If you’re starting a new business or adding new locations or business lines to an existing one, you are likely wondering if registering a DBA (doing business as) or forming an LLC (limited liability company) is the best route to travel.

A DBA is an assumed (fictitious) name that an existing business has received approval to use when conducting business. An LLC is its own registered business entity.

Both options provide a way to operate under a business name other than a company’s legal name. But in addition to that similarity, they have significant differences. Choosing one or the other affects a company’s costs, compliance requirements, and other aspects of operating the business.

What Is a DBA?

A DBA or “Doing Business As” is a fictitious name registration (also known as a “trade name” or “assumed name”) that allows a business to operate under a name other than its legal name.

It’s important to know that approval of a DBA does not:

• Guarantee a business an exclusive right to its fictitious name
• Create a separate legal entity
• Offer personal liability protection

DBAs for Sole Proprietorships and Partnerships

A disregarded entity, like a sole proprietorship or partnership, may file a DBA and conduct business under that name instead of the owners’ names.

For example, suppose someone named Josie Newman plans to open a gift boutique and wants to use the name “Extraordinary Finds Gift Emporium” rather than something like “Josie Newman’s Gift Shop.” If she files (and gets approved for) “Extraordinary Finds Gift Emporium” as a DBA, she can use that fictitious name on her signs, business cards, website, and other marketing materials. She could even set up a bank account under her DBA name.

DBAs for LLCs and Corporations

A formally registered business entity, like a limited liability company or corporation, may file a DBA and conduct business under that name instead of the legal name on its registered organizational or incorporation documents filed with the state.

For instance, let’s say a restaurant is operating as an LLC registered as “Diane’s Hometown Diner, LLC.“ Suppose Diane wants to expand her offerings by providing catering services, and she wants to use the name “First-Class Catering” for that line of business. To accomplish that, she could file “First-Class Catering” as a DBA to get state approval to use that name without having to start an entirely separate company.

DBA Name Restrictions

Before filing a DBA, it’s important that entrepreneurs do a business name search to make sure their desired name isn’t already used by another business entity within the state. If the type of business conducted is similar or closely related, it’s likely the state won’t approve the fictitious name. Also, it’s beneficial to check to make sure no business in the U.S. has a registered trademark claim on the name.

Business owners must also be aware that each state has its own rules for what can or cannot be included in a business name.

Typically prohibited are acronyms or words that will mislead the public into thinking a business is something it’s not. For example, abbreviations and acronyms like “Inc.”, “LLC,” “Assoc.”, etc. may not be part of a DBA. States may also prohibit words such as “bank,” “trust,” “foundation,” “United States,” and “school” or “university.”

Generally, states also require that businesses don’t use obscene words or words that promote illegal activity in their names.

Why DBAs Must Be Filed With the State

States (and sometimes local governments) require that businesses register their DBAs so that the public and consumers know who owns and operates any business that uses a fictitious name. That disclosure is a means for helping to protect customers from shady entrepreneurs who have a reputation for doing business badly. Business owners may not use a term like “LLC” or “Inc.” behind a fictitious name because a DBA is not a legal entity in and of itself.

Several states require that the business owner filing for a DBA publishes an advertisement or notice in a general circulation newspaper or legal publication — or both — usually within the county where the fictitious name is filed.

What Is an LLC?

A Limited Liability Company (LLC) is a state-registered legal entity. Its official legal name is whatever name is on its formation documents (Articles of Organization). An LLC’s legal name does not have to include the name of its owners; it can be a fictitious name. If an LLC uses a fictitious name as its legal name, it does not have to complete a DBA filing; the business name is registered officially when the LLC’s articles of formation are approved.

LLC Name Restrictions

When forming an LLC, entrepreneurs must heed any exclusions and restrictions their state enforces. For the most part, the rules for registering an LLC’s name are similar to those when filing a DBA.

