Rhode Island is a small state with a big personality, as demonstrated by vibrant downtowns and flourishing neighborhoods, thanks in part to the smart economic tools that the state continues to provide entrepreneurs.
The state has the nation’s lowest rate of new entrepreneurs, but signs indicate that may be on the rise. Rhode Island had been in the bottom ten of Forbes’ “Best States for Business” 14 years in a row, but has been moving up in recent years due to improved labor supply and economic outlook scores.
Here are a few small business statistics that highlight the Ocean State’s entrepreneurial landscape.
Quick Rhode Island Small Business Statistics for Entrepreneurs
- Approximately 98.9% of all businesses in Rhode Island are small businesses.
- Small businesses pay the bills for 52.2% of employees in the state.
- Military veterans make up 4.3% of workers and own 6.6% of small businesses.
- Racial minorities account for 15.4% of employees and 8.1% of business ownership.
- Between March 2019 and March 2020, 4,026 new businesses opened in Rhode Island, while 3,846 closed, resulting in a net increase of 180.
- In the annual CNBC “Top States for Business” report, Rhode Island ranks 46th out of 50 states.
- The per capita disposable income in Rhode Island is $54,850.
- Women account for 48.6% of workers and 40.5% of business owners.
- US News ranks Rhode Island 9th in healthcare and 10th in business environment out of all 50 states.
- The per capita consumption expenditure in Rhode Island is $45,144.
- The cost of living in Providence, Rhode Island, is 22% higher than the national average.
Rhode Island Small Business Statistics
1. What is considered a small business in Rhode Island?
A small business is defined by the Small Business Administration based on firm revenue (from $1 million to more than $40 million) and number of employees (usually 100 to over 1,500 employees, depending on the industry it operates in). There are currently 106,412 small businesses in Rhode Island that represent 98.9% of all businesses in the state.
Between January 2021 and January 2022, Rhode Island received 12,341 of the over 5.8 million new business applications filed nationwide, the fifth fewest among states. However, after adjusting for population, Rhode Island had 1,165 applications per 100,000 residents, which was lower than the national average and the ninth lowest among states.
Applying for a business license, especially for first-time business owners, may be a hard and intimidating procedure. That’s why it’s a good idea to contact an LLC formation agency to handle all the paperwork involved in the registration procedure. Find out which company is best for your business by reading my review of the best LLC Services in Rhode Island.
2. How many people are employed by small businesses in Rhode Island?
There are 230,742 Rhodians currently working for small businesses across the state. They account for 52.2% of all employees in the state. Rhode Island’s governor signed an amendment in May 2021 to join other states in striving towards a $15 minimum wage by 2025.
Starting in January 2022—when the current $12.25 hourly rate rose from $11.50—the amendment mandates yearly increases to the minimum wage. Following this rise, the minimum wage will climb to $13.00 in 2023, and then by $1.00 per hour per year until it reaches $15 in 2025.
3. Rhode Island small business statistics by industry
The professional, scientific, and technical services sectors have the highest number of small businesses operating in them compared to other industries in Rhode Island, a total of 15,551. Approximately 12,794 small businesses in these sectors have no employees, 2,537 have 1–19 employees, and 220 have 20–499 employees.
The mining, quarrying, and oil and gas extraction sector is the smallest industry in terms of small business investment, with only 22 firms currently operating in it.
4. Rhode Island small business ownership by ethnicity
There are 1,095,610 residents in the state of Rhode Island. White/Caucasian Americans are the majority ethnicity, and they represent 83.6% of the population. Hispanic/Latino Americans are the second largest racial group at 16.3%, and they are followed by Black/African Americans (8.5%), Asian Americans (3.7%), American Indian and Alaska Natives (1.1%), and Native Hawaiian and Other Pacific Islanders (0.2%).
The data below show how small business ownership is distributed among these groups:
- White/Caucasian — 92,322
- Hispanic — 9,700
- Black or African American — 4,368
- Asian — 3,438
- American Indian and Alaska Native — 234
- Native Hawaiian and Other Pacific Islander — 80
5. Rhode Island small business ownership by gender
Women own 32,000 small businesses in Rhode Island, all of which are nonemployer businesses. Men own the majority of small businesses in Rhode Island, a total of 59,627. Approximately 45,000 of them are nonemployer businesses and 14,627 have employees. There are, however, 4,490 small businesses that men and women own equally.
6. Business taxes in Rhode Island
Most LLCs in Rhode Island are so-called pass-through tax organizations. To put it another way, the burden for paying federal income taxes passes through the LLC and is borne by the LLC members individually. LLCs do not pay federal income taxes by default; only their members do. Typical LLCs, on the other hand, are subject to Rhode Island’s minimum business corporation tax. This tax is $400 per year.
When an LLC owner elects for a business to be taxed as a corporation rather than as a pass-through entity, the business must file a separate tax return. Rhode Island, like almost every other state, levies a corporate income tax. The corporate tax in Rhode Island is generally a flat 7% of net income, with a $400 minimum tax.
Rhode Island requires every business owner to be compliant with the tax laws. Any discrepancy in your tax documents or late filing will attract hefty fines and may result in a lost business license. You can mitigate these issues by hiring a registered agent to assist with your tax issues. To learn more, read my review of the best registered agents in Rhode Island.
7. Small business financing in Rhode Island
The Community Reinvestment Act (CRA) is a federal law passed in 1977 to encourage depository institutions to meet the credit needs of the communities in which they are situated, including low- and moderate-income areas.
Large banks are required by the Community Reinvestment Act to report new small business loans. In 2019, reporting banks gave out $245.6 million in loans to Rhode Island businesses with $1 million or less in revenue. Total reported new lending to businesses was $296.5 million for loans of $100,000 or less, and $789.2 million for loans of $1 million or less.
8. How COVID-19 affects small businesses in Rhode Island
Based on the percentage of employees in sectors with a high or medium-high level of exposure to COVID-19, Rhode Island has the 26th highest economic exposure to COVID-19 of all states in the US.
In Rhode Island, 49% of all employees, or 272,379 people, work in industries with a high or medium-high level of economic exposure to COVID-19. A further 8% of all employees, or 45,977 people, work in industries with a low or medium-low level of economic exposure to COVID-19.
9. Rhode Island small business export statistics
In 2019, a total of 1,976 identified firms exported goods valued at $2.4 billion from Rhode Island. Small businesses accounted for 1,733 of those exporters, or 87.7% and exported goods worth $1.3 billion, accounting for 54.3% of all exports by identified businesses.
The Final Word
While Rhode Island is busy creating an environment in which businesses can thrive in a compelling business environment, it’s ensuring that people can thrive there as well. Despite a cost of living that is higher than the national average, a thriving job market makes everything the state has to offer accessible. These include world-class academic institutions, an eclectic culinary scene, fantastic microbreweries, incredible outdoor activities, historical sites, cultural institutions, and much more.
- US Small Business Administration
- Tax Foundation
- CNBC – Top States for Business
- US News
- Square Up
- The Boston Globe
- US Census Bureau