How to Form a Professional Corporation in Rhode Island (2024 Guide)

If you would like to start and learn how to form a corporation in Rhode Island, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in Rhode Island are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in Rhode Island or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

Form a Professional Corporation in Rhode Island

On this page, you’ll learn about the following:

What is a Professional Corporation in Rhode Island?
How to Form a Professional Corporation in Rhode Island
Main Characteristics of a Professional Corporation
FAQs

What is a Professional Corporation in Rhode Island?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the Rhode Island. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in Rhode Island, if you changed your mind.
– WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Rhode Island

To form a Professional Corporation in Rhode Island 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
Accountants
Lawyers and others

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in Rhode Island

After you have decided to form a professional corporation in Rhode Island, you must choose a name for your corporation. Here are some pointers to consider when 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)
Limit of restricted words that need a license.
A unique name is needed with no match
No confusion with a government entity name.

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. You must file a name reservation application in the Rhode Island Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for Rhode Island DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the Rhode Island Resident Agent

The next step in forming a professional corporation is hiring a Resident Agent, who accepts legal paperwork for 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 Resident Agent if you have the time. Usually, in Rhode Island, a Resident Agent costs is ranging from $50 – $150. To make it easier, you can hire Rhode Island Resident Agent Services for your professional corporation.

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Step 4: File the Articles of Incorporation in Rhode Island

After you hire a 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. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

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 state. 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 in Rhode Island is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

About Business
Members and management
Capital contribution
Profit Distribution
Change of membership
Dissolution

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

The next step is to form the first board of directors for your PC in Rhode Island. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the Rhode Island Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In Rhode Island, you must have Three directors in forming your Professional Corporation.

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.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with Rhode Island Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

Name and Purpose of the Corporation
Registered Office and Agent
Shareholders
Board of Directors
Officers
Committees
Indemnification and Insurance
Conflict of Interest
Records and Reports
Amendments
Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in Rhode Island.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in Rhode Island. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

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 four 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 several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in Rhode Island for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in Rhode Island easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in Rhode Island

Before your professional corporation operates in Rhode Island, you must have Rhode Island Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in Rhode Island ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in Rhode Island

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the Rhode Island tax classification for the taxes that an LLC in Rhode Island must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in Rhode Island.

Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
Rhode Island Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in Rhode Island

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in Rhode Island

In Rhode Island, you must submit a report. 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 the report every 1 year in the Rhode Island Secretary of State.

FAQs

What is a professional corporation (PC) in Rhode Island?

A professional corporation in Rhode Island is a business structure that is formed to allow licensed professionals to incorporate their practice and enjoy the benefits of incorporation.

Is a professional corporation right for my business?

This depends on your specific business goals and structure. It’s recommended to consult with a licensed attorney to determine whether a professional corporation would benefit you.

What types of professionals can form a professional corporation in Rhode Island?

Physicians, attorneys, engineers, accountants, architects, and other licensed professionals in Rhode Island can form a professional corporation.

How do I choose the right business structure for my professional practice?

The right business structure for your professional practice largely depends on your business goals and liabilities. It’s important to consult with a licensed attorney to determine the best structure for your practice.

How do I form a professional corporation in Rhode Island?

To form a professional corporation in Rhode Island, you need to file articles of incorporation with the Secretary of State and receive approval from the appropriate licensing board.

What is the process for registering for a business entity certification in Rhode Island?

You need to fill out the Application for Business Entity Certification and file it with the Rhode Island Executive Office of Commerce.

Are there any licensing board requirements regarding a professional corporation in Rhode Island?

Yes. Rhode Island licensing boards require professional corporations to maintain their licenses and meet certain operational criteria.

What are the benefits of forming a professional corporation in Rhode Island?

Some benefits of forming a professional corporation in Rhode Island include liability protection, tax advantages, and the ability to offer ownership interests to shareholders.

What is the liability protection offered by a professional corporation in Rhode Island?

A professional corporation in Rhode Island can offer limited liability protection to its shareholders, protecting their personal assets from business-related liabilities.

Can different licensed professionals form a professional corporation together in Rhode Island?

Yes, different licensed professionals can form a professional corporation together in Rhode Island, so long as they meet licensing board requirements.

Are there any exceptions to the matter of receiving a Certificate of Authority (COA) in Rhode Island?

No, all foreign professional corporations must obtain a COA to do business in the state of Rhode Island.

What is the timeframe for filing my professional corporation’s annual report in Rhode Island?

Your annual report must be filed with the Secretary of State each year prior to March 31st.

Can I change my professional corporation’s name in Rhode Island?

Yes, you may change your professional corporation’s name by filing an amendment to your articles of incorporation with the Secretary of State.

