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

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. A corporation can potentially elect an S corporation tax status if it’s more beneficial. When you elect an S corporation tax status, your corporation becomes a pass-through entity, and is allowed tax advantages such as dividends not subject to self-employment tax.
• 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.

Note that whether you form an LLC or a corporation, you’ll need to file a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN) once your company is officially formed with the state of Oregon. This report provides the federal government with identifying information about your company and those with the most control over profits and business operations. However, unlike state filings, the information shared in your report does not go on the public record and there is no filing fee. (Though if you don’t want to file this on your own, we offer BOI filing service for just $25.)

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.

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:

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:

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.

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:

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.