Starting a Business in Rhode Island
A new business in Rhode Island is not out of reach. So have you been wondering: how do I start a business in Rhode Island? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Rhode Island during a recession?
New Business in Rhode Island: Advantages and Disadvantages
Business Insider puts Rhode Island in its middle ten states for starting a new business, per a 2016 article. This is for the whole country. There are few startup companies in Rhode Island. But opportunity is high.
This small state is also close to Connecticut and Massachusetts. Therefore, it can easily draw highly educated employees from either neighboring state.
Rhode Island has a high ranking for key economic indicators like economic output per job, productivity growth, and high tech share of all businesses. The state also has an extremely educated and tech-savvy workforce.
Recent Declines
In 2018, Forbes names Rhode Island to its number 43 slot. Also in 2018, Fit Small Business says Rhode Island belongs in the number 40 spot. Of course keep in mind the three sites all have differing methodologies.
Forbes says Rhode Island has a better than average quality of life. But for all of the other metrics, it’s worse than the average.
Fit Small Business agrees that Rhode Island has a good quality of life. Access to capital is in the top ten for the nation. The labor market is better than average. Labor market is a measure of the desirability of an area and the number of people with bachelor’s degrees. But the costs of starting a business are worse than average. And Rhode Island stumbles in three other areas: taxes, cost of living, and startup activity.
In fact, for cost of living, Rhode Island doesn’t rank much better than neighbors Connecticut and Massachusetts, both of which rank far better according to Fit Small Business.
Only you can decide if it’s worth it to start a business in Rhode Island.
Start a New Business in Rhode Island – Top Industries in Rhode Island
While the high tech sector in Rhode Island is one of the state’s brighter spots, manufacturing is increasingly gaining strength there. This is as a result of the state’s commitment to supporting its continued development. Rhode Island also has taken solid steps to specifically help small businesses.
New Business in Rhode Island: Initiatives
These include launching an initiative to support job creation in the small business sector. It also includes putting strong support behind a program meant to increase credit accessibility for small startup businesses.
Rhode Island Business Ideas
Smart business owners can find new opportunities. Work with bigger industries in the state. Offer goods or services such as trucking for any industry and computer support.
Here is exactly how to start a new business in Rhode Island.
Rhode Island New Business Secretary of State Requirements
Register a Business Name
Check business name availability on the Rhode Island Secretary of State’s website.
Business Permits and Licenses
A list of professional licenses is on the State of Rhode Island webpage. A list is also on the Rhode Island Department of Business Regulation.
Corporations
Corporation names must be unique. Do an extensive search to find out a name is available.
Start by searching online records and other archives and catalogs such as the database of registered Rhode Island corporations. It is available at the official Rhode Island government website.
Corporate Name Reservations
If business owners want to reserve a corporate name, they will need to submit a name reservation application to the office of the Rhode Island Secretary of State.
Download this application form at Reserve a Rhode Island Corporate Name on the Rhode Island Secretary of State website. There is a fee of $50.00 to reserve a name and then the name remains reserved for 120 days.
Local Permits and Licenses
Check with your local municipality, city or county office or website. See if there may be any local licensing or permit requirements.
For example, in Providence, go to the Board of Licenses page on the city of Providence website.
Start a New Business in Rhode Island – Business Registration
Be sure to visit the Rhode Island Department of State online business portal. It will guide you through the steps and forms that you will need.
Tax Registration
So go to the Business Registration page of the Division of Taxation.
Start a New Business in Rhode Island – Virtual Offices
Alliance offers Rhode Island virtual business office space in Warwick only. However, the state is so small that Warwick should fit most if not all business owners’ purposes.
For other areas of the state, if a business owner absolutely cannot travel, they can try Regus. Note: virtually all of Rhode Island is within a one hour drive of every other part of Rhode Island.
Or ask local business owners. Also, try computer user groups for help in this area. More options may be virtual business office space in neighboring states. These are Connecticut and also Massachusetts.
Start a New Business in Rhode Island – Establish Business Credit
Small business credit is credit in a business’s name. It doesn’t link to an entrepreneur’s individual credit, not even if the owner is a sole proprietor and the sole employee of the small business.
As such, an entrepreneur’s business and consumer credit scores can be very different.
The Benefits
Because business credit is distinct from personal, it helps to secure a small business owner’s personal assets, in case of court action or business bankruptcy.
Also, with two distinct credit scores, a business owner can get two different cards from the same vendor. This effectively doubles buying power.
Another benefit is that even new ventures can do this. Visiting a bank for a business loan can be a recipe for frustration. But building company credit, when done properly, is a plan for success.
Individual credit scores depend upon payments but also additional considerations like credit use percentages.
But for company credit, the scores really only depend on whether a business pays its invoices timely.
Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.
The Process
Growing business credit is a process, and it does not occur without effort. A small business needs to actively work to build business credit.