An LLC may not use a name that’s:

• Prohibited by the state
• Already used by another business entity within the state of registration
• Already used by a business anywhere in the U.S. that has a registered trademark claim on the name

Differences Between a DBA and an LLC

1. Formation Paperwork and Compliance

Filing a DBA is a simple process, requiring completing and submitting a form to the Secretary of State or other business agency to request permission to use a desired fictitious name. Generally, states require a relatively minimal one-time fee. Many states require DBAs to be renewed periodically — which can range from one year to ten years depending on the state. Otherwise, there are no ongoing business formalities (like annual reports or licenses) associated with a DBA name.

Forming a limited liability company requires completing and filing Articles of Organization (sometimes called a Certificate of Organization) with the state and paying an entity registration fee. There may be other filings, fees, reports, and requirements to fulfill as well. The requirements vary by state. Also, LLCs are governed by their LLC Operating Agreement, so owners (called members) must abide by that document’s provisions regarding the management of the company, distributions of profits, resolution of disputes among members, etc.

LLC Compliance Task Examples

• Designating a registered agent
• Obtaining business licenses and permits
• Applying for an EIN (Federal Tax ID Number)
• Filing Annual Reports
• Paying an LLC franchise tax
• Holding an Annual Meeting and recording minutes

2. Business Name Protection

When someone registers a DBA, it does not typically give them exclusive rights to use that name. Other companies may also be able to use the name in the state. While a few states protect registered fictitious names by refusing to approve overly alike names, most do not guarantee exclusivity.

Establishing an LLC offers more business name protection because the state will not usually allow the formation of another company (or a DBA) with that same name. However, if a business name is used by a company that provides products or services very different from the LLC that wants to use the name, the state might allow both companies to use the name.

Business owners can apply for a federal trademark through the United States Patent and Trademark Office (USPTO) for more extensive business name protection.

3. Business Owner Liability

A DBA does not create a business entity that is legally separate from its owners. It’s merely a name, not an entity independent from the sole proprietor, partners, or business entity that has registered to use it. So, the individual(s) or business entity responsible for the DBA is liable for any legal actions or financial problems associated with it. In the case of sole proprietors and partnerships, the individual owners’ personal property (including their home), retirement savings, bank accounts, and other assets are at risk.

An LLC, on the other hand, is a legal entity independent of its owners. That means, under most circumstances, an LLC’s members are not personally liable for the debts or legal issues of the business. As you can imagine, this offers peace of mind for entrepreneurs who want to protect their personal assets!

4. Taxes

Sole proprietorships and partnerships that operate under a DBA only have one income tax option; they are taxed as pass-through entities. All income and losses for the DBA flow through to the owners’ personal income tax returns and all profits are subject to income tax and self-employment taxes (Medicare and Social Security).

Similarly, if an LLC or corporation uses a DBA, any taxes associated with the business activity conducted under the DBA flows through to the LLC’s or corporation’s tax return. LLCs that meet the IRS’s eligibility requirements have the option of electing S Corporation tax treatment. So, instead of all business profits being subject to Social Security and Medicare taxes, only owners’ wages and salaries have those taxes levied on them. For some entrepreneurs, this might lower their overall tax burden.

Advantages and Disadvantages

To recap everything I’ve shared above, below is a glance at the potential advantages and drawbacks of a DBA vs. LLC.

DBA Advantages

• Allows sole proprietorships and partnership to creatively name their businesses
• Easy and inexpensive to establish
• Less compliance than an LLC
• Tax obligations flow through to the business owner’s tax return

LLC Advantages

• Helps prevent other businesses from using the same name in the state (a.k.a., name exclusivity)
• Establishes an independent legal entity
• Offers personal liability protection for the business owner
• Offers tax flexibility to potentially reduce a business owner’s tax liability

DBA Disadvantages

• Does not protect the name from being used by others (no name exclusivity) — in most states
• Does not establish a separate legal entity
• Does not offer personal liability protection to the business owner
• Offers no tax flexibility or savings

LLC Disadvantages

• Requires more paperwork and time to establish
• Costs more to set up and maintain
• Comes with ongoing business compliance requirements

Which One is Right for Your Business?

