How to Incorporate in Oregon vs. How to Start an Oregon LLC

A Guide to Choosing the Best Business Entity in Oregon

One of the first major decisions you’ll make after deciding to start a business in Oregon is which business entity structure is best for your company. The Limited Liability Company (LLC) and corporate entities are the most popular structures in the states, and have the most desirable elements from all the business entities, such as limited liability protection and flexible tax structuring options. This Oregon LLC formation and incorporation guide will help you understand both business structures and explain their main characteristics. We’ll go over the details of starting an Oregon LLC and an Oregon corporation, what to expect with their annual maintenance, and the advantages and disadvantages of the LLC and corporation.

After we’ve figured out which business structure suits your needs best, your next step is hiring Active Filings to get you where you need to be in the quickest amount of time. Our starter package begins at $25 (plus state fees). Hire us and you’ll quickly understand why Active Filings is America’s most reliable business incorporation service.

 

Hire us to form your LLC or Corporation in Oregon!

LLCs vs. Corporations

There are basic elements true of all LLCs and corporations that you’ll need to understand to help you make your decision:

  • Maintenance
    A major selling point for an LLC is its ease of maintenance. LLCs will need only minimal paperwork, have flexibility when a decision is needed, and have low annual upkeep. An LLC is the best choice if you have a small to medium-sized business and can only handle a low amount of maintenance. On the flip side, a corporation will require a high level of maintenance, both on a day-to-day and annual basis. Corporations have more legal formalities than an LLC, like electing a board of directors, holding shareholder meetings, and maintaining internal records such as meeting minutes and stock issuance.
  • Tax Structure
    Since an LLC is not a separate taxable entity apart from its owners, the LLC is a pass-through tax entity. Income and losses pass through the business and onto the members to report on their personal income tax return. LLCs are the simpler and less expensive option in terms of time and paperwork for business owners during tax season. Corporations are more advanced for a business owner to take care of during tax season. A standard corporation defaults to a tax structure called a C corporation, and is known for what’s called double taxation, where a business’s net income is taxed initially by a corporate tax, and then taxed again on personal income, after shareholders receive their profits (dividends) and losses. C corporations are typically taxed at a lower rate on profits, and have opportunities for tax deductions such as health care and travel, and can retain its earnings to be reinvested into the company’s growth.
  • Prospective Investors
    An essential element in a corporation is the advantage of appealing to investors more than any other business entity. Entrepreneurs looking to expand their company in the future will most likely need investor funds, making the corporate entity the suitable choice. Investors are more comfortable investing their time and money in a traditional business structure that offers stock, like a corporation. Investors don’t have to worry about complicating their personal taxes when they invest in a corporation, and only get taxed on profits actually distributed to them, unlike an LLC. Investors view corporations as a dependable business structure that will provide them with a return on their investment. Having a corporate structure will profoundly impact the ability to raise investment money. On the other hand, investors can still invest in an LLC by owning a percentage of that LLC. Owners of LLCs will have to pay taxes on their distributive shares, even if they haven’t received a distribution on those profits, and can’t issue stock, which is a turn-off for many investors. A corporation should be considered if you are serious about gaining investors.
  • Business Prestige
    When it comes to prestige, a business starts with its appearance, and having the “LLC” or “Inc” ending on your business name will give it a level of prestige. These endings convey permanence and encourage trust from potential investors or clients, and show that you are serious about your business. While both entities provide a level of prestige, incorporating provides a higher level of prestige for your business, since the corporation is the oldest and most traditional entity type. Keep in mind the LLC has surpassed corporations in popularity in most states, and the prestige of an LLC is continually growing.

 

OR LLCs vs. OR Corporations

Once you understand the main characteristics that apply to all LLCs and corporations, next is to uncover more specific characteristics of what makes an Oregon LLC or Oregon corporation unique from other states, which will bring us to the final answer on which entity is best for your business. Each state has its own set of statutes and tax laws that govern the way its businesses operate, and these unique details must be considered when choosing your business entity.

The information in this section will provide these specifics for the Oregon LLC and the Oregon corporation.

