Are you a small business owner looking for the right legal framework for your Oregon enterprise? If yes, then you should know what an LLC is and how it can benefit you and your business. An LLC, or Limited Liability Company, is a type of business structure that offers a unique combination of liability protection and tax advantages. It is a popular choice among small business owners due to its simplicity and flexibility. In this blog post, we will discuss what an LLC is, why it's important for your business, and why an Oregon business attorney is the perfect choice to help you set one up.
What is a Limited Liability Company?
A Limited Liability Company (LLC) is a type of business formation that provides personal liability protection to its owners, known as members. This means that as long as the members follow certain simple procedures and practices, the members' personal assets, such as a house, cannot be used to settle the company's debts or legal obligations. LLC formation is governed by state law and the rules vary from state to state. In Oregon, this is covered under the Oregon Revised Statutes 63.001 and seq. This statute requires that the company file Articles of Organization with the Secretary of State. LLCs have become a popular choice for many small business owners due to their liability protections, and flexibility in taxation and management. Overall, an LLC offers a great option for entrepreneurs who are looking to protect their personal assets while establishing a business.
Why might creating an Oregon LLC be important for me and my business?
Creating a Limited Liability Company (LLC) may carry several benefits for business owners. Among them are:
Personal Liability Protection: An LLC is a separate legal entity, shielding your personal assets from its debts and liabilities. When an LLC faces bankruptcy or lawsuits, your personal savings, investment properties, and other assets remain secure, as long as your organization follows proper LLC procedures and treats the LLC as a separate legal entity.
Flexible Taxation Options: The IRS allows LLCs to select versatile tax status to fit each members situation. By default, LLC’s are taxed as sole proprietorships (for single-member LLCs) or partnerships (for multiple-member LLCs), ensuring the company itself isn't taxed. Instead, profits and losses pass through to the owner(s), who report them on personal tax returns. Alternatively, an LLC can opt for corporate taxation if that option proves advantageous.
Management Flexibility: LLCs provide greater flexibility in business management compared to corporations. Expect less administrative paperwork and fewer restrictions on profit sharing within the LLC.
Enhanced Credibility: Establishing your business as an LLC can bolster credibility among customers, suppliers, banks, credit reporting agencies and other partners.
Simple Transfer of Ownership Interest: Transferring ownership of an LLC is typically simpler than transferring sole proprietorships or partnerships.
While these advantages demonstrate some of the potential benefits, it's crucial to recognize that each business situation is unique. Consulting a legal and tax expert is essential to determine if forming an LLC is the optimum choice for your specific business needs. If desired, Intellequity Legal Services can offer a comprehensive explanation of the implications associated with forming an LLC. Book here now for a low-cost ½ hour consult on your business formation.
Procedures necessary to set up your Oregon LLC and how an Oregon business attorney can help
When choosing a jurisdiction, you should consider the tax rules and regulations in each state. Some states have a higher tax rate, while others have more favorable tax conditions. You should also consider the reputation of the state and its regulatory environment. Once you’ve decided on a state, you need to file your articles of organization with the Secretary of State's office in that state.
Find an appropriate name for your business
First things first, before forming your new venture, you must have an appropriate and allowable business name. This should be one that does not conflict with another existing business name or trademark. The name of your company holds immense importance for several reasons:
First Impressions: The company name is often the first thing potential customers, investors, and partners learn about your business. A strong, appropriate name can create a positive impression and spark interest in your business.
Brand Identity: Your company name heavily influences your brand identity and how your business is perceived in the market. The right name can effectively convey your company's values, culture, and unique selling proposition.
Memorability: An easily remembered and pronounced name can help ensure that your company stays top-of-mind for your customers.
Searchability: In the digital age, a unique and identifiable name can make it easier for customers to find your business online.
Legal Protection: Choosing a unique name can provide legal protection and prevent other businesses from using a name that is too similar to yours, reducing potential confusion in the marketplace and the possibility of future litigation for trademark infringement.
When selecting a company name for your LLC, it's also crucial to ensure that the name conforms to the regulations put forth by the state in which you are filing. In Oregon, these requirements are spelled out in ORS 63.094. Oregon, like most states require 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 registered entities. You should also perform a thorough search for trademarks to ensure your chosen name is not infringing on any existing rights. If you need more in-depth analysis or assistance with this process, a Portland Oregon business formation attorney can help! Contact us today!
