Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
Many business owners choose to form an LLC but have no idea where to start. Forming an LLC in Oregon is a surprisingly simple process that comes with plenty of tax benefits.
In this article, you will find a detailed step-by-step guide on how to form a limited liability company, the costs, how long it will take, the different types of tax structures, and by the end, you’ll know whether or not you’ll need the help of an LLC formation service.
Step 1: Choose a Name For Your LLC
Choosing a name for your new business is the first step in forming your LLC in Oregon. According to Oregon law, there are several requirements you need to consider when deciding on a name.
The name needs to:
- Include the following words: LLC, L.L.C, or Limited Liability Company
- Be totally unique. Your chosen name should not be already in use by another company in the state. You can use this search engine to see if the name you want is still available.
- Avoid words that are used to describe government departments.
For a complete list of naming rules, visit here.
Once you have decided on a name but aren’t ready to file the Articles of Organization, you can reserve the chosen name for up to 120 days for a $100 fee. This can be filed online via the Oregon Central Business Registry.
As an extra step, check that your chosen business name is available as a URL or domain name. You want a name available to use if you’re planning on opening an online store or website.
There is also the option to apply for an assumed name or DBA for a fee of $50.
Step 2: Choose a Registered Agent
A registered agent handles and accepts all legal documents on behalf of the LLC. Every LLC in Oregon is required by law to have an appointed registered agent. The registered agent will be the one to interact with the State on your behalf. The registered agent can be a member of the LLC, the LLC’s attorney, or even a third-party registered agent service.
There are a couple of requirements that your registered agent needs to meet:
- They must have a physical street address in Oregon
- They must be available on-site during business hours to accept any legal documents on behalf of the LLC
For more information on registered agents in Oregon, you can visit the state’s website.
Step 3: Create an Operating Agreement
While the law does not require that LLCs in Oregon create and submit an operating agreement, it is highly recommended that you draft one regardless. This document outlines the procedures of your business and defines how the business will run. An operating agreement can come in handy during disputes as the court will use the operating agreement to determine outcomes instead of court law (which may not be in your best interest).
An operating agreement should consist of, but is not limited to, the following:
- The name and address of the LLC
- The functions and services of the LLC
- The name and address of the registered agent
- A basic summary of the Articles of Organization
- A list of the members of the LLC
- How profits and losses are handled
- The procedure for hiring and dismissing employees
- Liability clauses
All members of the LLC should read and sign this document to avoid any disputes or complications in the future.
Step 4: File the Articles of Organization
To register your LLC with the State of Oregon, you must file and submit the Articles of Organization. These can be either filed online or via mail. The fee for filing these Articles is $100.
The Articles of Organization will include the following information:
- The name and address of the LLC
- The name and physical address of your registered agent
- The address where all legal mail will be sent to
- The services the LLC will be providing
- The name and address of each member of the LLC
- The name and address of at least one manager of the LLC
- The business duration
- The management structure
- The signature of the organizer
Once your Articles of Organization have been approved, your LLC will be legally authorized to do business in Oregon. This acknowledgment will come in the form of a letter either sent by mail or online with a stamped copy of the Articles of Organization.
Cost to Start an LLC in Oregon
There are several costs involved in forming an LLC in Oregon. To reserve a name for 120 days will cost you $100, plus another $50 if you want to register a DBA. The filing fee for the Articles of Organization is $100. Additionally, the State of Oregon requires LLCs to file their annual reports for a fee of $100.
So, at the low end of the spectrum, if all you do is file your Articles of Organization, expect to pay just $100 to start your LLC in Oregon, plus $100 per year for the annual report.
Additional costs to consider include applying for licenses and attorney fees.
What To Do After Forming Your LLC in Oregon
Congratulations on forming your LLC in Oregon! Now, you still need a couple of other things to ensure your business remains in good standing with the State.