  • No Franchise Tax in Oregon
    Unlike most states, the state of Oregon does not impose a typical business franchise tax on businesses, saving both LLCs and corporations in Oregon a significant amount of money every year.
  • Oregon Corporation Excise Tax
    Oregon’s Corporation Excise Tax is a tax assessed on the income from the business a corporation conducts within the state of Oregon. This excise tax is fairly high and is important to take into consideration for the future of your business. This tax is one of two potential percentages, depending on your income:• 6.6% on the first $10 million of income, or
    • 7.6% on any income past $10 million.There is a minimum amount due, ranging from a $150 tax for income sales under $500,000, to a $100,00 tax for sales above $100 million. LLCs who are taxed as partnerships will owe a $150 excise tax fee as well.There is a separate tax that is typically irrelevant to most small and medium-sized businesses known as the corporate income tax for corporations not doing business in the state, which we will skip over.
  • Oregon Individual Income Taxes
    The Oregon individual income tax rate is a point of interest for LLCs, since the businesses income passes through the LLC and onto the members to report on their individual income taxes. Oregon has a tax on individual income at marginal rates. The brackets for 2019 are as follows:

    Income Bracket Tax Rate
    $0 – $3,450  5%
    $3,451 – $8,700 7%
    $8,701 – $125,000 9%
    $125,001+  9.9%
  • Oregon LLC Protection From Creditors
    LLCs in Oregon have a strong level of protection against creditors (a person who is owed funds or assets by a debtor). Creditors only have one remedy against the debtor of an LLC, which is a charging order that puts a lien on a debtor’s interest (funds and assets) and creditors then have a right to receive any distributions made to the debtor from the LLC, if the LLC makes a distribution. Often times, this leads to the creditor ending up with nothing, since creditors can’t order the LLC to make distributions (ORS §63.259).

 

Oregon LLC or Oregon Corporation? Final Answer.
All things considered, the decision to form either an LLC or a corporation for your company comes down to the size of your business, priority of investors, level of maintenance you’ll need, and the most beneficial tax structure for the future of your business.

Choose the Oregon LLC if you have a small to medium-sized business. LLCs in Oregon stay true to character in terms of simple formation and maintenance, simple management, strong flexibility in decision-making, and limited liability protection. If growing your company large with investors is not your top priorities, you’re looking for the least expensive and sophisticated taxes and annual maintenance, and needing limited liability protection for your business, the LLC is your answer.

Choose the Oregon corporation if you plan to grow your business big with the funds from investors, and you have the means for the amount of maintenance required. an Oregon corporation remains true to character in its substantial amount of paperwork, higher maintenance, and involved yet beneficial tax structure.

How to Incorporate in Oregon

When you’re ready to create your Oregon corporation, also known as incorporating, you must file the Articles of Incorporation with the Oregon Secretary of State. You can download the Articles of Incorporation online at the Oregon Secretary of State website. Once your Articles of Incorporation are approved, your corporation is officially formed.

You can file the Articles of Incorporation in the following ways:

  • Online at the Oregon Secretary of State website (recommended)
  • By postal mail

Filing your Oregon Articles of Incorporation on the website is fast, secure, and is the preferred method by the Secretary of State. The fee for filing your Articles of Incorporation costs $100. The state of Oregon processes business registration forms such as the Articles of Incorporation quicker than most states, and you can expect to get your corporation approved in about 1 day.

To complete your Oregon Articles of Incorporation, include the following information:

Enter your corporation’s name exactly as you would like it to appear. Your corporation name must include one of the following words: “Incorporated,” “Corporation,” “Company,” “Limited,” or an abbreviation of one of those words.

Your corporation name can’t imply it is organized for a purpose other than what is mentioned in the Articles of Incorporation. The name can’t already be in use, and can’t sound similar to the name of any other company in Oregon.

List the physical address of your corporation’s principal office.

A Registered agent is a person or entity who resides in the state and receives service of process from the government on behalf of a business. Enter the name of your Oregon registered agent here.

Enter the physical address of your registered agent here.

List the address where you would like to receive mail notifications from the Secretary of State.

State the number of shares your corporation is authorized to issue (most corporations start out with around 1,500). You must list at least one share.

If you are forming a professional corporation, indicate the professional service you are providing.

If any of the provisions listed in this section apply to you, check the appropriate box.

List the names and addresses of each person responsible for forming this business.

State the name and address of your corporation’s initial president.

State the name and address of your corporation’s initial secretary.

List the name and address of at least person who is an authorized representative on behalf of the corporation.

Have the incorporator(s) sign and print their name and title here.

How to Form an LLC in Oregon

When you’re ready to form your Oregon LLC, you must file the Articles of Organization with the Oregon Secretary of State. You can download the Articles of Incorporation online at the Secretary of State website. Once your Articles of Organization are approved, your LLC is officially formed.

