Are you looking to form a Rhode Island professional corporation, but you’re not familiar with the incorporation process?
Professional corporations are those owned and operated by licensed professionals, like doctors, lawyers, and architects. There are quite a few important steps you’ll need to take to create your Rhode Island professional corporation and maintain it, so this guide will outline the rules and regulations involved with this process.
To get started, please reference our 12-step guide below or hire a professional online incorporation service like LegalZoom.
How to Form a Rhode Island Professional Corporation (in 12 Steps)
Step One) Determine Whether a Professional Corporation is the Right Choice
A professional corporation ― also referred to in the state of Rhode Island as a professional service corporation ― is a business structure formed by licensed professionals. In Rhode Island, the following licensed professions are permitted to form a professional corporation: physicians, dentists, attorneys at law, professional engineers, architects, certified public accountants and licensed public accountants, veterinarians, chiropractors, podiatrists, registered nurses, optometrists, physical therapists, landscape architects, land surveyors, opticians, physician assistants, psychologists, and midwives or nurse-midwives.
Before beginning the process of forming a Rhode Island professional corporation, it’s very helpful to review your business’ objectives and become familiar with your options as a business owner.
Should you form a professional corporation?
This guide explains how to create a Rhode Island professional corporation. When starting a new business, forming a professional corporation is just one of several options. Many businesses instead choose to set up a professional limited liability company, or PLLC.
In general, the difference between the PLLC and a Rhode Island professional service corporation is the same as the difference between a regular LLC and corporation ― namely, that the corporation is a more formal and less flexible business type. Not sure which option is right for you? Read this guide from the SBA.
How will ownership be divided?
A professional corporation issues “shares” to its owners, who are known as its shareholders. Before forming your professional corporation, it’s important to decide how shares of ownership will be divided among the owners.
It’s crucial to note that any shareholders, directors, or officers of a professional corporation must all practice the same profession. In other words, people who are not physicians cannot hold these positions in a professional service corporation for physicians.
How will the professional corporation to be managed?
Corporations have two layers of control. The first layer is the Board of Directors. Directors are elected by the shareholders and meet periodically (as a “Board”) to make key decisions and set the strategic direction of the company.
The Board of Directors appoints “officers” who are responsible for carrying out the Board’s initiatives and managing the corporation’s day-to-day activities. Directors and officers can be (and often are) the same people. Before forming your corporation you should determine who your initial director(s) will be.
Step Two) Choose a Name
One of the most important aspects of the incorporation process is naming your business. There are three major elements to consider when choosing a name:
When naming a professional corporation in the state of Rhode Island, you will need to include the words “professional service corporation” or the abbreviation “PSC.” Your professional corporation’s name also cannot include any words or abbreviations that indicate other business types, like the phrase “limited liability company” or the initials “LLC.” You also are not allowed to include words that refer to certain types of businesses (like “bank” or “law office”) unless your business fits those descriptions.
In addition to the legal considerations, you might want to identify your line of business or your mission in your company name. For example, you can display any closely held values in your name, like using the word “green” for environmentally friendly businesses.
A Name You’re Proud of
Keep in mind that this is your business, so you should choose a name that you’re proud of, and that you enjoy sharing with potential customers. You should also make sure it sounds good when spoken aloud, and also looks good when written down.
Check Whether Your Preferred Name is Available
Visit the Rhode Island Secretary of State’s website and search the Corporate Database to check whether it is already in use. If it’s not unique enough, you may need to tweak it or come up with a new name altogether.
Consider reserving a name
For a $50 fee, you can instantly reserve a name online for up to 120 days. This will ensure that your name is not taken by another company during the incorporation process.
Step Three) Select a Registered Agent
Rhode Island professional corporations must designate a person or business to receive legal notices on behalf of the company. This important point of contact is known as the registered agent. You will be required to list the registered agent’s name and address when filing the Articles of Incorporation in step four.
Who can be my registered agent?
A registered agent must have a physical address within the state of Rhode Island where mail and legal notices can be served during regular business hours. You can hire a service to act as your registered agent, serve as your own registered agent, or even use an accountant or other business professional’s address – with their consent, of course.
