Benefits of a Corporation
Forming a corporation is a great way to protect your personal assets from liability for your business’s financial obligations. Unlike a sole proprietorship or general partnership, a corporation is a separate entity from its owners, which means that if a corporation is sued or cannot meet its financial commitments, the owners can lose only the money they have invested in the corporation—their homes, cars and personal bank accounts are not at risk. There may be additional benefits to forming a corporation, such as tax savings and increased appeal to outside investors.
Requirements for Incorporating in Rhode Island
Preparing Your Articles of Incorporation
The existence of a Rhode Island corporation begins when you file its articles of incorporation with and pay a fee to the Secretary of State. The articles of incorporation must contain the following information:
- Name of the corporation
- Stock structure
- Names and addresses of incorporators
- Registered agent and registered office
A corporation can offer different types of stock, called classes or series. These classes can offer different rights to their shareholders, for example some classes of stock may offer voting rights while others do not.
Regarding stock structure, the follow applies:
- The articles of incorporation must state the total number of authorized shares of stock.
- If there will be more than one class of shares, the articles must state the number of shares in each class. The articles may either provide a designation and state the powers, preferences, rights, qualifications, limitations, restrictions and rights applicable to each class of shares, or they may state that the directors have authority to determine these matters.
Naming Your Corporation
Before filing your incorporation papers, it is a good idea to search the online records of the Secretary of State.
You may reserve a corporate name for 120 days by filing a name reservation application with the Secretary of State.
Your corporation’s name must meet the following requirements:
- It must contain one of these words: “corporation,” “incorporated,” “company” or “limited,” or an abbreviation of one of those words.
- A corporation’s name must be distinguishable from any other entity name, registered name or reserved name in the Secretary of State’s records.
The person who files the articles of incorporation with the Secretary of State is called an incorporator. When specifying incorporators, you must meet the following requirements:
- Incorporators’ names and addresses must be listed in the articles of incorporation.
- There must be at least one incorporator.
- An incorporator must be an individual.
- If the articles of incorporation do not name initial directors, the incorporators must elect directors. They may also approve bylaws. Once the directors have been chosen, the incorporators have no further duties.
Corporate directors are responsible for managing the business and affairs of the corporation and exercising corporate power. They usually focus on “big picture” issues, such as long-term strategies, and leave the day-to-day operation of the business to its officers.
In regard to directors, your corporation must meet the following requirements:
- A corporation must have at least one director. Although there is no upper limit on the number of directors a corporation may have, the number of directors should be included in the articles of incorporation or bylaws.
- Directors do not need to be shareholders in the corporation or residents of Rhode Island. The articles of incorporation or bylaws may specify qualifications for directors.
Specifying a Registered Agent and Registered Office
Every corporation must maintain a registered office and a registered agent in Rhode Island. A registered agent receives legal documents, notices and demands for the corporation. The agent’s place of business is the registered office.
The following requirements apply when naming your corporation’s registered agent:
- The articles of incorporation must list the name of the registered agent and the street address of the registered office. The registered office address must be the same as the agent’s business address.
- A registered agent may be an individual who resides in Rhode Island or a corporation, limited liability company, limited partnership or limited liability partnership formed or authorized to do business in Rhode Island.
Stating a Corporate Purpose
In Rhode Island, you are not required to state a corporate purpose in the articles of incorporation.
Determining Incorporation Bylaws
A corporation’s bylaws outline internal rules and procedures for managing the corporation’s business. Bylaws may include any provision for regulating and managing the corporation’s affairs and typically address such matters as shareholder meetings, voting, how directors and officers are chosen and their duties. They are not filed with the Secretary of State.
The following requirements pertain to corporation bylaws in the state of Rhode Island:
- Bylaws must be adopted by the incorporators or directors at an organizational meeting.
- Bylaws cannot include provisions that are inconsistent with the law or the articles of incorporation. Costs of Incorporating in Rhode Island
The Rhode Island Secretary of State requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay state and federal income taxes.