You can file the Articles of Organization in the following ways:

  • Online at the Oregon Secretary of State website (recommended)
  • By postal mail

Filing your Oregon Articles of Organization on the website is fast, secure, and is the preferred method by the Secretary of State. The fee for filing your Articles of Organization costs a flat $100. The state of Oregon processes business registration forms such as the Articles of Incorporation quicker than most states, and you can expect to get your corporation approved in about 1 day.

To complete the Oregon Articles of Organization, include the following information:

Enter your LLC name exactly as you would like it to appear. Your company name must include the words “Limited Liability Company” or the abbreviations “L.L.C.” “LLC.”

Your company name can’t imply it is organized for a purpose other than what is mentioned in the Articles of Organization. The name can’t already be in use, and can’t sound similar to the name of any other company in Oregon.

Check the appropriate box depending on whether you’d like your LLC to be perpetual (continuous) or to dissolve by a specific date.

List the physical address of your LLC’s principal office.

A Registered agent is a person or entity who resides in the state and receives service of process from the government on behalf of a business. Enter the name of your Oregon registered agent here.

Enter the physical address of your Oregon registered agent here.

List the address where you would like to receive mail notifications from the Secretary of State.

If all the members are owners and are involved in decision-making and day-to-day operations, the LLC is member-managed. If certain members are appointed as managers to make the decisions and run day-to-day operations, the LLC is manager-managed.

Check the appropriate box depending on whether your LLC is manager-managed or member-managed.

If you are forming a professional corporation, describe the professional service you will be providing.

If any of the provisions listed in this section apply to you, check the appropriate box.

List the names and addresses of each person responsible for forming this business.

List the names and addresses of the owners or members of your LLC. Filling out this section may be helpful in regards to your future business banking needs.

State the name and address of your corporation’s initial secretary. Filling out this section may be helpful in regards to your future business banking needs.

List the name and address of at least person who is an authorized representative on behalf of the LLC.

Have the organizer(s) sign and print their name and title here.

Oregon Annual Report Requirements

You can keep your business in good standing and updated with the state of Oregon year after year by taking care of a few annual maintenance tasks.

1. File your corporation’s annual report
2. File your annual Oregon business tax returns

Below, we’ll explain the basic instructions and resources you’ll need to help you take care of your tax-related upkeep and annual maintenance.

What is a Oregon annual report?
Oregon’s annual report is meant to update or confirm the records for your business, such as officer/member names and addresses, and lets your business remain in good standing. Oregon LLCs and Oregon corporations that do business in the state are required to file annual reports with the Secretary of State.

How do I file an annual report in Oregon?
Oregon LLCs and Oregon corporations need to file their annual reports online at the Secretary of State website (recommended), or by postal mail.

How much does it cost to file an annual report in Oregon?
For LLCs and corporations, the annual report fee in Oregon is $100.

When are Oregon annual reports due?
Your Oregon annual report is due every year on the anniversary date of your original filing, with the first annual report due the year after you’ve formed your business.

Oregon Business Taxes

The filings can get complicated and you may need the help of a tax service or CPA to complete these requirements, but regardless of your accounting skills, we’re here to help get you started.

Check out our Oregon Business Tax FAQ below:

What is the Oregon Corporate Excise Tax?
Oregon’s Corporation Excise Tax is a tax assessed on the income from the business a corporation conducts within the state of Oregon. This excise tax is fairly high and is important to take into consideration for the future of your business. This tax is one of two potential percentages, depending on your income:

  • 6.6% on the first $10 million of income, or
  • 7.6% on any income past $10 million.

There is a minimum amount due, ranging from a $150 tax for income sales under $500,000, to a $100,00 tax for sales above $100 million.

There is a separate tax that is typically irrelevant to most small and medium-sized businesses known as the corporate income tax for corporations not doing business in the state, which we will skip over.

What is the Oregon individual income tax rate?
The Oregon individual income tax rate is a point of interest for LLCs, since the businesses income passes through the LLC and onto the members to report on their individual income taxes. Oregon has a tax on individual income at marginal rates. The brackets for 2019 are as follows:

Income Bracket Tax Rate
$0 – $3,450  5%
$3,451 – $8,700 7%
$8,701 – $125,000 9%
$125,001+  9.9%

What forms do you file for your Oregon business taxes?
You can file your Oregon corporation excise tax return using Form OR-20.

For single member LLCs, submit Schedule C as part of your individual income tax return.
For multi-member LLCs, submit Form OR-65 along with Schedule K-1, included within the form.

When are my Oregon business tax returns due?
Your Oregon corporate excise tax return is typically due May 15th , or the 15th day of the month following the due date of the federal return.

Hire us to form your LLC or Corporation in Oregon!