Do I need to have a formal Board of Directors in place for my Rhode Island professional corporation?

No, you are not required to form a board of directors as a professional corporation in Rhode Island.

Are there any residency requirements for forming a professional corporation in Rhode Island?

No, there are no residency requirements for forming a professional corporation in Rhode Island.

Do I have to maintain a registered agent for my Rhode Island professional corporation?

Yes, Rhode Island requires all professional corporations to designate and maintain a registered agent in the state.

Are there any annual franchise taxes involved in operating a professional corporation in Rhode Island?

Yes, professional corporations in Rhode Island must pay annual franchise taxes to maintain their corporate status with the state.

What is the status of the accounting profession under Rhode Island law?

The accounting profession in Rhode Island is recognized as a “licensed profession” and requires a professional license to perform certain activities.

How is a professional corporation taxed in Rhode Island?

A professional corporation in Rhode Island is typically taxed as a C corporation for federal tax purposes.

Can I apply for foreign qualification in another state from my Rhode Island professional corporation?

Yes, you can file for foreign qualification in other states if your Rhode Island professional corporation does business there.

Can I apply for conversion or merger of my Rhode Island professional corporation with another business entity?

Yes, you may apply for the conversion or merger of your Rhode Island professional corporation.

Is it necessary to obtain a certificate for registered trademark through any department in Rhode Island?

Yes, to obtain protection, a registered trademark must be filed with the Rhode Island Secretary of State’s Office.

Are professional corporations required to have shareholder agreements in place in Rhode Island?

Professional corporations are not required by Rhode Island state law to have shareholder agreements, but it is recommended for owners to have an agreement where they give proper representation of the interests of each owner.

Can a professional corporation offer its employees equity shares in Rhode Island?

Yes, a professional corporation in Rhode Island can offer employees equity shares, provided certain regulations are met.

What is the process of dissolving a professional corporation in Rhode Island?

A professional corporation in Rhode Island can voluntarily dissolve by having the boards of directors or the shareholders vote in favor of the dissolution and filing legal forms with the state government.

Can I retrieve and replace my professional corporation’s Certificate of Good Standing in Rhode Island online?

Yes, Rhode Island provides online submit options for Certificate of Good Standing requests.

Will shareholders be assigned with social security numbers or tax identification numbers?

Shareholders that hold equity interest in a professional corporation in Rhode Island is usually assigned Social Security numbers or tax identification numbers.

Is professional indemnity insurance mandatory for Rhode Island professional corporations?

The law does not mandate that Rhode Island professional corporations must obtain professional indemnity insurance, but it is highly recommended for some professions that carry a greater risk of professional liability into practice, such as medical settings or legal practice.

Can I start my professional corporation in Rhode Island using electronic documents?

Yes, via the Rhode Island Secretary of State online database, you can choose the option to use the Automatic Incorporation service to file electronically.

What is a professional corporation in Rhode Island?

A professional corporation is a type of business entity formed specifically for licensed professionals such as doctors, lawyers, and accountants.

What is the purpose of forming a professional corporation in Rhode Island?

The purpose of forming a professional corporation in Rhode Island is to protect the personal assets of the professionals involved while conducting their business.

What are the eligibility criteria to form a professional corporation in Rhode Island?

In Rhode Island, licensed professionals in certain fields such as medicine, law, architecture, and engineering are eligible to form a professional corporation.

Can I operate an unlicensed business as a professional corporation in Rhode Island?

No, Rhode Island law requires that a professional corporation be organized and partially owned by licensed professionals.

Can I form a professional corporation alone in Rhode Island?

No, Rhode Island requires that a professional corporation be organized by at least two licensed professionals.

What types of professionals can form professional corporations in Rhode Island?

Rhode Island law allows licensed professionals such as doctors, dentists, accountants, architects, and engineers to organize as professional corporations.

How much does it cost to form a professional corporation in Rhode Island?

The filing fee for professional corporation formation in Rhode Island is $230.

What documents do I need to form a professional corporation in Rhode Island?

To form a professional corporation in Rhode Island, you will need to file articles of incorporation, obtain a certificate of good standing, and have a registered agent in the state.

What is a certificate of good standing in Rhode Island?

A certificate of good standing is a document issued by the state confirming that a corporation meets all state requirements and is authorized to do business.

Can I change the name of my professional corporation in Rhode Island?

Yes, you can change the name of your professional corporation in Rhode Island. You will need to file a certificate of amendment with the Secretary of State.

What is a registered agent in Rhode Island?

A registered agent is a person or entity designated by a corporation to receive legal notices and other important documents.

Do I need to obtain any business licenses to form a professional corporation in Rhode Island?

Yes, depending on the type of business, you may need to obtain specific professional licenses or permits to operate.