That’s a question to discuss with an attorney, accountant, and tax advisor! There are legal and financial ramifications when choosing how to structure and name a business. So, entrepreneurs should seek licensed professionals who can assess their specific situation and guide them to what will offer the best results.

Know that CorpNet is here as a resource, too! We can help you with business name searches to explore if the name you wish to use is available. And, after you’ve gotten expert guidance from your lawyer and tax advisor, we can handle all your essential filings to get your DBA or LLC up and running.

If you’re planning to move your business to another state or close it altogether, there’s a process you must follow, which varies by the structure of the business. It may seem a bit complex, but we’ll simplify it for you.

Feel like it’s too late to close your business and/or move it to a new state this year? Don’t worry; you can still make it happen. Here’s the right way to process a business dissolution and legally move your business to a new state.

Closing a Business

The steps for business dissolution depend on the legal structure of your business. Let’s look at the steps for each structure.

Sole Proprietorships

Sole Proprietors are “non-entities,” which means they have no legal separation from the business owner and are not registered with the state. Therefore, dissolving a Sole Proprietorship is relatively uncomplicated. After letting customers and vendors know you plan to close the business, make sure you pay off your debts, close business bank accounts, and file your final tax returns. The sole proprietor must also cancel any business licenses and permits. Since Sole Proprietors who operated their businesses using a DBA (Doing Business As) needed to register that name with the state, they must file the correct form to cancel the DBA in their state.

Partnerships

Although Partnerships are also not registered with the state, a few more steps are needed to close a business. To close a Partnership, all partners must agree to dissolve the business. The details of what happens when the business closes should have been documented in the Partnership agreement, including how the assets and liabilities will be divided among the partners. It’s also crucial to check with your state’s Secretary of State about any state regulations regarding Partnership closures.

In addition to filing their final tax returns, Sole Proprietors and Partnerships may need to file IRS tax forms regarding sales of business property and self-employment taxes.

Unlike Sole Proprietorships and Partnerships, C Corporations and Limited Liability Companies (LLCs) must be registered with the state in which they are formed. The formality gives these business structures separate entity status from the owners. Therefore, C Corporations and LLCs exist as legal entities until officially dissolved within the state.

C Corporations

The C Corporation’s home state dictates the process for forming and dissolving a corporation. Typically, the state requires the company to be in “good standing,” which means its ongoing compliance obligations, such as paying state taxes and filing timely corporation documents, are up-to-date.

C Corporations are separate, taxable entities, and owners/shareholders are W2 employees of the corporation—which is why the owners have limited liability from the company’s debts and legal responsibilities. C Corporations must have a board of directors, hold annual meetings, keep meeting minutes, and draft bylaws by which they operate. When deciding on dissolution, the corporation must have a meeting and vote to close the business. The board’s secretary must record the decision in the meeting minutes, and all voting board members must sign the document. If the C Corporation has shareholders, two-thirds of the voting shareholders must sign off on closing the business.

Limited Liability Companies (LLCs)

Likewise, LLCs are legal entities separate from owners and regulated by the state. In a Limited Liability Company, the owners are called members, and depending on state guidelines and the steps outlined in the member-created operating agreement, a meeting must be held to vote on dissolution.

Once the decision to close has officially been made, the following steps for C Corporations and LLCs are the same.

• The businesses must file Articles of Dissolution (also called Certificate of Termination or Certificate of Dissolution) with the state, usually through the Secretary of State’s office.
• The business may be required to settle the company’s debts and notify creditors and vendors about the company’s closure before filing the Articles of Dissolution.
• Some states require corporations to publish an official notice of the dissolution in a print publication or online for a specific time period.
• The companies should cancel any business licenses and permits, file final tax returns, submit final sales tax obligations, and divide up remaining property and assets among the owners.

