Key Takeaways

  • The Oregon Limited Liability Company Act governs the formation, operation, and dissolution of LLCs in the state.
  • Filing Articles of Organization with the Oregon Secretary of State is the foundational requirement.
  • LLCs must meet specific naming rules and designate a registered agent with a physical Oregon address.
  • The Act allows flexible management structures (member-managed or manager-managed).
  • Tax treatment defaults to pass-through status but can be elected as corporate taxation.
  • LLCs in Oregon are often used to hold real estate or operate single-purpose ventures.
  • An operating agreement, while not required by statute, is highly recommended to avoid disputes.
  • Limited liability protection is strong but not absolute—misconduct or fraud can pierce the veil.

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.

Filing Requirements

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.

Importance of an Operating Agreement

While the Oregon Limited Liability Company Act does not legally require LLCs to adopt an operating agreement, having one is critical. An operating agreement establishes how profits and losses are shared, voting rights, member contributions, and procedures for adding or removing members. Without this document, disputes are resolved under default state rules, which may not reflect the members’ intentions. Courts and lenders also view an operating agreement as evidence of a well-structured business, helping reinforce limited liability protections.

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.

Oregon LLCs and Real Estate Ownership

LLCs are one of the most common structures used to hold real estate in Oregon. The Oregon Limited Liability Company Act permits LLCs to own, lease, and manage property directly. Many investors create a single-purpose LLC solely to hold one parcel of property, which helps isolate liabilities. If an LLC formed outside Oregon acquires real estate in the state, it may need to register as a foreign LLC to conduct business, depending on its activities. This flexibility makes the LLC an attractive option for both investors and developers.

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.

Member Rights and Duties Under the Act

Under the Oregon Limited Liability Company Act, members have both rights and obligations. Rights often include access to company records, participation in major decisions, and entitlement to profit distributions. Duties generally include acting in good faith and avoiding conflicts of interest. The Act allows these rights and responsibilities to be further customized in the operating agreement. This balance of statutory default rules and contractual flexibility gives members wide latitude to design governance that fits their business.

LLC Taxation

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.

Annual Reporting and Fees

Every Oregon LLC must file an annual report with the Secretary of State and pay the required renewal fee. The annual report keeps the state informed of updated addresses, management structure, and registered agent information. Failure to file on time can result in late fees or even administrative dissolution of the LLC. Staying compliant with annual reporting obligations ensures that the LLC maintains good standing and preserves its liability shield.

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.

Common Mistakes to Avoid in Oregon LLCs

Some of the most frequent mistakes Oregon LLC owners make include:

  • Failing to adopt an operating agreement – leaving the LLC governed only by default state rules.
  • Not maintaining separation of personal and business finances – which risks piercing the liability veil.
  • Ignoring annual reporting duties – which may cause loss of good standing.
  • Improperly designating management authority – leading to confusion or unauthorized actions.

Avoiding these errors helps ensure that an LLC enjoys the protections and flexibility the Act was designed to provide.

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.

Frequently Asked Questions

  1. Is an operating agreement required under the Oregon Limited Liability Company Act?
    No, it’s not required, but it is strongly recommended to clarify member rights and prevent disputes.
  2. Can an Oregon LLC hold real estate?
    Yes. Many investors use single-purpose LLCs to hold real estate in Oregon, taking advantage of liability protection and management flexibility.
  3. What annual obligations do Oregon LLCs have?
    They must file an annual report with the Secretary of State and pay a renewal fee to remain in good standing.
  4. Are Oregon LLCs taxed like corporations?
    By default, LLCs are taxed as pass-through entities, but they can elect to be taxed as corporations.
  5. Does the Oregon Limited Liability Company Act provide absolute liability protection?
    No. Protection can be lost if members engage in fraud, commingle funds, or fail to observe proper LLC formalities.

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