Decide what jurisdiction makes the most sense for you to register your business
While this post is directed to those that will be setting up an entity under Oregon law, just because you are an Oregon resident does not automatically mean that making your entity an Oregon domestic LLC is the right choice. In most cases if you are a smaller entity just starting out, and doing most of your business activities from Oregon, registering in Oregon does make sense. However, there may be tax and legal implications based upon the nature and extent of your business that make considering another jurisdiction appropriate as your state of domestic entity. These analyses should be conducted by an attorney and perhaps an accountant who can advise based upon your specific circumstances.
Setting up the legal framework for your LLC
To set up a domestic LLC in Oregon, you will need to file the articles of organization with the Oregon Secretary of State. The State allows businesses to file online and requires the payment of a filing fee. In order to file, you will need your unique business name, a principle office address which is the physical address where company business activities take place and is a publicly viewable address, a registered agent and their information, information for each member of the LLC, the type of business that will be conducted, the name of the organizer of the business and information on whether the business duration will be perpetual or will end on a specific date.
Filing the articles is the easy part. Once you’ve filed the articles, you will need to prepare an LLC operating agreement, which lays out the rules and regulations for the operation and management of your business. Failure to create and/or follow the rules contained within this document can subject you and the other members to PERSONAL LIABILITY under the doctrine of “Piercing the Corporate Veil’. Piercing the corporate veil refers to a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Typically, this happens when the corporation has been used to commit fraud or other wrong, or where the corporation is effectively indistinguishable from its owners.
Besides the previous two steps, you should create two other documents to keep with your initial company records. The first is a statement of the organizer. Although not required by statutes, a statement of the organizer continues with the theme of ensuring you are keeping the entity, and the owners separate. The ‘organizer’ is the person in charge of setting the entity up. This person(s) would be the one(s) contacting the attorney, acting on behalf of the proposed entity and paying the costs associated with the startup of the entity.
The other document that should be created is the initial resolutions of the LLC. The initial resolutions are crucial documents used in the setup of an LLC (Limited Liability Company) and provide a record of the important first actions taken by its members. They have the following purpose:
Formalizing Decisions: The initial resolutions formalize the key decisions made by the members of an LLC during its formation. This can include things like approving the articles of organization, confirming the appointment of a registered agent, or electing initial managers or officers.
Establishing Procedures: The initial resolutions may establish some of the key operational procedures of the LLC. This can include details about regular meetings, decision-making processes, and management structures among other things.
Documenting Start of Business: Initial resolutions serve as the official record of the establishment of the LLC, marking the beginning of its operation.
Legal Compliance: The resolutions can illustrate the LLC's compliance with relevant legal rules and regulations. They can demonstrate that the LLC is functioning according to the rules laid out in its own articles of organization and operating agreement, and that it is complying with state legislation.
Dispute Prevention: The resolutions can prevent future disputes among members by stipulating the agreed upon decisions and procedures at the onset of the LLC's formation.
Remember to properly store these critical legal documents as they may be needed for future legal or financial references. If you're in the process of setting up an LLC and have more detailed questions, please book a consult here.
Other actions needed
Once you have the business formed legally, there may be other items to attend to before you can actually begin operating. For instance, oftentimes, obtaining an EIN from the IRS or a BIN from the State of Oregon may be necessary, especially where your new venture may involve hiring employees or opening a bank account. In addition, there may be other state and federal statutes, regulations, rules and procedures that require additional business licenses or filings. For the State of Oregon, you may find some guidance on that information here.
Finally, after getting your LLC set up, make sure to keep accurate and complete records, follow your bylaws and other company rules and procedures and always treat the entity as separate from its’ members, which especially means, do not co-mingle funds or pay for personal expenses with business bank cards, or vice-versa.
Why an Oregon Business Attorney is a great choice to help you set up your Oregon LLC
If you have read this entire post, you can see that forming an LLC in Oregon can be a bit more complicated than originally thought. In addition to an attorney being able to provide necessary and important legal information during this process, a law firm like Intellequity can help provide practical business guidance as well. Further, hiring an attorney can save you valuable time; time better spent on getting your business up and operating. Finally, hiring an attorney is a bit like buying insurance. It will help to give you peace of mind knowing that your business formation is being handled properly and setting your business up for future success.
Wrapping Up
An LLC can be a great legal framework for small business owners. It offers liability protection and tax benefits, while remaining flexible in management and easy to set up. When setting up your LLC, you should be sure to do a thorough name search, decide what state jurisdiction works best for your business and be sure to consider all pertinent state regulations and licensing requirements, as well as state and federal tax rules. You should also be sure to follow all bylaws and other company rules, keep accurate records, and manage your finances carefully. By following these steps, you can ensure the success of your LLC and your business. If you have any questions, would like to set up a consult or are ready to have Intellequity get your LLC set up for you, please reach out to us here. Best of luck in your new endeavor!