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Swyft Filings is committed to providing accurate, reliable information to help you make informed decisions for your business. That's why our content is written and edited by professional editors, writers, and subject matter experts. Learn more about how Swyft Filings works, our editorial team and standards, what our customers think of us, and more on our trust page.
Starting a new business can be exciting, but while you’re spinning the many plates of being an entrepreneur, don’t forget to consider fundamentals like tax implications. For example, business owners can choose an S corporation as their tax status. An S corp is not a type of business entity like an LLC; it’s a way of taxing the business income, losses, deductions, and credits at the shareholder level instead of the corporate level.[1]
Every state has its own set of rules for forming, maintaining, and dissolving an S corp. Keep reading for a detailed guide on starting an S corporation in Rhode Island.
S Corporation in Rhode Island: Key Points
An S corp is a tax status popular with business owners because it allows pass-through taxation.
For a Rhode Island S corp, you’ll need a business name, registered agent, articles of incorporation, employer ID number, and IRS form 2553.
You can save time and hassle by hiring a business filing service to do the S corp paperwork.
Unlock tax savings and ensure compliance with critical regulations with our assistance.
What Is an S Corporation?
Electing S corp status does not mean choosing a structure for your business, like an LLC. Instead, think of it as a type of tax classification that your business follows when filing taxes.
Businesses file corporate taxes each year as part of federal and state laws. In the case of S corps, instead of filing corporate tax separately, taxes are passed to the business’ shareholders. Shareholders then file business taxes on their individual tax returns, assessed at their own personal tax rate.
Tax Considerations for an S Corporation in Rhode Island
From Providence to Newport, every business operating in the state gets the same tax treatment. State law requires every corporation operating in Rhode Island to file an annual tax return and pay income tax (minimum $400).[2] This section will help you understand how to treat your S corp’s taxes.
Pass-Through Taxation
One of the benefits of electing S corp status is tax returns are assessed at the business owner’s personal income tax rates. This means you can avoid being taxed twice on corporate income, making this tax classification very attractive for small business owners. Owners can pay using IRS Form 1040-ES, which is usually required every quarter throughout the tax year starting around April 15.[3]
Rhode Island Tax Treatment of S Corps
According to the Rhode Island Secretary of State, S corp shareholders can pay their individual tax rate on their business’ profit share and capital.[4] S corps are pass-through entities, so shareholders can report the company’s gains and losses on their own personal tax returns when they file each year.
Rhode Island Franchise Tax for S Corporations
You may have heard that Rhode Island businesses were previously required to pay a franchise tax, or privilege tax, to operate in another state. Fortunately, this was repealed in 2015, so you probably don’t need to worry about it.
Requirements for Forming an S Corporation in Rhode Island
Not everyone is eligible for S corp status. To qualify, a business must meet these requirements.
Be a domestic corporation (i.e., operate in the United States)
Have only allowable shareholders
Allowable: individuals, certain trusts, U.S. citizens, estates
Not allowable: partnerships, corporations, non-resident aliens
Have no more than 100 shareholders
Have only one class of stock
Not be an ineligible corporation, such as certain financial institutions, insurance companies, or domestic international sales corporations[1]
Filing as an S Corp in Rhode Island
Once you’ve checked that your business is eligible to elect S corp status, you can move forward with the filing process. While this process differs from state to state, we’ll focus on Rhode Island. Make sure your business follows state and federal laws when electing S corp status.
Step 1: Choose a Business Name
What’s in a name? Actually, a few things required by state law. First, do a business name search on the Rhode Island Department of State Corporate Database to make sure the name you want is available. If another Rhode Island business is already using it or something similar, you’ll have to pick something else.[5]
Using the same business name as another entity can get you into legal trouble. The Secretary of State provides helpful guidelines on name availability. For example, adding an article like “the” or “a” before your business name, or making it plural, does not distinguish it from a name that has already been registered.[6]
Filing a name reservation or incorporating in Rhode Island does not prevent the name from being used by businesses in other states. To do so, consider filing a federal trade or service mark.[7] If you have a name but aren’t yet ready to form your S corp in Rhode Island, you can file a name reservation online to hold your name for up to 120 days.[8]
Step 2: Appoint a Registered Agent
All entities that do business in Rhode Island must have a registered agent with a physical address in the state.
Hiring a registered agent is required by state law, but it’s also incredibly useful. Rhode Island registered agents can help relieve administrative burdens and legal headaches. They accept service of process, serve as the address linked to the business, keep certain information about the companies they represent, and more.
