Are you starting a new business in Oregon? Consider forming it as a limited liability company (LLC) then. It’s one of the easiest ways to get a new business started. Or an existing business to get scaled.
This type of business entity is great for small businesses and can provide tax advantages and legal protections not offered by sole proprietorships or corporations.
LLCs are a type of business entity that provides limited personal liability for its owners, called members. This business structure keeps your personal assets out of reach if your business should fall into legal or financial trouble. And LLCs avoid double taxation through a concept called pass-through taxation.
Creating an Oregon LLC is an excellent option for new business owners. And if you already have a business, you can form it into an LLC quickly by following the steps in this guide.
We’ll cover the entire process from start to finish and answer the most commonly asked questions about Oregon LLCs.
Table of contents
- Step 1: Choose a name for your Oregon LLC
- Step 2: Designate a registered agent
- Step 3: File Articles of Organization with the Oregon Secretary of State
- Step 4: Obtain an EIN (Employer Identification Number) from the IRS
- Step 5: Prepare an LLC operating agreement
- Step 6: Open a business bank account
- Taxes, costs, and fees in Oregon for LLC
- Business permits and licenses in Oregon
- Pros and cons of forming an LLC in Oregon
- Key takeaways
- Formation FAQs for an LLC in Oregon
1. Choose a name for your Oregon LLC
The first step in forming your Oregon LLC is to select a name for it. But you’ll need to be aware of the state’s naming requirements.
To register your LLC in Oregon, the name you choose must meet the following requirements:
- Must be distinguishable from other business names
- Must include the term “limited liability company” or the abbreviation “LLC” or “L.L.C.”
- Can only include
- Letters A-Z
- Numbers 0-9
- Certain special characters like *, =, #, +, and ~
Once you settle on the right name, you’ll want to check that another business hasn’t taken it. Like most states, Oregon doesn’t allow multiple companies to operate under the same name.
You can use the business name search on the Oregon Secretary of State’s website to look up the business registry of used names and verify availability.
If your name is available but you’re not quite ready to file your formation application, you can reserve the LLC name for 120 days. The service requires a $100 fee.
DBA or assumed business name
Using an assumed name allows you to use a different name than your registered name.
For example, if your LLC is named “West Coast Enterprises” and you’re operating a Mexican cuisine food truck, you may want to register the name of your food truck as your assumed business name.
It lets you market your business using the name your customers know, not your formal business name.
Oregon assumed business name registrations are valid for two years. After that, you’ll need to renew it every two years if you want to continue using it for your business.
2. Designate a registered agent
All Oregon LLCs need to appoint a statutory agent (registered agent) as part of the company registration process. And you’ll need to provide their information to the state.
Your registered agent is the person or company that will accept service of process (e.g., legal and other official documents) on behalf of your LLC.
Registered agents can be a:
- Business owner
- Trusted employee or manager
- Corporate attorney or accountant
- Professional registered agent service
Remember that registered agents must have a physical street address in Oregon (not a P.O. box) and be available during regular business hours. If your company doesn’t have a physical location in Oregon, you’ll need to hire a local registered agent service.
Companies with a presence in Oregon can also benefit from a registered agent service. A professional service will ensure you don’t miss any important legal documents.
Additionally, if your business operates out of your home, it can prevent receiving unsolicited mail or having your private address listed in public records.
How much does it cost to hire a registered agent in Oregon?
Hiring a registered agent service comes with a fee. Depending on the services they provide, it can cost between $50 and $200 per year.
|Registered agent: DIY vs. hire a registered agent company|
3. File Articles of Organization with the Oregon Secretary of State
These Articles are the official document that forms your LLC and allows your company to do business in Oregon when approved by the Secretary of State. The state filing fee is $100.
When preparing your Articles of Organization, you’ll need to include the following:
- Name of the LLC.
- Physical address and mailing address of the company.
- Registered agent name and address.
- Management structure.
- Names and addresses of all members of the LLC.
Registering your LLC online is the fastest way to get your company registered.
If you prefer to submit your Articles of Organization via the mail, allow up to two weeks of processing time before you hear back from the Secretary of State’s office.
4. Obtain an EIN (Employer Identification Number) from the IRS
After you’ve successfully filed your Articles of Organization, you’ll need to secure a federal employer identification number (EIN) from the Internal Revenue Service to file your federal income taxes.
The EIN acts like a social security number for your company. It’s an identification number unique to your business, and you’ll use it on all correspondence with the IRS.
There’s no fee for getting an EIN, and you can do it quickly online by answering just a few questions. And after you complete the application, your EIN will be generated immediately.
You can also submit a paper application using Form SS-4, Application for Employer Identification Number. However, applying this way can take several weeks before you get a response from the IRS.
The EIN is necessary not only for federal taxes. But you’ll need it to open a business bank account, which we’ll discuss more a little later.
5. Prepare an LLC operating agreement
Oregon doesn’t require your LLC to include an operating agreement as part of the company formation process. But it’s still essential to have one for everyone but single-member LLCs.
What’s an operating agreement?
An LLC uses an operating agreement to spell out the rules and procedures for operating and managing the company. It includes details on financial and operational decision-making.
Operational agreements serve as a roadmap for preventing and resolving business issues. It should cover grounds in regards to the following:
- Who has decision-making power? What happens if there’s a disagreement?
