How To Start An LLC In Oregon [2023 Guide]
Starting a business can be an exciting and rewarding experience, but it’s also important to understand the legal and financial implications of doing so.
To help with one aspect of starting a business, I have a guide to starting an LLC in Oregon, where I’ll cover the different steps involved in establishing an LLC, as well as some of the key benefits and drawbacks of this type of business structure. So if you’re thinking about starting a business in Oregon, be sure to read on for more information!
What is an LLC?
The Limited Liability Company (LLC) is a popular entity structure for businesses starting in Oregon. The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Oregon without an attorney.
Unlike a sole proprietorship or partnership, where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure, that protects the business owner’s personal assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
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What are the steps to Form an Oregon LLC?
Let’s break down the steps to complete the Oregon LLC formation process.
Step 1: Choose a Name for the LLC
The first step in forming an Oregon Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Oregon. The Oregon Secretary of State makes it easy to search and verify if your LLC name is available. Here is more information on how to do an Oregon LLC name search.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
If you are not ready to register the LLC, you can file the Application for Name Reservation with the Oregon Secretary of State, Corporations Division, to reserve a company name for up to 120 days.
Before settling on a name, you may want to see if a domain name is also available to match your business name and website address.
Step 2: Appoint an Oregon Registered Agent
Every LLC in Oregon is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The basic requirements to be a Registered Agent in Oregon include:
– The agent must be an Oregon resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.
Learn more about the requirements for a Registered Agent in Oregon.
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from their personal residence or is still employed and don’t want their employer to find out. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Step 3: File the Oregon LLC Articles of Organization
The paperwork to officially create an LLC in Oregon is called the Articles of Organization. To submit the paperwork, either file online through the Oregon Secretary of State’s website or download and file the Articles of Organization.
If you have questions, contact the Oregon Secretary of State Corporations Division
503-986-2200 8 am to 5 pm, Monday through Friday
When filling out the Articles of Organization, a few sections, and terms can be confusing. Let’s go over a few of these sections to help get your LLC started right.
Activity Description – Provide some basic information about what the business does in fewer than 250 characters. Entering something now does not force the LLC only to perform that business activity forever, as this statement can be changed later. One way to keep the activity description more open-ended you can enter “Any legal business activity for which a Limited Liability Company may be organized in Oregon.”
Related: How to Answer the Activity Description.
Duration – In this section, indicate how long the LLC intends to remain in existence. Most LLCs will choose a Perpetual duration; however, some businesses (usually investment-related) will have a specific closure date.
Principal Place of Business – In this section, enter the street address, city, state, and zip code of the initial principal office. This address can be the LLC’s physical address, or it can be the address where the business records are stored. You may not use a PO Box for the designated office.
Assign the Organizers – An LLC Organizer is someone involved with the formation of the Articles of Organization. The Organizer may or may not become a LLC member, such as a mentor, attorney, or accountant, but any initial member can be listed as an organizer.
At least one organizer must be entered.
Register Individuals with Direct Knowledge – The Oregon Secretary of State requires that at least one person who is a member or manager of the limited liability company or an authorized representative with direct knowledge of the operations and business activities be on file.
Enter at least one person’s name and address.
Statement of Management – This question asks how the LLC will be managed. The two choices are:
– Member-Managed – An LLC with members who have an active involvement in the management of the LLC. Most LLCs fall into being member-managed.
– Manager-Managed – An LLC whose members hired a manager to run the LLC, similar to a CEO of a corporation.
Select either “Member-Managed” or “Manager Managed.”
Declare the Initial Members or Managers – This is an optional section to include the names, contact information, and title of the LLC members and managers. Some banks will request this information before allowing LLC bank account signing authority.
Professional Services Rendered – If the LLC offers services that require state licensing, enter “Yes” and choose from the list of professions. Some common services that require licensing include accountants, acupuncturists, architects, attorneys, chiropractors, dentists, engineers, landscape architects, podiatrists, psychologists, and real estate appraisers.
This is an optional section and is not used by most LLCs. Here you would include additional rules for the operation of the LLC.
– Indemnification – The company elects to indemnify its members, managers, employees, agents for liability, and related expenses under ORS 63.160 to 63.170. Many LLCs will elect the indemnification clause.
– Benefit Company – Not as common for an LLC to select, but a benefit company is a blend between a not-for-profit and for-profit company. There are some requirements to be an Oregon benefit company.
What To Do After Starting An Oregon LLC
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare an Oregon LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Related: Oregon operating agreement template
Obtain an EIN
If the LLC will hire employees or is owned by more than one member, an EIN is required.
The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
If an Employer Identification Number isn’t required, the LLC can use either the owner’s social security number or register for an EIN.
Related: How to Apply for an EIN
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original LLC formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- Occasionally, the bank will request an Oregon Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start.
- Professional License – Certain services from barbershops, accountants, salons, and others must obtain licensing.
- Oregon Business Identification Number – All businesses operating in the state must obtain a Business Identification Number from the Oregon Department of Revenue, which includes registration for Unemployment Insurance Tax, Employee Withholding Tax, and Oregon state taxes.
- Sales Tax Permits – Even though Oregon does not charge a sales tax, each state has different rules regarding the collection of sales tax when selling and shipping taxable items to residents in their state.
File the Oregon LLC Annual Report
LLCs are required to file an annual report with the Oregon Secretary of State. The fee for the annual report is $100 and is due each year on the LLC’s anniversary date.
Oregon LLC FAQs
How much does it cost to start an LLC in Oregon?
The state filing fee to start an LLC in Oregon is $100.
How long does it take for an LLC to be approved in Oregon?
Oregon LLCs formed online normally take 1-2 hours, while mailed-in forms can take 5-7 business days for the Secretary of State to process.
Is there an annual fee for an LLC in Oregon?
An annual report and $100 LLC annual renewal fee are due each year for Oregon LLCs.
What are the benefits of an LLC?
An LLC provides several benefits, such as personal liability protection, tax flexibility, ease of operation, and much more.
Related: What are the benefits of an LLC?
Can you be your own Registered Agent in Oregon?
Anyone can be a Registered Agent, provided they are at least 18 years old, reside in the state of Oregon, and are generally available to receive documents during normal business hours.
If I have an LLC, is a business license required?
It’s sometimes thought that the LLC and business license are the same in Oregon, but they aren’t. An LLC is referred to as a business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to operate legally.
Most businesses in Oregon will need to register with a variety of government agencies. Oregon business license requirements are based on what the business does or where it is located in the state, not on the type of entity.
What is a Foreign Limited Liability Company?
A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state but wants to physically operate in Oregon. Physically operating means having a presence, such as having an office or hiring an employee.
Before an out-of-state LLC can operate in Oregon, foreign qualification can be granted by submitting an Application for Authority to Transact Business
Related: What is a foreign LLC?
What is a Professional Limited Liability Company?
Businesses that require occupational licensing in Oregon, such as accountants, architects, veterinarians, etc., will want to file for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.
Related: What is the difference between a domestic Oregon LLC and a foreign LLC?
Is an LLC the same as a corporation?
Can you use a PO Box for your LLC in Oregon?
A PO Box can only be used as a mailing address for the LLC. A physical street address in Oregon must be used for the Registered Office and Registered Agent.
Where do you check if your Oregon LLC name is available?
Every LLC in Oregon must have a unique name. You can check if your Oregon LLC name is available by searching the Oregon business registry on the Oregon Secretary of State’s website. The business registry is a database that contains information on all businesses registered with the state of Oregon.