The Rhode Island Secretary of State says that,
The agent must be a Rhode Island resident or entity qualified to do business in this state. A Rhode Island street address is required, NOT a P.O Box. In addition to all legal service of process, other important correspondence from the state will be sent to this address.”
We recommend hiring a professional service to act as your registered agent. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off the public record. For a list of the top 5 registered agent services, check out our guide.
Step Four) Complete Your Articles of Incorporation
This is THE document that formally registers your professional corporation with the state of Rhode Island. In Rhode Island, the Articles of Incorporation for a professional corporation must be filed by mail with the Rhode Island Secretary of State’s Division of Business Services. Online filings are not currently accepted. Note that you must also file a certificate showing that the professional corporation has obtained professional liability insurance covering the corporation and its employees. In addition, for professional corporations formed for the purpose of rendering engineering services, you will also need to submit evidence of prior approval from the Rhode Island Department of Business Regulation, Board of Design Professionals.
Keep in mind that you are acting as the incorporator when you fill out and submit the Articles of Incorporation. You should sign as the incorporator before submitting the document.
|Cost to File||Varies based on number of authorized shares (minimum of $230)|
|Time to Complete Filing||1-2 business days (plus mailing time)|
|Agency||Rhode Island Secretary of State, Division of Business Services|
Division of Business Services
|Agency contact info for filing questions||(401) 222-3040|
Step Five) Establish a Corporate Record
Professional corporations are required under Rhode Island law to document and keep a permanent record of all important company decisions.
The official corporate record may be kept at the professional corporation’s principal place of business, or stored in a safe location elsewhere. You should take the opportunity to set up a secure digital or physical location for storing company records as soon as possible.
Step Six) Designate a Board of Directors
The incorporator is responsible for selecting initial director(s) of the professional corporation. The incorporator should record initial director appointments in a signed document and file it to the corporate record. This document is known as the “incorporator’s statement.” A sample incorporator’s statement can be found here.
The initial directors will serve until new directors are elected at an annual shareholder meeting, or as otherwise indicated in the bylaws. The incorporator may also serve as an initial director. Keep in mind that your directors must all share the same profession as the one the professional corporation was formed for.
Step Seven) Create Corporate Bylaws
Corporate bylaws set out the rules and procedures for how the professional corporation will operate. Some important topics typically covered in the bylaws include:
- How shareholders will conduct votes
- The total number of directors and how each director will be elected
- How often the board of directors will meet
- The types of officer roles that will be appointed
- Procedures for resolving internal disputes
In Rhode Island, all corporations are required to adopt bylaws.
Bylaws help your business run smoothly, and are sometimes required by financial institutions for opening business bank accounts or acquiring loans.
Either the incorporator or the initial directors may prepare the company bylaws. The bylaws should be recorded in an internal company document, signed by the incorporator or a director, and filed to the corporate record. The bylaws are not filed with the state of Rhode Island.
Popular Strategies for Preparing Bylaws:
- Use a free online template. Northwest Registered Agent has a great free template you can download.
- Hire a lawyer to draft the bylaws. If your business has investors, is already profitable, or has multiple co-owners, we strongly encourage you to hire a lawyer experienced in Rhode Island corporate law to help you draft suitable bylaws. Look through Avvo’s directory of KY attorneys you can work with.
Step Eight) Hold First Board Meeting
After designating a board of directors and preparing bylaws, the new professional corporation should call for an initial board meeting. The incorporator often arranges and attends this first meeting. During the first board meeting, the initial directors should plan to cover the following topics:
- Review and approve corporate bylaws
- Designate officers to manage day-to-day business affairs
- Choose a bank
- Approve issuance of stock certificates
- Determine whether the company should elect to be taxed as a C corporation or S corporation (see step nine for more details)
Recording Meeting Minutes: a detailed record of all key discussions and decisions during the board meeting should be prepared and distributed to all board members for their review and approval. This record is known as the “minutes.” A copy of the minutes should be sent to each director for review and filed in the company record.
Step Nine) Handle Tax Obligations
You’ll need a federal tax ID number (EIN) to operate a professional corporation in Rhode Island. You can obtain your EIN from the IRS for free, and it’s a fairly painless and simple process. An EIN enables your professional corporation to hire employees, file corporate taxes, open business bank accounts, and more.
