Step #3 Choose Business Structure
(Licensing Needs for Your Business Operation)
With a complete business plan and a decision to move forward, it’s time to “own” a restaurant. Officially owning a business means registering your business structure and obtaining the proper operating licenses.
In addition to physical location needs and permits, as identified in Step #2 (Select Your Location), the business operation will require specific registration or licenses in order to operate. We have identified some of the requirements for business operation below, but it will depend upon which business structure you decide upon as to whether you register your business with the Secretary of State’s Office and/or with a municipality. Therefore, you need to first determine if you want to be a sole proprietor/general partnership or a corporation/limited liability company.
A. Register Your Business Structure
It’s important to register your business structure BEFORE entering into any legal agreement or making any expenditures on behalf of the business.
A business is a legal entity. It can own property, hold bank accounts and is required to pay taxes. There are different types of business entities, each with unique benefits and limitations.
The “right” choice for you depends on your interests and needs. You’ll need sound counsel to understand your obligations regarding your business. Get to know the business structure options and discuss them with your advisors to determine which will be optimal for you. Find legal, tax and business advisors from these resources; SCORE, and Small Business Development Centers (SBDC), or seek professional guidance from your attorney.
If you decide your business structure is going to be an LLC, corporation or nonprofit corporation, then you'll need to register with the Rhode Island Department of State, Secretary of State’s Office.
Learn More:
Department of State (Secretary of State’s Office) – Types of Business Structures
https://www.sos.ri.gov/divisions/business-services/business-basics/your-structure
Department of State (Secretary of State’s Office) - Starting a Business in Rhode Island
http://sos.ri.gov/divisions/business-portal/business-basics
Register Your Business Structure
B. Apply for Municipal Licenses & Permits at the Local Level
If you decide your business will be organized as a sole proprietorship or a general partnership, you will need to contact the city or town clerk in the municipality where you intend to do business. Some cities and towns also require you to register your “Doing Business As” (DBA) – a trade name or a fictitious name, if you use one.
Determine Your Licensing Requirements at the Municipal Level
Local cities and towns determine registration, licensing, and permitting requirements, and business applications vary by city and town, so visit local government websites to find out what you need to do. (Link to municipalities -https://www.ri.gov/towns/)
A Business Application is normally used to apply for a municipal business license, and to register trade names. Before you register, make sure your trade name is available. You must register a trade name, or “Doing Business As” name, for:
- A sole proprietor or partnership using a name other than the full legal name of the owner or owners.
Important: Registering your trade name does not protect the name from use by others. The right to use a trade name belongs to the one who first uses it in connection with their business.
A business license from the local municipality is one of the requirements for restaurants. It essentially grants you the permission to open your doors for business in that community. Generally, business licenses are issued by the city or local municipality. Go to the city or town office to apply for the business license. There you will be required to complete an application and pay a licensing fee.
C. Apply for a Federal Identification Number
Register your business with the Internal Revenue Service (IRS) before any financial activity. You will need this identification number to pay federal taxes, hire employees, open a bank account, or apply for business licenses and permits.
To Apply for a Federal Employer Identification Number (Click here)
The Employer Identification Number (EIN) is the primary way to legally establish your business. EIN is also known as a Federal Tax Identification Number. It's free to apply for an EIN, and you should do it right after you register your business. You'll get your EIN on the same day if you apply online. By mail, it takes up to 5 weeks.
D. Other Business Requirements
Apply for a Rhode Island State Tax ID and Permit to Make Sales at Retail
Submit an application to the Rhode Island Division of Taxation using the Business Application and Registration (BAR) form.
- Application website - the online registration process has been designed to register New Businesses only
- Application – to print a hardcopy, complete and submit
- The BAR form is used to apply for licenses and permits as well as to establish tax payer accounts, including:
- A taxpayer account for income tax withholding;
- Unemployment insurance;
- Sales and Use Permit to make sales at retail; and
- Most specialty licenses, including Liquor, Lottery, and Cigarette and/or Tobacco Retailer.
Review Insurance Liability Needs – Business Liability Insurance
Business insurance protects you from the unexpected costs of running a business. Accidents, natural disasters, and lawsuits could run you out of business if you’re not protected with the right insurance. Speak to insurance agents to find out what kinds of coverage makes sense for your business and compare terms and prices to find the best deal for you.
Also keep in mind, if you want to have a liquor license, insurance is mandatory, and a certificate of insurance must be provided by the insurance company to the city or town listing them as the certificate holder. Click here to see a sample Certificate of Liability for Insurance Certificate.
Learn More about insurance needs with the SBA Business Guide
https://www.sba.gov/business-guide/launch-your-business/get-business-insurance
Worker’s Comp Insurance
Review the brochure on information you need to know about workers' compensation insurance online at the Rhode Island Department of Labor and Training (DLT) website: https://dlt.ri.gov/documents/pdf/wc/WCComplianceBrochure.pdf and at http://www.dlt.ri.gov/wc/
You need to contact an insurance carrier to find out about this type of insurance, workers' compensation insurance is not provided by the DLT.
RI New Hire Reporting Form
On or before the effective date of employment, a new employee must complete a W-4 form as required by both Rhode Island and Federal law. Internal Revenue Code Section 3402 (8) (2) (A). Within fourteen (14) days of the employee's effective date of employment or effective date of reinstatement, the employer must submit to the Rhode Island Division of Taxation or its designee, the information as provided in section 15-24-5 of the RI General Laws.
Click here for information and registration
E. Consider Hiring an Expert For Help
Obtaining licenses and permits can take time to acquire, especially if you plan to do renovations, sell beer, wine or liquor, so allow plenty of time to complete these steps. Be sure to contact state agencies and local government offices for specific requirements or review their websites. Consider hiring attorneys, accountants and other consultants who can help you navigate the licensing and permitting process.
