How to Start an LLC in Oregon
Nestled between Silicon Valley and the tech hub of Seattle, Oregon is becoming a popular state for business in its own right. A growing population, no state sales tax, and a talented labor pool make the state a great choice for any small business, including your LLC. When you are ready to start a new business and register with the state of Oregon, you need to be sure you meet all requirements and are in good standing with the state. The step-by-step guide below will help you prepare for these next steps and move you toward your LLC’s beginning operations.
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To be considered an LLC, entrepreneurs need to go through Oregon itself to register your business and be formally recognized. Doing so makes you eligible for the tax benefits of an LLC and allows you to complete other necessary steps in your business. The process is simple and can be done primarily online.
Name your LLC
Have a name in mind? See if it’s already listed in the state’s business directory. If the name comes up in a search, it’s taken. If it doesn’t, it’s yours to claim.
The name of your business serves two important purposes: for the state, it is the identifier for your business, while for the public, it is the brand your business is known as. You should consider both when choosing a name for your LLC.
Oregon state naming rules
Since businesses are managed at the state level, each state sets rules for the names within the state. Like other states, Oregon requires that no two business entities share the same name. The Secretary of State maintains a business name database where you can run a name search to determine name availability in Oregon.
It is also required that any LLC name include either the term “Limited Liability Company” or an abbreviation like “LLC” or “L.L.C.’. You can also not use words that are misleading about the nature of your business, considered offensive, imply the business is a government agency, or require additional licensing you don’t have.
General name considerations
Oregon only requires that a name is unique among the state’s registered business entities, but that does not cross state lines. To avoid a situation where your business and one in another state share the same name, it is helpful to do a quick search and see what comes up for your planned name. If your domain name, social media usernames, and ad spaces are taken, it may be worth choosing something distinguishable to avoid confusion.
How to reserve your LLC name in Oregon
When you file to form an LLC in Oregon, the business being registered automatically secures your name so no one else can take it. But if you are set on a name and not ready to complete your filing, it’s important to protect the name in the meantime. You can reserve a name for 120 days by filing an Application for Name Reservation through the Oregon Central Business Registry webpage.
You can reserve a business name in Oregon for 120 days.
Select a registered agent
When filing for an LLC, you must designate a registered agent to receive official paperwork on behalf of the business. This can include legal documents in the event that your business is sued (also called a “service of process”), or things like registration renewal notices and tax documents. By naming an agent to receive this documentation, the state is able to hold your LLC accountable to respond as necessary. Oregon requires that each LLC designate a registered agent.
A registered agent can be either an individual over 18 years of age or a business, as long as either can provide a physical address in Oregon. This address is used as the address for all documentation, and the agent is expected to be available there during all normal business hours. Because of this requirement, many people choose to use a registered service agent in Oregon to ensure that there is no gap.
If you would prefer to use an individual as your registered agent, it can be anyone, including yourself or another member of your business. You can also choose a trusted individual who is not affiliated with the LLC, so long as they meet other requirements.
File Articles of Organization
To officially register your LLC in Oregon, you need to complete a form known as the Articles of Organization. This can be done either online or by mail and requires you to provide basic information about the business, including the name and registered agent.
You will need to provide the following pieces of information:
- Name and principal address of your LLC.
- The intended duration of the LLC, if it is not perpetual.
- Name and mailing address of the registered agent.
- Whether the business will be managed by LLC members or appointed managers.
- The intended purpose of the business.
- Names and signatures of all organizers.
It is important to ensure that all information you include is accurate and complies with state requirements to avoid rejection and needing to re-file.
You can fill out and submit your LLC formation documents here.
When you submit the Articles of Organization, there is a $100 filing fee due. This is payable to “Corporate Division.”
Oregon processing time
When filed online, the Articles of Organization can be processed in 24 hours. For those submitted by mail, the expected turnaround time is 3 to 5 days by mail.
Create an LLC operating agreement
Any attorney or business expert will tell you that having an operating agreement in place is a critical step in your formation process. There is no requirement that Oregon LLCs do this, but it is still in the best interest of your business to do so. An operating agreement is meant to establish how your LLC is run, both on a daily basis and in the long term. If there are ever any conflicts, an operating agreement can be referenced to settle them without involving courts or reverting to state laws.
There are plenty of free templates online to help you craft an operating agreement. Some of the most common topics you should include are:
- Ownership: If your LLC has multiple members, spell out how LLC owners divide the company. This can be an even split or some other configuration.
- Profit distribution: Because profits will be claimed on members’ tax returns, it should be specified how these profits are allocated.
- Decision making: Most LLCs will use a vote system to make major decisions, but you can specify how votes are allocated and if a majority is sufficient instead of a unanimous vote.
- Management structure: State whether your startup is manager-managed, member-managed, or is a single-member LLC.
- Member exit: If a member chooses to leave, passes away, or is unable to continue their role, it should be laid out what happens to their ownership interests.
- New members: Lay out what it will look like for someone to join, including capital contributions and how other allocations may change.
- Dissolution: In the event that you decide to close the business, an operating agreement should discuss what steps are taken and how assets may be divided.
Since the state doesn’t need to see your operating agreement, it can be kept as an internal record and referenced as needed. You can also amend the operating agreement at any time.
Once an LLC is established, it is an official business entity in the state of Oregon and is recognized as such. But before you can begin actual operations or hire employees, there are other requirements that you may need to meet. These steps require you to finalize the LLC, and then you can move towards your business being operational.