You’ll need to file additional paperwork if your registered agent or registered office changes. You can find the correct form on the Secretary of State website.[9]
Swyft Filings’ registered agent service can help you find an agent that fits your needs and save you from searching for the right fit. Check out this article if you want to know more about Rhode Island registered agents.
Step 3: File Articles of Organization/Incorporation
Next, business owners can further establish their entity by filing their Articles of Organization. This document contains key information that lets the state recognize the entity as fully formed. Rhode Island calls this “Articles of Incorporation” and charges a filing fee of $230.[10] The state also requires annual reports with varying due dates depending on the business.[11]
Your Rhode Island Articles of Incorporation must contain:
The business name
The professional services your business offers
The total number of shares your business can issue
The business’ registered address
Any additional provisions
The name and address of each business owner
The filer’s name and contact information
A signature and date
Step 4: Create an S Corp Operating Agreement
Next, create an operating agreement. This is the sole governing document for an LLC in Rhode Island and defines who has decision-making powers and should be involved in financial and functional decisions. It helps guide the entity’s internal operations according to the business owners’ needs.[12]
When drafting your operating agreement, include:
A description of the business structure
The names of the owners
An explanation of your management styles
This helps establish who has ownership over the company and outlines the responsibilities each business owner needs to perform to keep the entity running.
Step 5: Apply for an Employer Identification Number
Toward the end of the process, apply for an Employer Identification Number (EIN). An EIN is similar to an individual social security number (SSN) in that the IRS uses it to identify your business when you file your taxes. Businesses need an EIN to open a business bank account, get a credit card, apply for required licenses, and report taxes.[13]
A sole proprietor without employees who doesn’t file excise or pension plan tax returns does not need an EIN. This means that if your business is a one-owner LLC, you don’t employ anyone else, and you don’t file several different taxes, you can likely use your SSN as the business’s federal tax identification number. However, you can still get an EIN if you want.[14]
Step 6: File Form 2553 for S Corporation Election
The last step is for business owners to officially elect their business as an S corp. You can do this by filling out IRS Form 2553 (Election by a Small Business Corporation) online.
For your S corp status to take effect, make the election at any time during the tax year before the tax year you want it to apply for.[15] You must do this sooner than two months and 15 days after the tax year starts. For late elections, all shareholders must sign the form for it to be eligible, signifying they take full ownership for filing business taxes on their personal returns.
You need to file your form within 75 days of forming the business. If you file past the deadline, you must file Form 8832 (Entity Classification Election) together with Form 2553. This allows the business entity to pay taxes as a corporation. For more information, contact the Department of the Treasury here.
Rhode Island S Corp vs. Rhode Island LLC
A frequent question from new business owners is whether they should form an S corp or an LLC. Remember that an S corp is a tax classification, while an LLC is a business structure. So you can have both.
Advantages of Starting an LLC in Rhode Island
LLCs offer personal liability protection and flexible taxation. If you’re a business owner looking to start an LLC, using Swyft Filings as an online filing service can help you save time, effort, and money.
Disadvantages of Starting an LLC in Rhode Island
On the other hand, there are some downsides to forming an LLC. Because it’s a business structure, the IRS doesn’t recognize LLCs as a tax classification. When filing an LLC, the default taxation method is sole proprietorship for one owner or partnership for more than one. However, you can elect S corp status to gain the benefits of pass-through taxation.
Advantages of Forming an S Corporation in Rhode Island
When it comes to tax treatment, electing your LLC or small business as an S corp can come with significant benefits. Because S corps are pass-through entities, shareholders report the company’s income and losses on their own personal tax returns. This allows the IRS to recognize your individual income tax rates and prevents shareholders from being taxed twice.
Disadvantages of Forming an S Corporation in Rhode Island
Electing S corp status might mean LLCs face stricter administrative requirements than sole proprietorships or partnerships. LLCs offer flexibility when filing taxes and ownership but may complicate things when choosing a tax classification or managing members. However, these complications can be minimized by establishing a solid operating agreement early on.
Ready to File for S Corp Status in Rhode Island?
You can file the paperwork for an S corp in Rhode Island, but it takes time, money, and energy. You must ensure each step is correct and follows legal requirements on state and federal levels. If you’re looking for a solution to getting S corp status with the process done successfully from start to finish,try using Swyft Filings.
Entrepreneurs and small business owners can use our S corp filing service to free themselves of the administrative headache and extra attention to detail. By letting us handle the paperwork, you can trust that everything is done correctly from the start. We check S corp limitations early on, guarantee fast and efficient turnaround times, and let you focus on what’s important — running your business.
