Forming an Oregon LLC

What is a Limited Liability Company (LLC) and what are its' advantages?

A Limited Liability Company (LLC) is a type of business entity that combines elements of both corporations and partnerships. 

An LLC can be a good choice for medium- or higher-risk businesses, owners with significant personal assets they want to protect, and owners who want to pay a lower tax rate than they would a corporation.

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Here are some key characteristics of an LLC:

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Limited Liability:

One of the primary advantages of an LLC is that it provides its owners, known as members, with limited liability. This means that members are typically not personally responsible for the company's debts and liabilities. This is similar to the protections shareholders receive in a corporation.

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Flexible Management and Ownership Structure:

Unlike corporations, which must have a board of directors and adhere to a strict corporate structure, LLCs allow for a much more flexible management structure. Members can manage the LLC directly, or they can appoint managers to run it.

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Profit Distribution:

LLCs can distribute profits however members see fit, regardless of a member's ownership percentage.

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Pass-through Taxation:

Profits and losses can pass directly to members, who report this information on their individual income tax returns. The LLC itself does not pay federal income taxes unless it chooses to be treated as a corporation. This helps to avoid the double taxation that affects traditional corporations.

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Easier to Set Up and Maintain:

LLCs are generally simpler to establish and require fewer ongoing formalities compared to corporations.

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However, legal and tax implications can vary depending on your situation, so it's advisable to consult with legal and tax professionals when forming an LLC.

How do I form an LLC in Oregon?
 

Creating a Limited Liability Company (LLC) usually involves the following steps:

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Choose a Name for Your LLC:

The name you choose must comply with Oregon Revised Statutes ORS 63.094. Oregon, like most states, requires that the name include an identifier showing that the company is an LLC (such as "LLC" or "Limited Liability Company") and that the name be distinguishable from other Oregon registered entities. 

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File the Articles of Organization:

The Articles of Organization is the document you file to officially establish your LLC with the Oregon Secretary of State. Information needed to fill and file this document includes your LLC's name, its business purpose, and information about its organizer(s), members and managers.

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Select a Registered Agent:

Oregon requires you to designate a registered agent. This individual or business entity is responsible for receiving legal papers on behalf of your LLC.

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Create an Operating Agreement:

While not legally required, creating an operating agreement is highly recommended. It outlines the ownership and operational procedures of the LLC and can help protect your limited liability status and prevent financial and management misunderstandings.

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Obtain an EIN from the IRS:

Most LLCs are required to get an EIN from the IRS. This is also known as an Employer Identification Number and is used by the IRS to identify your business for tax purposes. Banks will also need this number if you plan on opening a business bank account.

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Obtain an Oregon BIN:

Not all LLC's will need this number, but many do, especially if you have, or plan to have, employees by the time you start operating your business. 

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Register to Do Business in Other States (If Necessary):

If your LLC will do business in a state other than Oregon, you may need to register your LLC in those states and appoint a registered agent for each.

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It is important to research the law or consult an Oregon business attorney and/or tax professional while completing these steps. Please note that fees are associated with several of these steps, including filing the Articles of Organization.

Why should I hire an attorney to create my Oregon LLC?

While there may be costs associated with hiring an attorney, the benefits you receive in terms of avoiding future legal issues, ensuring compliance with laws, and receiving personalized advice often outweigh the initial expense.

Having an attorney create your Limited Liability Company (LLC) is beneficial for several reasons:

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Navigating Legal Complexity:

While starting an LLC may seem straightforward, there can be complexities depending on your unique business situation. An attorney can help navigate these complexities successfully.

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Drafting the Operating Agreement:

An attorney can draft an operating agreement that encompasses your financial and working relationships with co-owners in terms of percentage of ownership, distribution of profits and losses, management roles, meeting schedules, and more.

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Compliance with Laws:

An attorney will ensure that your LLC formation is in compliance with federal, state, and local laws. This is particularly important if your business operates in multiple states or countries.

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Protecting Personal Liability:

Limited personal liability is one of the primary advantages of an LLC. An attorney can ensure you don't inadvertently take actions that could compromise this limited liability.

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Tax Advice:

While an attorney may not give tax advice per se, they can discuss with you the legal ramifications of different tax elections and suggest the best approach with your specific circumstances in mind.

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Future Disputes:

Having an experienced attorney can also help you foresee potential disputes and issues that could arise down the road, thereby helping mitigate future risks.

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Time and Effort:

Hiring an attorney can also save you time and effort in the long run by ensuring things are done correctly the first time around.