Moving a Business to Another State

For Sole Proprietors and Partnerships, moving a business means closing it in one state and restarting it in another. However, for C Corporations and LLCs, the businesses can either dissolve the company in their former state and register in the new state or keep the original state as the corporation’s state of formation and file for a foreign qualification in the new state.

Filing for foreign qualification is wise if the company plans to do business in both states. Each state has its own process for foreign qualification, although it can usually be done online by filing for a Certificate of Authority and paying a fee. Keeping the business registered in both states also requires the company to designate a registered agent. Registered agents must have a local address and the authority to accept legal documents and government notices.

If the business is physically moving locations to another state, it’s better to follow the business dissolution process in the former state and register as an entity in the new state.

Alternatively, some states offer conversion or redomestication to change the company’s state of formation. The conversion option alleviates the burden of completely starting over in the new state. After the conversion, the company no longer exists in the former state.

In states that offer conversion, companies must apply for Articles of Domestication or Articles of Continuance. The company typically provides a Certificate of Good Standing and a copy of the application for Articles of Dissolution from the former state. Once approved, the company files Articles of Dissolution in the former state, and the company has officially moved. Only 27 states allow conversion, so check with your attorney or third-party legal counsel to see if your company offers that option.

Yes, operating a business as a sole proprietor or general partnership offers simplicity, but that comes at the cost of not having a separation between you as an individual and your company. Are there other options? There are alternate options that include popular entity types like the Limited Liability Company, C Corporation, and S Corporation.

For entrepreneurs who want to protect their personal assets and have tax flexibility, registering as a legal business entity, such as an LLC, oS Corpo, or C Corp, is well worth exploring. Continue reading because I’m going to break down the basics of the LLC vs. S Corp vs. C Corp, so you gain some knowledge of what they have to offer.

Keep in mind that what I share here is for informational purposes only and is in no way meant as legal or tax advice. You should consult an attorney and accountant or tax professional to ensure you understand your options as you decide which structure will be best for your business.

Limited Liability Company

What is an LLC?

The Limited Liability Company (LLC) business structure has become popular with many small business owners. It is less complicated and less costly to establish and maintain than a corporation, and it limits personal liability and provides tax treatment flexibility. If being a sole proprietor or partner isn’t giving you peace of mind, becoming an LLC offers some of the benefits that corporations enjoy—without the complexity.

Forming an LLC

To form an LLC, you need to file Articles of Organization with the state in which you wish to operate your business. Although most states don’t require it, I suggest also creating an operating agreement for your LLC—especially if you have more than one owner. An operating agreement will define the responsibilities and roles of owners, so you can avoid misunderstandings about how your company should be managed.

Protection Against Personal Liability With an LLC

When you form an LLC, you legally separate your personal self from your business. So, if someone sues your company or you cannot pay your business debts, plaintiffs and creditors generally may not seek your personal assets as restitution.

Tax Flexibility With an LLC

Whether your LLC has a single owner or multiple owners, it has two tax treatment options:

1. Pass-through tax treatment – By default, your LLC will be taxed in the same way as a sole proprietorship or general partnership. For tax purposes, the IRS will view your company as a disregarded entity. In other words, all income and profit or loss will pass through directly to your personal income tax return.
2. S Corporation tax treatment – If you elect for your LLC to have S Corp tax treatment, your business income/losses will flow through to your personal tax return, too. But the difference is you will only pay self-employment taxes (Social Security and Medicare) on your owner’s wages and salaries, not on all income.

LLC Ownership and Management Flexibility

Many states allow individuals (including non-residents of the U.S.), corporations, other LLCs, and groups to form an LLC. If your business has multiple owners, you have the freedom to allocate percentages of your LLC’s profits and losses among owners as you see fit. As a multi-member LLC, you can opt to be either member-managed or manager-managed. A member-managed LLC gives all the authority over making decisions, signing contracts, and managing operations to the owners of the LLC. A manager-managed LLC is one in which members elect a manager or managers to run the business operations and have a certain degree of decision-making authority. In this management structure, the owners will often retain the authority to make important decisions, enter into contracts, and fulfill other duties. Unless specified in your formation documents, in most states, your LLC will by default be considered member-managed.

