If you're thinking about starting an LLC in Oregon, it's essential to understand the process and all of its implications.
This post will cover how to create an LLC in Oregon and what the advantages and disadvantages are for doing so.
The article will also discuss foreign LLCs, taxes that LLC owners need to pay, and all the rules and regulations regarding LLCs in Oregon.
What Is a Limited Liability Company?
A limited liability company, or LLC for short, is a business structure that protects the owner(s) from being personally responsible if there are any debts.
The limited liability company was not created to provide owners with tax benefits, but it does help them avoid paying taxes twice on the same income since they don't have to pay both corporate taxes and personal taxes.
LLC offers personal liability protection to owners in case of lawsuits or debts.
The limited liability company is a relatively new business structure that was officially recognized in 1977.
LLCs are not available for all businesses, but they can be used by any sole proprietorship or partnership.
In addition to personal limited liability protection, the limited liability company also provides tax benefits and less paperwork compared to corporations.
If you offer professional services as attorneys and healthcare workers do, you'll need to start a professional limited liability company.
It has one extra step and takes more time to form, but the process is still fairly straightforward.
Why Should You Opt for Starting an LLC?
Starting an LLC in Oregon is a great idea for many businesses since limited liability companies don't have to pay both corporate taxes and personal income tax.
For example, an LLC doesn't get taxed when it distributes profits among members or owners in contrast to corporations that are required by law to distribute earnings as dividends.
As a result, an Oregon limited liability company is extremely beneficial for those who want to start a profitable business.
In addition, limited liability companies in Oregon are known as flexible entities that offer limited disclosure and easy management.
For example, LLCs don't have to hold annual shareholder's meetings or elect the board of directors as corporations do.
All you have to do to get all this is file important legal documents with the Oregon Secretary of State and begin doing business.
Here's What You Need to Do to Form an Oregon LLC
Before you can form an LLC, first decide which business structure is best for your company.
You have two options: a limited liability company or a corporation.
However, if you want to have more control over your business without being taxed as heavily as corporations are, then the LLC might be right for you.
There are a couple of steps you have to take before you can form an LLC in Oregon.
You have to file articles of organization with the Oregon Secretary of State and pay a filing fee.
You will also need your company name, which cannot be similar to another registered business entity within the state or violate someone else's trademark.
Here's everything you need to do before you conduct business in Oregon.
Step 1: Register Your Oregon LLC Business Name
If your business is located in Oregon, you need to register your business name before conducting business.
Otherwise, someone else could potentially use that same business name which would be bad for both parties involved.
You can start this process by checking if the business name you want is available online on the Secretary of State website under Corporation Division Search.
You have the option to reserve a name before registering it. You'll have 120 days to register a name that you've reserved; otherwise, it'll expire.
When you find an available business name, you have to register it using the name application form on the Oregon Secretary of State website.
You can also decide to file for a DBA name or "doing business as." This is an option if you want to use a name that's different than the official business name.
Step 2: Look for a Registered Agent
Every Oregon LLC needs to have a registered agent, and most professional registered agents will offer a variety of additional services with their package.
You need to have your own registered agent if you want to maintain the limited liability of an LLC.
An Oregon registered agent is an individual or business entity responsible for receiving official documents and packages on behalf of your business, like tax forms or court summonses (when they're delivered by mail).
Moreover, you can hire a registered agent service that will handle various tasks for you.
However, you won't be able to use a reliable registered agent service free of charge.
It usually costs about $50 a year on average. If you decide that you don't need a professional registered agent service after all, then at least make sure that whoever ends up being your registered agent is accessible and reliable.
Step 3: Submit Oregon Articles of Organization
The most important step of establishing an Oregon LLC is filing articles of organization with the Secretary of State.
Articles are typically filed using paper, but you can also file online through various electronic business-related services.
Oregon LLC articles of organization should contain your business name (you can't use a name that is too similar to another Oregon company), business' physical street address, purpose, or activities of the business (this could also refer to what type of work you expect to be doing as an LLC), and a registered agent and address for service of process.
Your articles can be filed online, by mail, or in person at the office of your Secretary of State's Corporations Division.
You will need to pay a $100 filing fee when you file articles with this division.
Step 4: Come up with an LLC Operating Agreement
Oregon LLC operating agreement states the rights, duties, and relationships of the LLC members.
This document is important because it preserves member responsibilities when absent or when a member doesn't communicate with other members about business matters.
An operating agreement should contain:
- Name of your LLC operating in Oregon
- Registered address for service of process
- Roles and responsibilities of members
- Distribution of profits and losses, contributions to capital by each member
- Rules for the LLC's dissolution in the event of a member leaving or death. The agreement should also include entrance/exit provisions that deal with how members will interact when they are added or removed from the business.
Operating agreements aren't mandated by law but are highly encouraged.
They help to protect the LLC from litigation and resolve disputes between owners in a constructive manner rather than through legal proceedings.
An operating agreement is not required when forming an Oregon LLC, but it should be created anyway for your business's protection.
As long as you include the necessary information listed above, you will have an effective operating agreement that everyone abides by.
Step 5: Obtain an Employer Identification Number
Once you have an operating agreement in place, you need to obtain an employer identification number (EIN) for your LLC.
This is a federal tax ID that you will use when filing taxes in the future, so be sure to keep it safe.
A federal employer identification number is easy to obtain. Fill out the employer ID number application and submit it online or send a paper copy in the mail to be processed.
