Many self-employed Rhode Island residents are eager to start their businesses. The simplest and most rational solution to this issue is to join the ranks of sole proprietors.
Organizing and managing a business in this format is the least difficult in America and has no service pitfalls. Although, future business owners will have to adhere to certain norms. Also, be prepared that you will have to face some restrictions regarding the functions of your sole proprietorship.
So, the main task of this manual is to help you answer the essential question – is the business format of an individual enterprise right for you? And, of course, we will tell you which aspects to pay attention to while opening a sole proprietorship and how to set up a business structure in this vein properly.
It is vital: business owners should be aware that a sole proprietorship is not a guarantor of the safety of personal assets. But with LLC, on the contrary – the assets will be safe. LLC is easy to organize by doing forming it yourself or hiring a cheap LLC service.
The Proper Way To Start Business As The Rhode Island Sole Proprietor
There is no algorithm for organizing the business work of an individual entrepreneur in Rhode Island as for LLC. In addition, the state does not charge additional service fees for the formation or management of this type of business or company. Are you looking to become an individual business owner and start a sole proprietorship in Rhode Island? – Just start working!
Though, you still have to go through several additional legal formalities. These service stages are optional. Although many sole proprietors prefer not to neglect them, compliance with these formalities guarantees the legal protection of their interests.
Applying For DBAs
Almost every company and business owner prefers doing business as a DBA. There are many benefits to running a business under an assumed name compared with an entity or LLC. We are talking primarily about creating the business image of your company. Potential clients and consumers will find this approach more professional and give you more confidence. It turns out that a company that uses the real name of its owner is often not competitive.
Let’s clarify that a company owned by sole proprietors can use the DBA to open and manage a business bank account. Customers will appreciate it as one more advantage in favor of the business owner, so they feel more comfortable.
Many entrepreneurs in Rhode Island use “fictitious names” for their business objects. They choose such names and register them with the state authorities. But first, they need to make sure that the name is available. You don’t have to search for this name all over the Internet to find out if you can take it.
Today there is a convenient service – the state Name Availability Database, where you will check the availability of the name. You can also get this information by calling (401) 222-3040). If everything is fine, and the name is available, register it with the Secretary of State. To do this, submit the Fictitious Business Name Statement and send it to the Rhode Island state office.
You will learn more details on the DBA registration in the state of Rhode Island if you read our updated guide. Here you see full information about fictitious names of Rhode Island State.
Clarification & Compliance with Tax Requirements
You can run your business in this format and not hire third-party employees. In this case, you do not need to obtain an EIN (Federal Tax Identification Number) because your Social Security number will replace it. Of course, it would be correct to take care of your confidentiality and still use the EIN and not the SSN.
The nature and the structure of the business activity of individual entrepreneurship determine the list of tax requirements that the state will put forward (as with LLC).
Some business entities in the state of Rhode Island pay such tax fees to the state as a sales tax and a use fee. For each individual industry, there are different types of taxes that you need to know before launching your company. By the way, some companies pay several taxes to the state treasury at once, including industry fees. Also, many businesses in Rhode Island have to pay local taxes. They differ, depending on the specific city of this state.
You will find detailed information about all types of current taxes here, in Rhode Island’s Business Tax Filing Services section. Also, for a more convenient search for related information, an entrepreneur can refer to the Rhode Island Business Tax Filings platform here.
Business Licenses & Permits
You are exempt from obtaining a general license if you do business in the state of Rhode Island as an individual entrepreneur. In many other American states, such a permit is mandatory. But this does not mean that you do not need licenses at all. In Rhode Island, you still have to run a legal business, and for this, you need to get licenses and/or permits based on the specifics of your business.
So, here you may need occupational licenses, which depend on the field you work. Also, Rhode Island entrepreneurs receive industry permits to work in. For example, these are companies of the real estate sector, brokers, the automotive sector, and much more. In each case, you get a special license.
You will find more about all this here. To determine the license that your company needs, go to the Department of Business Regulation License Lookup website.
Also, local licensing regulations apply in this state. In each city and county of Rhode Island, entrepreneurs receive special local licenses. For example, in the cities such as Providence and Richmond, businessmen must have local permits to run their businesses. To be aware of the latest license requirements in your municipality, contact the local government of your city or county.
Rhode Island Sole Proprietor: The Notion & Essence
A sole proprietor is not a legal entity! But any corporation and limited liability company (LLC) has this status. As a sole proprietor, you run the business alone (register and manage it on your behalf). It is worth noting that this gives the business owner advantages, though, imposes additional obligations and responsibilities on him.
Make Sure to Pay Attention to the Following Three Aspects
There are obligations to pay taxes to the state
A business owner and an individual entrepreneur are the same people. It means that filing tax returns is not a requirement, as with an entity or LLC. You need to declare your income and expenses and fill out the declaration of an individual;
Business owners who are registered as sole proprietors have the right to enter into contracts on their behalf, unlike an entity. Also, receiving profit from clients, in checks they can indicate their name in the recipient column;
Flexible terms of business management
The advantage difference between individual entrepreneurship and any entity is the ability to combine work and personal assets. Whereas corporations and LLCs must separate personal assets from company assets. It has several positive and negative aspects. For example, if you have financial difficulties, creditors can seize or confiscate your personal property (house, car, etc.). In the case of corporations and LLCs (or any entity), creditors do not have this freedom, as their powers only apply to business assets.
Of course, the structure of doing legal business as a sole proprietor is greatly simplified while in Rhode Island. You don’t even have to pay any commission fees provided for the entity or LLC. At the same time, based on the nature and structure of the business activity that you conduct, you will all have to go through a series of entity stages.
The issues of taxation, obtaining licenses, and permits require more detailed consideration. Also, pay attention to the possibility of obtaining and using DBA. These aspects are vital, as their omission can result in unnecessary legal penalties for you.
We have prepared this manual so that you can think over the structure of your business to the smallest detail. Manage it correctly and get more legal profit!