However, it can be done readily and quickly, and it is much more rapid than developing individual credit scores.
Vendors are a big aspect of this process.
Accomplishing the steps out of order will lead to repetitive denials. No one can start at the top with business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.
Start a New Business in Rhode Island – Company Fundability
A small business must be fundable to credit issuers and merchants.
Hence, a small business will need a professional-looking website and e-mail address. And it needs to have website hosting from a company such as GoDaddy.
Additionally, company telephone and fax numbers must have a listing on 411.com.
Additionally, the business telephone number should be toll-free (800 exchange or the equivalent).
A company will also need a bank account dedicated solely to it, and it needs to have all of the licenses essential for operation.
Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.
Working with the IRS
Visit the IRS web site and acquire an EIN for the company. They’re free of charge. Select a business entity such as corporation, LLC, etc.
A business can begin as a sole proprietor. But they will most likely want to switch to a form of corporation or an LLC.
This is in order to diminish risk. And it will make the most of tax benefits.
A business entity will matter when it involves tax obligations and liability in the event of a lawsuit. A sole proprietorship means the business owner is it when it comes to liability and tax obligations. Nobody else is responsible.
Sole Proprietors Take Note
If you run a small business as a sole proprietor, then at least be sure to file for a DBA. This is ‘doing business as’ status.
If you do not, then your personal name is the same as the business name. As a result, you can wind up being personally liable for all business financial obligations.
Also, according to the IRS, by having this structure there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 chance for corporations! Prevent confusion and significantly decrease the chances of an Internal Revenue Service audit simultaneously.
Starting Off the Business Credit Reporting Process
Begin at the D&B website and obtain a cost-free D-U-N-S number. A D-U-N-S number is how D&B gets a small business in their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s websites for the small business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.
By doing so, Experian and Equifax will have activity to report on.
Vendor Credit Tier
First you should build trade lines that report. This is also known as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can start to acquire credit in the retail and cash credit tiers.
These varieties of accounts tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.
But first off, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are generally Net 30, versus revolving.
Hence, if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, such as within 30 days on a Net 30 account.
Details
Net 30 accounts need to be paid in full within 30 days. 60 accounts have to be paid completely within 60 days. In comparison with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you used.
To launch your business credit profile the proper way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. Once that’s done, you can then make use of the credit.
Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
Vendor Credit Tier – It Makes Sense
Not every vendor can help like true starter credit can. These are vendors that will grant an approval with negligible effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than one time to these vendors. So, this is to demonstrate you are responsible and will pay on time.
Retail Credit Tier
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move onto the retail credit tier. These are companies which include Office Depot and Staples.
Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the business’s EIN on these credit applications.
One example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or more.
Fleet Credit Tier
Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are businesses such as BP and Conoco. Use this credit to buy fuel, and to repair, and maintain vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the business’s EIN.
One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or higher and a 411 business telephone listing.
Shell may claim they want a certain amount of time in business or profits. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get an approval.
Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.
Cash Credit Tier
Have you been responsibly handling the credit you’ve up to this point? Then move onto the cash credit tier. These are companies such as Visa and MasterCard. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.
One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They need to see a PAYDEX Score of 78 or more. And they also want you to have 10 trade lines reporting on your D&B report.
Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).
Plus, they want you to have an established business.
These are companies like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are often MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.
Start a New Business in Rhode Island – Monitor Your Business Credit
Know what is happening with your credit. Make certain it is being reported and attend to any mistakes as soon as possible. Get in the practice of checking credit reports and digging into the details, and not just the scores.
We can help you monitor business credit at Experian and D&B for only $24/month. See: www.creditsuite.com/monitoring.
Update Your Information
Update the information if there are mistakes or the details is incomplete.
Fix Your Business Credit
So, what’s all this monitoring for? It’s to dispute any errors in your records. Errors in your credit report(s) can be taken care of. But the CRAs usually want you to dispute in a particular way.
Disputes
Disputing credit report mistakes usually means you send a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always mail copies and keep the original copies.
Fixing credit report mistakes also means you specifically spell out any charges you challenge. Make your dispute letter as crystal clear as possible. Be specific about the issues with your report. Use certified mail so that you will have proof that you sent in your dispute.
Start a New Business in Rhode Island – A Word about Business Credit Building
Always use credit smartly! Never borrow beyond what you can pay back. Monitor balances and deadlines for repayments. Paying on time and completely will do more to boost business credit scores than almost anything else.
Building company credit pays off. Good business credit scores help a small business get loans. Your loan provider knows the small business can pay its financial obligations. They know the company is authentic.
The company’s EIN connects to high scores and loan providers won’t feel the need to ask for a personal guarantee.
Business credit is an asset which can help your small business for years to come.
Learn more here and get started toward opening a new business in Rhode Island.
Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.
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