Get an EIN (Employer Identification Number)
Once your LLC is formed, you must apply for an Employer Identification Number or an EIN. This 9-digit number is issued by the Internal Revenue Service. The EIN is basically a tax identification number and is used for the following reasons:
- Opening a business bank account
- File federal and state taxes
- Hire new employees
There is no fee for applying for an EIN.
Open a Business Bank Account
Opening a bank account for the LLC is a great way of separating your personal assets from the business and making accounting and tax filing so much easier. You may want to consider getting a credit card for business expenses as this can help build a credit score.
Get Legal Advice
It is a good idea to seek professional legal advice from an attorney to create contracts and legal documents and help deal with internal and external disputes in the business.
You should also consider getting an accountant to take care of your tax filing needs and maintain the business’s accounts. With an accountant taking care of the financial aspects of the business, you can spend more energy focusing on the bigger picture.
Get Business Insurance
Business insurance is something all businesses need, no matter how big or small your company is. There are many types of business insurance to choose from, ranging from general liability insurance to something more specific. To understand the best insurance plan for your business, consider consulting an attorney or a broker.
Submit Your Annual Report
All Oregon LLCs must file an annual report with the Oregon Secretary of State. These reports are each year by your LLC’s anniversary date. The annual report filing fee is $100, which is non-refundable and paid every year.
Failure to submit your annual report can result in the dissolution of your LLC.
Apply For Necessary Licenses and Permits
Depending on your business type, you should apply for licenses and permits. Use the Business Xpress License Directory to better understand what kind of permits you need for your business. You may also need to apply for local licenses, so check with your county clerk to see what you may need to apply for.
How To Keep Your LLC Compliant in Oregon
Forming your LLC is one thing; you must also ensure that your business remains compliant with the State of Oregon to keep operating.
To keep your LLC compliant, you should:
- Submit annual reports
- Make sure your permits and licenses are up to date
- Register for federal and state taxes
- Submit and pay taxes on time
- Report any new hires to the State
- Maintain your registered agent
Tax Filing Requirements for LLCs in Oregon
A significant advantage of forming a business in Oregon is that, unlike other states, Oregon does not impose a sales tax. However, there are still other tax filing requirements to keep in mind. For example, if you have employees, you must pay state employer taxes.
Most LLCs are taxed by default as a pass-through entity, so the LLC itself does not pay taxes. Instead, the individual members of the LLC are taxed according to income earned.
There are also some federal taxes to keep in mind. Most notably, LLC members will pay a self-employment tax by filing Form 1065 Partnership Return or Form 1040 Schedule C, depending on whether you are a multi-member or single-member business.
The tax filing requirements can be tricky at the best of times, so you might want to consider hiring an accountant for advice and to do your taxes for you.
Frequently Asked Questions
How long does it take to register an LLC in Oregon?
Registering an LLC online is a much faster option that takes just 24 hours. This includes the time it takes to process the submitted documents, the approval, and the return of the downloadable stamped copy.
Registering via mail can take weeks. Although the processing may take only about a week, this does not account for mailing time.
There is no option for expedited services in the State of Oregon. However, since filing online takes just 1 day, the processing time is much faster than in many other states. With that said, if you file by mail, there are ways to speed up the process by using an overnight courier.
What tax structure should I choose for an LLC in Oregon?
In Oregon, all LLCs are treated as a disregarded entity (for single-member) or a partnership (multi-member). Both of these tax structures are very similar, wherein the members do not pay taxes through the LLC; each member pays taxes through their own personal income. This is the most common and simplest method of taxes for an LLC.
There is also the option to have your LLC taxed as a corporation. This is typically used for larger businesses as there are some tax benefits to being taxed as a corporation if you have a larger income.
If you’re unsure of what tax structure to use, it may be best to hire an accountant or business attorney to assist you.
Should you hire an LLC formation service in Oregon?
Hiring an LLC formation service in Oregon is entirely up to you. Forming an LLC on your own is quite possible. There is a lot of paperwork involved, but it is relatively easy. If you want to focus on other aspects of starting the business, then using a formation service could be a great idea.