Maximize Tax Benefits: Experience pass-through taxation with Rhode Island S corp status and avoid double taxation.
Access a One-Stop Solution: Establish an LLC or C corporation easily and then transition to S corp status, all within our platform.
Stay Compliant: Our compliance alerts help keep you up-to-date on all the complex compliance requirements of an S corp so you can stay on the government’s good side.
Frequently Asked Questions
What is an S Corporation in Rhode Island?
A Rhode Island S corp is a business that passes its income, losses, deductions, or credits through to its shareholders. Shareholders file business taxes on their individual tax returns using their own personal tax rates. It is especially attractive to small business owners for federal tax purposes because S corps are a pass-through entity type of tax classification.
Does Rhode Island recognize S corporations?
Yes, Rhode Island recognizes S corps once they are filed successfully with the IRS. Entrepreneurs can register a business and elect S corp status as their tax designation with the IRS using Form 2553. [12, 16]
What is the turnaround time for filing for S corp status with the IRS?
On average, business owners will be notified of their business entity’s S corp status within 60 days after filing Form 2553.[15]
What is the difference between an S corp and an LLC?
The main difference is that an S corp is a type of tax classification, not a business structure. An LLC is a business structure that needs to elect a tax classification. So your business can be an LLC with S corp status. You can file an LLC with the Rhode Island Secretary of State and then elect S corp status through the IRS.
What are the requirements for an S corporation in Rhode Island?
According to federal law, to be eligible for S corp status, a business must:
Operate domestically in the U.S.
Appoint only allowable shareholders (individuals, certain trusts, estates)
Have no more than 100 shareholders
Have only one class of stock
Are taxes for LLCs and S corps the same?
No, LLCs are a type of business structure that need to elect a tax classification. There are four tax classifications: S corp, C corp, partnership, or sole proprietorship. Each tax classification serves a different purpose and has pros and cons. Only some of these are pass-through entities, while others are not.
What is the S corp tax rate?
It depends. S corps in Rhode Island are required to file an annual tax return using Form RI-1120S and are subject to the income tax minimum of $400 per year. Subchapter S corps that are taxable for federal purposes must pay any tax due at the 7% state tax rate and attach RI Schedule S to its tax return.[2]
How do I dissolve an S corporation in Rhode Island?
Dissolving your Rhode Island S corps is relatively straightforward. The business must be active and up to date with all its filings with the Department of State. Business owners must complete a Final Return Form with the state’s Division of Taxation and confirm that all other tax accounts have been closed and taxes have been paid in full.[17] For more information and contacts, check here.
Bibliography
1. Internal Revenue Service. “S Corporations.” Accessed April 17, 2023.
2. State of Rhode Island: Department of Revenue. “Tax Filing Requirements.” Accessed April 17, 2023.
4. Internal Revenue Service. “Form 1040-ES.” Accessed April 17, 2023.
3. Rhode Island Department of State: Secretary of State. “Types of Business Structures.” Accessed April 17, 2023.
5. Rhode Island Department of State: Secretary of State. “Your Name.” Accessed April 24, 2023.
6. Rhode Island Department of State: Secretary of State. “Name Availability Guidelines.” Accessed April 24, 2023.
7. United States Patent and Trademark Office. “Trademarks.” Accessed April 24, 2023.
8. State of Rhode Island: Office of the Secretary of State. “Business Services Online Filing System.” Accessed April 24, 2023.
9. State of Rhode Island: Office of the Secretary of State. “Start Your Rhode Island Business.” Accessed April 24, 2023.
10. State of Rhode Island: Office of the Secretary of State. “Professional Corporation: Articles of Incorporation.” Accessed April 24, 2023.
11. Rhode Island Department of State: Secretary of State. “File Your Annual Report.” Accessed April 24, 2023.
12. Rhode Island Department of State: Secretary of State. “Your Structure.” Accessed April 24, 2023
13. Internal Revenue Service. “Employer ID Numbers.” Accessed April 24, 2023.
14. Internal Revenue Service. “Frequently Asked Questions.” Accessed April 24, 2023.
15. Internal Revenue Service. “Instructions for Form 2553 (12/2020).” Accessed April 24, 2023..
16. Internal Revenue Service. “About Form 2553.” Accessed April 24, 2023.
17. Rhode Island Department of State: Secretary of State. “Close Your Rhode Island Business.” Accessed April 24, 2023.
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