Rhode Island Business License Basics

Registering a business in Rhode Island involves several important steps. While the idea of starting a company is exciting, many new business owners get bogged down trying to figure out which forms to file or which agencies to contact.

This guide breaks down the Rhode Island business registration process into easy-to-follow steps. We’ll walk you through each stage, from choosing a business structure to obtaining necessary licenses so you can quickly launch your business.

Related: Starting A Business In Rhode Island Checklist

Step 1: Business Structure

With a solid idea in place, the first step of registering a business in Rhode Island is to create the business structure (also called a business entity). A business structure refers to how a business will be legally organized, operated, and taxed. Understanding the different types of business structures is important, as each one will impact your personal liability, tax obligations, and business operations.

In Rhode Island, there are four common types of business entities, each with its unique characteristics, pros, and cons:

Related: Comparison of Business Structures

Sole proprietorship: This is the simplest form of business structure, where one person owns and runs everything. There’s no separation between the owner and the business, meaning the owner is personally responsible for all debts and legal actions against the business. Taxes are straightforward as the owner reports business income on their personal tax return.

Pros

• Easy and inexpensive to set up
• Complete control over business decisions
• Minimal regulatory requirements

Cons

• Unlimited personal liability for business debts and obligations
• Limited in raising capital

Related: How to Start a Sole Proprietorship in Rhode Island

General partnership: Similar to a sole proprietorship, but with two or more people running the business. Partners share profits and losses, and like sole proprietors, they are personally responsible for the business’s debts and legal issues. Partnerships also don’t pay taxes as a separate entity; instead, each partner includes their share of profits or losses in their personal tax filings.

Pros

• Relatively easy to establish
• Shared management and financial responsibility
• More resources and expertise are available to run the business

Cons

• Unlimited personal liability for each partner
• Potential conflicts between partners
• Limited access to capital

Corporation: A corporation is a more complex entity that is separate from its owners, providing personal liability protection. Owners, known as shareholders, are not personally responsible for the corporation’s debts or legal problems. In addition to borrowing money, corporations can raise money by selling stock. This entity has more administrative requirements, like having board meetings, issuing shares, and record-keeping.

Pros

• Limited liability for shareholders
• Additional source of funding by issuing stocks
• Transferable ownership and perpetual existence

Cons

• More expensive and time-consuming to set up
• Potential for double taxation (corporate and personal income tax)
• Increased administrative requirements and paperwork

Related: How to Form a Rhode Island Corporation

Limited Liability Company (LLC): An LLC blends elements of sole proprietorships, partnerships, and corporations. Owners (members) have limited personal liability for business debts and actions. This structure offers flexibility in management as it has less strict requirements than a corporation.

Pros

• Limited liability for members (owners)
• Tax flexibility (can choose to be taxed as a sole proprietorship, partnership, C corporation, or S corporation)
• Fewer formalities and regulations compared to corporations

Cons

• More complex and expensive to establish than a sole proprietorship or partnership

In conclusion, it’s important to understand the unique characteristics of each type of business structure and carefully weigh the pros and cons before making a decision.

Related: How to Form a Rhode Island LLC

Step 2: Business Name

After choosing a business structure, many Rhode Island entrepreneurs focus on registering a business name.

Sole proprietorships and general partnerships must register a Rhode Island Trade Name with the City or Town Clerk’s office in each location where the business will operate if they plan to operate under a name different from the owner’s legal name.

For example, Sarah Johnson, a sole proprietor in Providence, wants to open a bakery called “Ocean State Sweets.” Since she’s not using only her full first and last name for the business, Sarah needs to register a Trade Name. To do this, she’ll visit the Providence City Clerk’s office to file a Trade Name Certificate.

Corporations and LLCs typically won’t go through this process as they create the business’s legal name during formation. If these entities wish to operate under a different name or additional name, they can register a Fictitious Business Name with the Rhode Island Department of State. These entities may not register a name that is the same or similar to another business in Rhode Island and must do a Rhode Island business name search on the Rhode Island Department of State’s name database before requesting one. 

Step 3: Federal Employer Identification Number 

The next task for many new businesses is obtaining a Federal Employer Identification Number (FEIN), also known as an Employer Identification Number (EIN). This unique nine-digit identifier is issued by the Internal Revenue Service (IRS) and serves as a business’s tax ID number.

An EIN is necessary for:

• Businesses with employees
• Corporations, partnerships, and multi-member LLCs

While sole proprietorships and single-member LLCs without employees can use the owner’s Social Security number for tax purposes, they may still choose to obtain an EIN.