Get your EIN
For a single member LLC that doesn’t pay excise taxes, owners can use their personal Social Security Number as a tax ID. But any LLC with more members, employees, or excise tax obligations is required to obtain an Employer Identification Number (EIN) through the Internal Revenue Service. This nine-digit number is used for tax purposes, just like an SSN is for individuals. Obtaining this EIN is free and takes only a few minutes online.
Even if you are not required to have an EIN, your LLC can apply for one, which may be beneficial. This prevents you from needing to supply your personal Social Security Number to vendors or customers and thus protects your identity, since the EIN is much less sensitive information. There may also be times when an EIN is required or seen as more credible, like when you apply for a business bank account and funding.
In addition to the federal EIN, Oregon issues a business ID number (BIN) which acts as a statewide tax identification number.
You can get your EIN by visiting the IRS website.
Get Oregon business licenses
Oregon is like many states in that there is no statewide license required by any blanket rules for all businesses. However, it is unique because there is no state sales tax, which means that no seller’s permit or similar registration is required. This means that for most businesses, there is no licensing done at the state level in Oregon. The exception will be certain professions that require specific licensing and permits, which can be found on the Oregon Business Xpress License Directory.
Though there is little state licensing required, various local governments in Oregon will require licenses and permits for businesses located there. For example, the City of Portland and Multnomah County both require every business to register in order to operate. The best thing to do is check with the town or county government where your business is located to find out what requirements their jurisdiction has in place.
Certain industries may also need to consider federal licensing, if they include activities regulated by the federal government like alcohol, firearms, or agriculture.
Open business bank accounts
From the beginning of your LLC, you will want to track all business expenses and income so that it can be properly reported for tax and other accounting purposes. This can be much simpler if you have a dedicated checking account in the name of your business so that there are no personal transactions to parse out. But having this account set up also serves the more important purpose of protecting your assets.
LLCs offer personal asset protection to their owners based on the assumption that you act as a separate financial entity from your business. This includes managing finances in separate bank accounts. If it is found that you don’t do this, it can be ruled that your asset protection is no longer valid and you can be held liable for business obligations. When this happens, it is called “piercing the corporate veil” and can be very costly.
In addition to a checking account, you may also choose to set up a savings account for your business or even a credit card. Your EIN can even be tied to a credit score in your business’s name, which may be helpful if you ever need a large line of credit.
Review LLC tax rules in Oregon
While Oregon has no sales tax, making it unique among most states, the rest of its tax policies for LLCs are fairly standard.
By default, an LLC is a pass-through tax entity, which means that the business itself is not subject to income taxes. This allows businesses to avoid the Oregon corporate tax rate, which is generally calculated at a pair of marginal rates. Instead, LLC members claim the business’s profits and losses on their personal income taxes. Federal taxes and state taxes are paid on personal tax returns.
While LLCs are not responsible for income taxes in this scenario, they may be subject to employment taxes and other requirements.
File an annual report
Each LLC must also file an annual report with Oregon each year. This can be done online by generating a pre-filled form and updating any information that has changed, then submitted along with the $100 filing fee. The annual report, known as a Statement of Information in other states, is due each year by the anniversary of the LLC’s formation.
Get insurance for your LLC
Insurance to protect your business and its assets is not required in Oregon, but most business owners choose to have at least some coverage in place. There are two types that are the most common for LLCs:
- General liability insurance covers the most basic needs for any business, like bodily injury on your property or physical damage caused by employees.
- Professional liability insurance, sometimes known as errors and omissions insurance, is meant for professionals who give expert advice. This coverage protects against liability for errors, poor advice, or even malpractice.
The one type of insurance that Oregon does require is workers’ compensation insurance, which protects employees in the event of illness or injury caused by their job. Oregon requires any business with one or more employees, including LLC members, to have workers’ compensation insurance in place.
Additional resources to help you set up a business in Oregon
Oregon’s Secretary of State is responsible for the management of all business entities in the state, including LLCs. As a part of this support and encouragement for residents to start small businesses, the state website provides a range of resources.
- Guide to Starting a Business in Oregon.
- All guides and forms are available in a range of languages.
- Start a Business video series.
How much does it cost to start an LLC in Oregon?
Forming an LLC happens when the Articles of Organization are submitted to the Oregon Secretary of State, which costs $100. You may also need to pay additional fees for things like name reservations, business licenses, or registered agent services, which can make the cost vary. There is also a recurring $100 fee for filing annual reports each year.
What are the benefits of an LLC as a business structure?
Doing business as an Oregon LLCs has its perks. For starters, this type of business offers personal liability protection, which means personal assets like your car, home, and savings accounts, can’t be used to cover debts for the business.
Who can be a registered agent in Oregon?
In Oregon, either an individual or a business entity can be named as a registered agent. Both are required to have a physical address in the state (not a P.O box) and be available during all normal business hours. If you choose an individual, it can be anyone who is over 18, whether they are affiliated with the business or not.
What taxes does an LLC pay in Oregon?
Most LLCs do not pay income tax, as the profit and losses are passed through to members rather than taxed as a corporation. Oregon does not levy additional taxes on LLCs, nor do they have sales tax that the business would pay. LLCs may need to pay employment taxes, however, if they have any employees on their payroll.
Is there a seller’s permit in Oregon?
A seller’s permit is a form of license or registration that permits a business to collect sales tax on behalf of a state and then registers them to pay those taxes back accordingly. Because Oregon does not have a state sales tax, there is no seller’s permit or equivalent needed for any business in the state.
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