What is Oregon Limited Liability Company Act?
The Oregon Limited Liability Company Act allows companies to enjoy the taxation that partnerships do as well as the personal liability that corporations enjoy.3 min read
The Oregon Limited Liability Company Act allows companies to enjoy the taxation that partnerships do as well as the personal liability that corporations enjoy. LLCs have the benefit of not having to perform many of the formal requirements that a corporation has to, such as keeping formal minute meetings or having the management structure of a board of directors. The Oregon Limited Liability Act sets forth the regulations that companies need to follow to form an LLC.
When someone owns an LLC, they are often referred to as members. To form an LLC, members are required to file Articles of Organization with the Oregon Secretary of State's office. Some of the requirements the state of Oregon sets forth include:
- The articles must be legible.
- They must be signed by everyone with the intent to create the LLC.
- They must contain the full name and address of the company.
- They must include the full name and address of the registered agent.
- They must include the full name and address of each member.
An LLCs registered agent is the individual that will accept all legal and important notices for the business. To be an LLC member in the state of Oregon, this individual need to:
- Be an Oregon resident and have a physical address.
- They must be authorized to perform business in the state of Oregon.
The Articles of Organization must indicate how the members plan to manage their company, either as performing management operations themselves or by hiring outside people to become managers. They also must indicate whether their LLC will operate indefinitely or for a set period of time.
Naming Your Company
Members must decide on a name for their LLC. Under Oregon state law, an LLC name needs to:
- Include the words Limited Liability Company or LLC
- Be different from any other business name in the state
- Must not be deceptively created to sound like another business name
You can search the name database on the Oregon Secretary of State website. You can reserve your business name for up to 120 days by filling out a Name Reservation with the Oregon Secretary of State Corporation Division. You will need to include a filing fee of $100 when reserving your name.
Decide on Your Management
In your Articles of Organization, you need to determine whether your LLC will be member-managed or manager-managed. One of the benefits of owning an LLC is having flexibility with your management structure. In a standard corporation, shareholders are the only ones making major decisions that affect the future of the company and day-to-day decisions. In an LLC, members are able to control what goes on with their company.
Taxation of an LLC is similar to a partnership where it acts as a pass-through tax entity. The profits that an LLC makes are included on each member's personal tax return based on each individual member's portion of ownership. This can be beneficial when compared to having a corporation because a corporation will be taxed twice. First on their corporate return and then again at the shareholder level where they will pay taxes on their dividends. LLCs do have the option to be taxed as a corporation if they choose to.
Limitations on an LLC
LLC members enjoy the same benefits of limited liability that corporations enjoy. In general, owners and members of an LLC cannot be held liable for business debts or the negligent acts of other managers or members. If a member is directly involved in a fraud or intentional illegal activity, they can lose their protection from liability.
Oregon Limited Liability Protection Goes Only So Far
There have been court cases in Oregon that have challenged limited liability protections that LLC members enjoy. An example was the case of Cortez v Nacco Materials. In this case, a worker sued the managing-member and others for a work-related injury that was not covered under the business worker's compensation insurance. The case was dismissed against the managing-member under the limited liability protection but was later reversed on appeal, stating that the manager did not have statutory immunity.
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