Obtaining an EIN is a straightforward and cost-free process. The most efficient method is to apply online through the IRS website, which typically takes only a few minutes to complete. For those who prefer alternative methods, applications can be submitted by mail or fax using Form SS-4, though these options generally require more time.

How to Apply for a FEIN

Step 4: Professional & Industry Licensing

Rhode Island requires professional licenses and registrations for numerous occupations. Some professions requiring licensing include:

• Accountants
• Landscapers
• Auto body repair technicians
• Brewpub operators
• Real estate agents
• Cosmetologists
• Electricians
• Plumbers
• Architects
• Nurses

This list is not exhaustive, and requirements can change. For detailed information on fees and licensing requirements, visit the State of Rhode Island Department of Business Regulation website.

Beyond professional licenses, some industries require specific operational licenses. A couple of these include:

• Food Service License – Rhode Island Department of Health: Required for restaurants, cafes, and food trucks
• Child Care Center License – Rhode Island Department of Children, Youth & Families: Necessary for operating daycare facilities

Before launching your business, research your industry’s specific licensing requirements.

Step 5: Business Tax Registration

In Rhode Island, most new businesses must complete the Business Application and Registration (BAR) process. This system streamlines registration, allowing businesses to register with multiple state agencies simultaneously.

Businesses that need to register include those that:

• Corporations, partnerships, or Limited Liability Companies
• Those with Rhode Island employees
• Businesses needing a Sales Tax Permit
  • Selling products such as retail items, clothing, and electronics or
  • Selling certain services such as repairs, maintenance, or catering
• Entities that withhold taxes

Sole proprietors and single-member LLCs without employees typically don’t need to complete this process because they report business income on their personal tax returns and don’t have separate tax obligations at the state level. However, if they plan to hire employees or sell taxable goods or services, they would need to register.

Step 6: Resale Certificate

A Rhode Island Resale Certificate, also known as a wholesale license, is useful for businesses that buy merchandise to resell to customers. This document allows these businesses to purchase inventory without paying sales tax. Later, they collect sales tax from the end customer when the product is sold.

Who needs a Rhode Island Resale Certificate?

• Retailers selling physical goods
• Wholesalers
• Manufacturers purchasing components for products they will sell
• Online sellers with nexus in Rhode Island

To obtain a Rhode Island Resale Certificate, businesses will first need their Sales Tax Permit from the Rhode Island Division of Taxation, which would be obtained through the Business Application and Registration in the previous step.

Step 7: Local Business Licenses

While there isn’t a statewide general business license requirement in Rhode Island, many cities and towns require local business licenses. These local licenses help municipalities regulate businesses operating within their jurisdictions and can vary significantly between locations. The city or town clerk’s office or local business licensing department typically issues these licenses.

Common local licenses include:

• Retail Stores: Retail establishments typically need a local business license to operate. The City of Providence, for example, requires retail stores to obtain a business license from the Board of Licenses.
• Restaurants: Food service establishments usually require local health permits and business licenses. In Newport, restaurants must obtain a Victualing license from the City Clerk’s office.
• Professional Services: Businesses offering professional services often need local licenses. The City of Warwick requires professional service providers to obtain a business registration certificate from the Tax Collector’s office.
• Contractors: Many municipalities require contractors to obtain local licenses. In Cranston, general contractors must secure a contractor’s license from the Building Inspections Department.
• Salons and Barbershops: Personal care businesses typically need local licenses to operate. The Town of East Greenwich requires beauty salons and barbershops to obtain a business license from the Town Clerk’s office.

Given the differences in licensing between Rhode Island municipalities, business owners need to check with their local government offices for specific licensing needs in their area. Contact your city or town hall’s business licensing department to understand the exact requirements for your location and type of business.

Step 8: Local Building & Zoning Permits

When establishing a business location in Rhode Island, it’s beneficial to understand the building and zoning requirements before finalizing a property purchase or lease. These regulations vary by municipality but generally involve similar processes.

Zoning Regulations: These rules determine how property in specific areas can be used. Business owners should verify that their intended location is zoned for their type of business. This information is typically available from the local planning or zoning department.

Home-Based Businesses: Some areas have specific rules for businesses operating from residential properties. For instance, the City of Pawtucket has regulations for home-based businesses, which the Zoning Board of Review oversees.

Building Permits: These are necessary for new construction, renovations, or changes to existing structures. The local building department usually handles these permits.

Certificate of Occupancy: Many Rhode Island municipalities require this document before a business can operate in a building. It confirms that the structure complies with building codes and is safe for occupancy.

Sign Permits: Many localities regulate business signage. The zoning or planning department often handles these permits.

Business owners should consult with their local municipal offices in the planning process to understand and fulfill all necessary building and zoning requirements for their specific location and business type.