Below you will find answers to frequently asked questions concerning corporate law and small business in Rhode Island and Providence Plantation. These corporate and business law FAQS are answered by an experienced Rhode Island business attorney.
Should I protect my primary residence and personal assets and property by incorporating my business?
Typically, yes. A crucial motivation for incorporation of a business in Rhode Island is because the debts of an incorporated business do not cause person liability for that debt on behalf of the owners of the business. Also, breach of contract and debt claims against a Corporation or LLC will not adversely affect the owners’ personal assets and residences.
What will my Rhode Island corporate lawyer need to know at our first meeting for him to incorporate my business in Rhode Island?
You will need to provide the RI business attorney with two or three potential names for the business so that he can determine if any of them are already used. The RI corporate law attorneys will need to know the name of your accountant so that he can discuss with the accountant whether you should be a corporation or a limited liability company. The commercial law lawyers will need to know the names, addresses and social security numbers of each of the shareholders/members of the corporation or limited liability company.
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- RI corporations
What is the primary difference between an LLC and a Corporation in Rhode Island?
LLC and Corporations protect the owner’s personal property against debt of the business entity. The primary difference between the two entities is the treatment of profits and losses for income tax purposes. A corporation is a taxable entity and pays taxes on its profits. An LLC does not pay taxes on the corporate level, but its profits and losses are taxed on each member’s own tax return. In a corporation the owners are referred to as shareholders and in a limited liability company the owners are referred to as members. The chief executive officer of a corporation is the President. The chief executive officer of a limited liability corporation is the Manager.
If I am operating a small or medium sized business with another person in Rhode Island, should I form a partnership or incorporate?
If you are in business with another person, at the very least you should have a partnership agreement indicating who owns the business and how decisions are made in the operation of the business. Another crucial aspect of the agreement will be determining what happens upon the death of one of the owners. Often, it is preferable to set up a corporation or limited liability company so that your personal assets will be protected from the debts of the partnership and for any claims for injuries or property damage resulting from the other partner
If I incorporate, will I need to do anything each year to keep the corporation in good standing?
Yes. An annual report filed with the Secretary of State in Rhode Island is required each year listing the address of the business and the current shareholder/member. Typically, RI corporations lawyers prepare this report and update the corporate minute book by preparing the minutes of the annual meeting.
Citations and Statistics:
“The “owners” of an LLC are referred to as “members.” Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations or other LLCs. Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity. Instead, all profits and losses are “passed through” the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.” U.S. Small Business Association (SBA) https://www.sba.gov/content/limited-liability-company-llc
“The tax rules provide that all mergers and divisions of tax partnerships will follow either an assets-over or assets-up form. An assets-over merger occurs when a terminating entity contributes all of its assets and liabilities to the continuing entity in exchange for interests in the continuing entity, and the terminating entity then distributes those interests to its members in complete liquidation.” Avoiding Adverse Tax Consequences in Partnership and LLC Reorganizations Bradley T. Borden, Brian J. O’Connor, Steven R. Schneider About the Authors: Bradley T. Borden is a professor at Brooklyn Law School in Brooklyn, New York. Brian J. O’Connor is a partner at Venable LLP in Baltimore, Maryland; Tysons Corner, Virginia; and Washington, D.C. Steven R. Schneider is a director (partner) at Goulston & Storrs PC in Washington, D.C. http://www.americanbar.org/publications/blt/2013/12/01_borden.html