A major decision for any professional corporation is determining whether to be taxed as a C corporation or an S corporation. Take a look at how these two formats differ:
- C Corp: The majority of professional corporations are C corporations, as they are subject to far fewer restrictions than S corps. With a C corp, profits are taxed at the corporate level, and again on the personal tax returns of the shareholders, resulting in what’s commonly referred to as double taxation.
- S Corp: This is only an option if your professional corporation has fewer than 100 shareholders, only issues one class of stock, is not owned by another business entity, and does not have any foreign shareholders. If your corporation meets these requirements, you can select the S corp’s pass-through taxation which eliminates the double taxation issue of C corps. S corp dividends are not taxable.
Businesses incorporated in Rhode Island are generally subject to the Business Corporation Tax. Depending on the nature of your professional corporation’s business activities, it may also be subject to other state business taxes in Rhode Island, such as sales and use tax. You can find out more information about Rhode Island state taxes on the Division of Taxation’s website. Many business taxes can also be filed online through the Rhode Island Division of Taxation’s website.
Many cities and counties also impose their own taxes. You should contact your local revenue or tax department to confirm your professional corporation’s local tax obligations. Resources for businesses located in the four largest cities in Rhode Island are available online:
Step Ten) Obtain Business Licenses and Permits
Businesses in Rhode Island are not required to obtain a generic state business license. However, certain types of businesses are required to obtain licenses from state agencies. The Rhode Island Department of Labor and Training’s website includes a list of licensed occupations in the state.
You should also be sure to contact your city and county to confirm if any local licenses, permits, or registrations will be required for your business.
Step Eleven) Acquire Insurance
In Rhode Island, employers generally must provide workers’ compensation insurance for their employees. There are few exceptions to this requirement. If you intend to hire employees, you should visit the Department of Labor and Training’s website for more information about workers’ compensation in the state.
As noted above in Step Four, you will also need to obtain professional liability insurance. When filing the Articles of Incorporation for your professional corporation, you will need to file a certificate showing that your professional corporation has obtained this insurance.
In addition, you should also pursue general liability insurance and other more industry-specific types of insurance. Because professional corporations are specialized businesses, you will most likely require insurance policies based on your occupation.
Step Twelve) Open a Business Bank Account
To operate a professional corporation and receive the limited liability protection that comes with it, you have to keep your personal assets entirely separate from your business assets. Due to this requirement, it’s strongly advised that you acquire a business bank account for your corporation.
Get Help Forming a Professional Corporation
The process of forming a professional corporation in any state can be a lengthy one. If you run into any trouble along the way, remember that there are plenty of organizations that can help you navigate the incorporation process.
Online Incorporation Services
If you would like to hire an affordable business incorporation service to create your professional corporation for you, services like LegalZoom and MyCorporation can help you out. These service providers can handle most of the formation process, while still charging much lower rates than a business attorney’s fees.
There isn’t the same level of personalization that a lawyer can provide, but online incorporation services can still be a tremendous help. The only major issue with these service providers is the fact that they can’t provide any actual legal advice, so you need to know what you want ahead of time.
Rhode Island Business Attorney
There are some situations where hiring a business lawyer is a preferable route to using an online incorporation service. The professional corporation as a business structure can be highly complicated and specialized, and if you want to have the peace of mind that every single step was taken care of by a true expert, hiring a business attorney to form your Rhode Island professional corporation is the way to go.
If you would like to pursue this route, there are some convenient services that can help you choose the right lawyer for your business. We like to use Avvo, which has extensive reviews and ratings for hundreds of Rhode Island business lawyers, which can make it much easier to select an attorney who has your best interests in mind, and also has the expertise to get the job done right.
Rhode Island SBDC
If you need help with your Rhode Island business, you can contact the Rhode Island Small Business Development Center, or RISBDC. Business counselors are available at several locations in the state to help with issues such as business planning, loan applications, licenses and permits, and marketing. You can also find business resources and information about training and other events on the RISBDC website.
The Rhode Island District Office of the U.S. Small Business Administration is another great resources for small businesses in Rhode Island. You can find business resources, information about local small business events, news, and more on its website.