Do I need to pay Rhode Island taxes on professional corporation earnings?

Yes, just like any other business entity, your professional corporation will be subject to Rhode Island taxation.

How can I protect my personal assets as a professional in Rhode Island?

By organizing your practice as a professional corporation, you can limit your liability in the event of a lawsuit or other legal action.

What is liability protection in Rhode Island?

Liability protection is the ability to shield personal assets from the risks and liabilities associated with running a business.

Can a professional corporation engage in business outside of Rhode Island?

Yes, a professional corporation in Rhode Island can conduct business outside of the state subject to applicable laws.

Can I form a single-member professional corporation in Rhode Island?

No, Rhode Island mandates that a professional corporation must have two or more owners.

Does Rhode Island require certain insurance coverage for professional corporations?

Yes, Rhode Island law requires certain professionals to carry malpractice insurance, including physicians and attorneys.

How do I amend articles of incorporation for a professional corporation in Rhode Island?

You can amend articles of incorporation for a professional corporation in Rhode Island by filing a certificate of amendment with the Secretary of State’s office.

What is dissolution in Rhode Island?

Dissolution is the legal process of ending a business entity in Rhode Island.

What is the timeframe for filing annual reports in Rhode Island?

Annual reports for professional corporations in Rhode Island must be filed between January 1 and March 1 each year.

What are the consequences of not filing annual reports in Rhode Island?

Failure to file annual reports in Rhode Island can result in your professional corporation losing its good standing with the state and subject to be dissolved.

Can a professional corporation use a fictitious business name in Rhode Island?

Yes, a professional corporation can use its licensed professional’s name or a fictitious business name upon registration with the Rhode Island Secretary of State.

What is business entity conversion in Rhode Island?

Business entity conversion is the process of changing from one type of business entity to a different type in Rhode Island.

How do I merge or amalgamate my professional corporation with another business entity in Rhode Island?

To merge or amalgamate your professional corporation with another business entity in Rhode Island, you will need to file appropriate documents with the Rhode Island Secretary of State.

What is a shareholder agreement in Rhode Island?

A shareholder agreement in Rhode Island is like an operating agreement can include the rights and responsibilities, decision-making powers, and responsibilities of each shareholder in the corporation.

Can I conduct business as a solo-certified public accountant (CPA) without a professional corporation in Rhode Island?

No, Rhode Island law requires filed Board of Accountancy forms and set up for professional corporation of a licensed CPA to conduct business.

How often do special providers’ requirements reports for professional corporations need to be submitted in Rhode Island?

Professionals entities receiving medical assistance payments or Medicaid waiver payments in Rhode Island must submit Special Providers Requirement Reports usually quarterly.

How to Save Money While Forming Rhode Island Professional Corporation

One way to save money when forming a professional corporation in Rhode Island is by conducting thorough research and comparison shopping. Before committing to any specific service providers or legal professionals, it is essential to explore all available options and obtain quotes from multiple sources. By taking the time to compare prices and evaluate the services offered by different providers, entrepreneurs can identify cost-effective solutions that meet their needs without breaking the bank.

Another way to minimize costs when establishing a professional corporation is to utilize free or low-cost resources whenever possible. For example, some online platforms offer DIY incorporation services at a fraction of the cost of hiring a traditional law firm. While these services may not provide the same level of personalized attention as working with a dedicated attorney, they can be a cost-effective option for entrepreneurs looking to save money during the initial stages of forming their professional corporation.

Additionally, entrepreneurs can save money by streamlining the process of forming a professional corporation and avoiding unnecessary expenses. This may involve opting for a basic business structure that meets the minimum requirements for incorporation in Rhode Island, rather than choosing a more complex structure that comes with higher costs. By focusing on the essentials and avoiding optional add-ons or upgrades, entrepreneurs can keep their expenses in check while still achieving their goal of establishing a professional corporation.

Entrepreneurs can also save money when forming a professional corporation by taking advantage of discounts, promotions, and incentives offered by service providers. For example, some providers may offer special pricing for new customers or offer package deals that include multiple services at a discounted rate. By keeping an eye out for these opportunities and being willing to negotiate with service providers, entrepreneurs can secure cost-effective solutions that help them save money during the incorporation process.

In conclusion, saving money while forming a professional corporation in Rhode Island is possible with careful planning, research, and strategic decision-making. By comparing prices, utilizing free or low-cost resources, streamlining the process, and taking advantage of discounts and promotions, entrepreneurs can establish their professional corporation without breaking the bank. With the right approach and a commitment to cost-effectiveness, aspiring business owners can turn their dreams of business ownership into a reality while keeping their financial well-being intact.

Conclusion

In conclusion, forming a professional corporation in Rhode Island is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.