities for growth.

For professionals in Rhode Island, forming a professional corporation should be a top priority when starting or expanding their practice. By taking the necessary steps to establish a PC, professionals can protect themselves, their assets, and their reputation, ensuring a successful and sustainable business for years to come.

In conclusion, the significance of Rhode Island Professional Corporation cannot be understated. It provides essential legal and financial protections for professionals in licensed fields, while also offering credibility, professionalism, and opportunities for growth. Professionals in Rhode Island should prioritize the formation of a professional corporation to secure their future success and prosperity.

Conclusion

In forming a professional corporation in Rhode Island, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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