Guest MINDSETTER™ Hunt: State Business Regulation Reform Desperately Needed

Guest MINDSETTER™ Billy Hunt

Guest MINDSETTER™ Hunt: State Business Regulation Reform Desperately Needed

Billy Hunt
Most people know what Black Friday is but few know where the name comes from. In the early 80s retailers claimed the term referred to the date in the year when most stopped operating at a financial loss. Being the official start of the holiday shopping season, the day after Thanksgiving is when most merchants start generating profit for the first time all year.  They went from being “in the red” to being “in the black” - hence the name.

This is an important time of year for all businesses especially the small retailers operating in our state. Much to do was made of “Small Business Saturday” in Bristol this year where our entire federal delegation came out to stress the importance of shopping locally to help these small business owners.

Every year, as our elected officials pat themselves on the back and smile for photo-ops with these small business owners across the state, many of those same business owners have a rude surprise waiting to be discovered right before the biggest shopping season of the year. Many of the business owners reading this right now don’t realize that this rude surprise is already waiting for them as well.

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The Dreaded Annual Report

The wheels of the unrelenting bureaucracy of our state are set in motion on the first day of every year. Between January 1st and March 1st every corporation: domestic or foreign, for profit or not, big or small, is required to file and annual report (along with a $50 filing fee) with the RI Secretary of State’s office. Failure to file said report within 30 days of the deadline (March 31st) is subject to a $25 penalty.

While the necessity of these state mandated annual reports and the fees associated with them are dubious, they are not the purpose of this commentary. Instead, the processes and circumstances that occur if an annual report is not filed on time demonstrate the business-unfriendly climate of our state and why we are consistently ranked at the bottom of most national rankings.

So Your Business Missed the Deadline

There are many reasons why a corporation would fail to file their annual report. The most common reason is oversight: a small business owner forgets to file their report and they receive a letter from the RI SOS office instructing them to file their report, pay their $50 fee and $25 penalty. No big deal right? The business owner may kick themselves for forgetting and curse the state for adding a 50% penalty to the fee, but no real harm so no foul.

But what if it wasn’t an oversight? What if the corporation never gets a letter from the RI SOS?

You might be thinking: this can’t be something that happens all of the time, can it? You would be very surprised.

Every corporation needs what’s known as a “registered agent” on file with the RI SOS. For most small businesses this is usually the owner or one of the officers of the corporation. It may also be a CPA, a lawyer, or any individual the corporation chooses at the time they form the corporate entity. This registered agent is the individual who is designated to receive all correspondence relating to that corporation - including all notices about filing the annual report.

What becomes very apparent when you work with a lot of small businesses is these notices from the RI SOS are constantly being mailed anywhere and everywhere except to the person responsible for renewing the annual report. Businesses and their registered agents are always doing crazy things... like changing their address. God help you if your registered agent moves and you forget to file Form No. 640 with the state.

Good Enough for Government Work

If you didn’t update your registered agent, you will never see the renewal notice or any of the notifications mailed out by the RI SOS:

You will not see the notice warning you that your Certificate of Incorporation/Authority will be revoked in 60 days (perplexingly sent out in late August - nearly five months after the March 31st deadline.)

Since the aforementioned revocation notice isn’t sent out until late August, the required 60 day notice period (an inconsequential grace period if the registered agent didn’t receive the notice in the first place) pushes the revocation date until late October.

Next, inexplicably delayed again, the actual revocation notice doesn’t get issued until mid-November - ironically just in time for Small Business Saturday.

Revoked business entities are expected to suspend operations until they are reinstated with the RI SOS. Theoretically, corporate structures, contracts, liability protection, and more are all suspended until the state’s bureaucracy is satisfied. You would think the state would have a way to expedite the process to resolve potential calamity… wouldn’t they?

Incompetence at its Finest

Once your corporate entity is revoked, in addition to submitting the annual report, a $50 annual fee, and don’t forget the $25 penalty - you must now also obtain a certificate of good standing with the RI division of taxation.

That’s right; a second state bureaucracy is going to require a completed form and a $50 fee in order for you to obtain your certificate of good standing. The estimated processing time: four to six weeks. Four to six weeks for the STATE division of taxation to confirm that you have paid your STATE taxes.  

Assuming you miraculously figured out that your Certificate of Incorporation/Authority was revoked (possibly by reading this article) just before your busiest time of the year AND you immediately send your request for a certificate of good standing from the division of taxation, the chances of you getting the certificate back before the first of the year are slim. And as you probably already guessed, after January 1st another $25 fee will be added to your penalty from the RI SOS.

It’s Time for a Change

These ridiculous processes exist throughout our state government. Business owners dislike being nickeled and dimed to death with the fees but the frustration they feel interacting with the state government is what drives them to close up shop or move out of state.

States like Delaware are attracting businesses from around the world to incorporate there due to the ease of doing business in their state. In Rhode Island, many companies feel the need to pay a premium for specialty third-party companies to act as their registered agent and file their annual reports with the state for them.

My holiday wish would be for our state legislature to re-examine the enormous number of laws businesses must comply with in every industry. Look at these laws from the perspective of a business owner and realize compliance is a full time job in itself. Look at these laws from the perspective of our state workers and realize helping a business owner grow their business is much more fulfilling than fighting with them over arbitrary rules and regulations. Look at these laws from the perspective of our economy and realize the opportunity cost of lost productivity, lost earnings, and lost wages.

Preferably eliminated, minimally automated, business regulations need to be the priority of the 2019-2020 legislative sessions.

William Hunt Jr is a licensed property & casulaty insurance professional who specializes in commercial insurance and working with small businesses. Hunt is the Secretary of the Libertarian Party of Rhode Island and a former candidate for the Rhode Island House in Bristol/Warren.


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