- What happens if one member wants to leave the business? What happens to his stake? How can the member leave?
- What if the LLC wants to bring on another member? How will the new member’s powers differ from the original members?
- What happens when the members want to end the LLC?
What should you include in an operating agreement?
There are operating agreement templates available online that you can use. But you’ll want to make sure it includes:
- Name of the LLC
- Duration of the LLC
- Principal place of business
- Name and address of the registered agent
- General statement about the LLC’s purpose
- Initial members
- Ownership interest/percentage
- Rules for additional contributions
- Procedure for adding members
- Process for dividing profits and losses between members
- Designation of the LLC’s manager
- Strategy for how members can leave
- Procedures to dissolve the business
Since the operating agreement creates the foundation for running your LLC, invest in having it written correctly.
Online services offer customizable forms that can cost a few hundred dollars. Hiring a corporate attorney can cost $500 or more.
6. Open a business bank account
Once you have your EIN, you can open a business bank account. Keeping your business finances separate from your personal is critical for LLC members.
Why a business bank account is essential:
- Simplifies business record keeping.
- Eases tax preparation.
- Prevents commingling of personal and business funds. It’s a big no-no in the eyes of the IRS.
- Preserves personal liability protection.
Since banks have different requirements for opening and maintaining accounts, it’s wise to call around to see who offers the best option for your company.
Things to consider include:
- Monthly service fees.
- Miscellaneous fees (e.g., wire transfer fees, overdraft fees).
- Minimum required balances.
- Minimum initial deposits.
- Interest rates.
You’ll also want to know what documents you’ll need to bring with you when you open an account. Most often, at a minimum, you’ll need:
- A file-stamped copy of your LLC’s Articles of Organization.
- Your EIN.
- Your driver’s license or other photo identification ID.
Confirm with your bank what documents you’ll need to open your business bank account.
Oregon LLC costs, taxes, and fees
Each year, Oregon requires foreign and domestic LLCs to file an annual report to keep the company in good standing. The fee is $100, and you’ll receive a renewal notification approximately 50 days before your report is due.
The annual report is used to update any corporate information previously on file with the Secretary of State. You should keep the state posted on any updates of your company’s address, registered agent, or members details.
Be sure to file your annual report on time. Failing to do so can make your company inactive, meaning it’s no longer legally allowed to do business in Oregon, and its members lose their limited liability protections.
To reinstate your business into good standing, you’ll need to file reinstatement forms and pay the state fees based on the number of years your LLC has been inactive.
Taxes for your Oregon LLC
There are three different “buckets” of taxes your LLC may need to pay.
1. Federal taxes
One of the benefits of owning an LLC is its pass-through taxation. The LLC won’t pay tax on its profits. Instead, the members will pay tax on their personal tax returns.
If you have employees, your company will need to pay federal payroll taxes, including FICA and federal unemployment tax.
2. State taxes
The most common types of state taxes are described below.
But depending on your industry, your business may be subject to other state taxes like the bicycle excise tax, marijuana tax, or vehicle privilege and use tax. It’s best to check with the Oregon Department of Revenue.
Corporate activity tax (CAT)
LLCs operating in Oregon may have to pay the corporate activity tax (CAT). Generally, if your annual revenue is $1 million or more, you’ll need to pay the CAT, which is $250 plus 0.57% of gross revenue that exceeds $1 million.
State unemployment tax
If you have employees, your business will need to pay state unemployment tax.
- Wage base: $43,800 per employee per year
- New employer tax rate: 2.6% for the first three years before it’s adjusted for experience
3. Local taxes
Some cities, counties, and municipalities in Oregon may charge taxes on businesses operating in their jurisdiction. And if you have employees, headcount or occupational privilege taxes may be charged.
Oregon business permits and licenses
Oregon doesn’t require a general business license or permit to run a business in the state.
However, certain professional businesses may need a license to operate. For example, breweries will need a permit from the Oregon Liquor Control Commission.
And your local city or jurisdiction may require a general or a specific permit or license too. So check with your local authorities to determine if your business needs any type of license to operate.
Application and licensing fees vary depending on the industry and type of license required. But here are some ballpark costs:
- Accountants: Original License cost: $150 application fee plus $160 initial permit fee.
- Property services contractors: $350 for an annual license.
- Esthetician or Cosmetologist: $45 license fee.
- Chiropractors: $425.00 annually if actively practicing.
Pros and cons of forming an LLC in Oregon
Choosing the correct legal structure for your business is vital. Consider these pros and cons when determining whether an Oregon LLC is suitable for you.
Oregon LLC pros
- No state sales tax.
- Online company formation process.
- Pro-business climate.
- Educated workforce.
- No corporate activity tax if revenue is below $1 million per year.
Oregon LLC cons
- Annual reports required.
- No expedited service.
- High employer taxes (if you have employees).
- If you’re operating as a sole proprietorship, consider forming an LLC.
- You can form an LLC in Oregon for as little as $100.
- Most LLCs won’t pay Oregon corporate taxes.
- Although Oregon doesn’t require any general business license, certain businesses may need special permits or licenses to operate.
Oregon LLC Formation FAQs
Below are some of the most frequently asked questions (FAQs) about forming an LLC in Oregon.