An EIN is not necessary for your LLC if you don't hire employees, but it is a good idea to have one as soon as possible.
Not only will this EIN help you file taxes and pay any necessary fees in the future, but an EIN can also make it easier for your business to open bank accounts and apply for financing.
An Oregon business identification number can be obtained through the Internal Revenue Service (IRS) website.
Oregon LLC Tax Requirements
The federal government requires all LLCs to pay a tax yearly, but there are no Oregon state taxes for either corporations or limited liability companies.
However, an annual fee is required by the Secretary of State, which is based on how many members your company has.
Since LLCs are pass-through tax entities, LLC members pay taxes on their share of profits and losses for their individual tax returns. The LLC itself doesn't need to pay both federal and state taxes.
However, if you have a corporation as an owner or partner in your LLC, then the company may need to file a federal corporate income tax return.
It depends on whether you classify for taxes as a C corporation, S corporation, or sole proprietorship.
Business entities that sell goods or services will need to pay a sales tax. Besides sales tax, there's also employee withholding tax if you hire employees.
If you want professional services regarding taxation issues related to starting an Oregon LLC, talk with tax experts before starting your LLC.
Get a Business Bank Account
When you start an LLC business in Oregon, it's a good idea to get a business bank account as soon as possible.
This will help your new business run smoothly and give people the impression that you have been running this business for some time.
In fact, some banks may require proof of company registration before opening up an LLC bank account. You'll need an EIN before you open your account.
When you apply for a bank account, make sure that all of the LLC's business income and expenses are accounted for when filing taxes.
You can deduct business expenses like travel, software licenses, or any other type of business expense to reduce how much tax you pay each year.
The reason why you'd want to have separate personal assets from the business ones is to maintain your business's identity.
The business expenses are separate from the personal ones, which makes it easier for you to track each one of them independently.
Having a bank account just for your business helps build trust between you and potential customers because they'll know that your business isn't just an extension of yourself.
Keep Personal and Business Assets Separate
One of the main advantages and the reason why it's a good idea to keep personal and business assets separate is that you'll be able to maintain personal liability protection.
This means that if your company goes bankrupt or something like that, then personal bank accounts and personal property won't be affected by those events as long as they're properly separated from one another.
Having a separate bank account helps to keep personal and business finances separate.
This way, if something goes wrong with your personal or business account, you will be able to quickly get everything back on track without worrying about mixing up the two types of accounts.
You Might Need a Business License
Certain types of businesses are required to have a business license, even if they're operating under an LLC. Businesses that operate in the following industries will need to get business licenses:
- Attorneys at law
- Trucking and transportation companies with vehicles over 26,000 pounds (you only need one permit per vehicle)
- A business that works with hazardous materials
- Healthcare professionals
To find a list of industries that require business licenses, head over to the Oregon Secretary of State website.
In addition, if you're an individual who works as a contractor or consultant for other businesses in any industry (including those listed above), you will need to get your own business license.
Get Insurance for Your Business
Don't forget business insurance. There are a variety of business types that require business insurance.
If you're starting an Oregon LLC, you're probably going to need it. It can be hard to find the right policy for your business because there's lots of information out there, and it often seems overwhelming.
Keep unemployment insurance tax in mind as well, especially if you're a business owner. You'll need to pay taxes on your business income, too.
At the end of the day, it's best to consult with professionals who can help ease getting business insurance and all other important business transactions done smoothly and quickly.
How Much Does It Cost to Form an LLC in Oregon?
It costs $100 to file your Articles of Organization with the Oregon Secretary of State.
It costs another $60 for an annual report that you must submit each year, regardless if you do any work or not.
This is filed by March 15th every year and can be done online without paying a fee.
Can I File for an LLC on My Own?
Yes, you can file for an LLC without anyone's help. But before you do so, be sure to read through this blog post and examine the advantages and disadvantages of doing so first.
It might be a good idea to find a professional resident agent service to help you with some of the steps.
How Long Does It Take To Get LLC Approved in Oregon?
On average, it takes about a month to acquire the necessary documents you need from the Oregon Secretary of State.
There is an option for expedited service if needed, which will cost around $200 more and cut your wait time down to only five days.
What Taxes Do LLCs Pay in Oregon?
LLCs in Oregon need to pay state taxes, but there is no federal tax.
If you are a single-member LLC in Oregon and do not need to file an EIN, you can file your income under your own personal Social Security number.
How to Dissolve an LLC in Oregon?
To dissolve an Oregon LLC, you will file a Certificate of Dissolution.
This document must be signed by the LLC members and filed with the state's Secretary of State office.
You can find this form on the Secretary of State website. It costs $100 to dissolve an LLC in Oregon (or $200 if you need it expedited).
Can I Form an LLC Online?
Yes, it is possible to form your new LLC online.
To do so, you will need to file Articles of Organization on the Secretary of State website.
Is It Hard to Create Your Own LLC?
No, it is very easy to create your own LLC.
This means that it's a good choice for people who want the benefits of a corporation but don't have a lot of time or money to spend on legal paperwork and fees.
Starting an LLC In Oregon: Conclusion
LLCs in Oregon are companies that can be registered with the Secretary of State and are not subject to income tax.
To set up an LLC, you will need to file articles of incorporation or some other form and complete an operating agreement.
You should always seek professional help if you want to do everything by the books, such as hiring a lawyer to draft your documents and an accountant to file taxes on behalf of your business.
These professionals may charge a fee, but they can save you time and money in the long run by ensuring that all legal obligations are met from day one.