Under Rhode Island law, a business may incorporate. If it chooses to do so, it is thereafter recognized as its own legal entity. As a separate entity from the owners, the business is then considered to be acting on its own when it buys and sells property, assents to contracts and exercises legal rights. A business seeking to incorporate in Rhode Island must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in Rhode Island
A corporation enjoys benefits that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to pay its liabilities. A corporation also allows creditors in the West Warwick area to assess the credit worthiness of the business as a whole rather than that of its owners, allowing the business to obtain loans more easily. Lastly, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.
Costs of Incorporation
Incorporation can be costly. First, a modest filing fee may be charged in Rhode Island for any business that wants to incorporate. Also, a corporation is taxed as its own entity. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business may avoid this disadvantage with proper planning and assistance from a local West Warwick lawyer.