Compliance Responsibilities of an LLC

A nice LLC perk is you’ll have less complicated ongoing compliance responsibilities than if you register as an S Corporation or C Corporation. As an LLC, you won’t have to elect officers and directors to oversee your business. You will have some ongoing compliance tasks to stay in good standing with the state, though. I encourage you to do your homework to learn what they are, so you’re not caught off-guard and risk losing your status as an LLC.

Potential Downsides of an LLC

As with all business entity types, the LLC has some disadvantages to consider. An LLC may not issue company stock, so you’ll have fewer ways than an S Corporation and C Corporation to raise capital. Also, investors may perceive your business as a less reliable investment than a corporation. Another downside to an LLC is that self-employment taxes will typically apply to all your business earnings, not just the money you take as personal draws.

S Corporation

What Is an S Corporation?

The S Corporation isn’t a legal business entity type in and of itself but rather a special election made by either an LLC or C Corporation with the IRS.

Personal Liability and the S Corporation

Because your business is formed as either an LLC or C corporation, it’s considered a legal entity separate from its owners. That means owners’ personal assets have protection against lawsuits and debts of your company.

Income Tax and the S Corporation

An LLC or a Corporation that chooses an S Corp election will have its profits and losses flow through to its shareholders (owners), who then report them on their personal income tax returns. Like an LLC, your business will not pay federal taxes at the corporate level. But unlike an LLC, not all income is subject to self-employment taxes—only owners’ salaries are.

Compliance Responsibilities of an S Corporation

When a business elects S Corporation status, many of the requirements it needs to meet are standard for its underlying business structure. You should check with your state and make sure you understand your obligations as either an LLC or Corporation with S Corporation election.

Potential Downsides of an S Corporation

If your business is a C Corporation choosing to be treated as an S Corp, you may only have up to 100 shareholders, and you can issue just one class of stock. That could limit your ability to raise capital. Also, your shareholders must be either citizens or permanent residents of the U.S. United States.

For an LLC, another drawback is higher formation costs and more compliance complexity.

C Corporation

What Is a C Corporation?

Although more complicated to operate, a C Corporation provides the most personal liability protection for shareholders in a company. The IRS considers a C Corporation an independent taxpayer and associates its income and expenses with the business, not its owners (shareholders). Ownership of a C Corporation is established through issuing shares of stock, either held privately or publicly.

Forming a Corporation

To register as a C Corporation, you must file Articles of Incorporation with the state in which you want to operate your business.

Taxes and the C Corporation

A C Corporation (unless it files for the S Corporation election) must pay federal income tax on company profits at the corporate tax rate. In some circumstances, the corporate tax rate may be lower than paying the individual tax rate on business profits (as with an LLC). As a C Corp, your company may be eligible for tax deductions not available to other business structures.

C Corporation Ability to Sell Stock

A C Corporation has more potential to raise capital and grow. It can issue multiple classes of stock, and it may have an unlimited number of shareholders.

Longevity of a C Corporation

Unlike with a sole proprietorship (and in the case of some LLCs), a C Corporation will survive beyond its owners’ life spans. You can transfer a C Corporation’s ownership interests by selling, bequeathing, or gifting shares of stock to others.

Compliances Responsibilities of a C Corporation

A C Corporation has more compliance requirements than other business entity types. To retain the benefits of its corporate status and stay in good standing with the state, a C Corporation must follow internal and external corporate rules. Some of the requirements may include adopting bylaws, submitting annual reports to the SEC (U.S. Securities and Exchange Commission), holding shareholder and board of director meetings, and others.

Potential Downsides of a C Corporation

Double taxation (when profits are distributed to shareholders as dividends are taxed again at the individual tax rate on shareholders’ tax returns) deters many small businesses from becoming a C Corporation. The higher business registration costs and more rigorous compliance requirements also may be more than a small business will want to bear.

Remember Ongoing Business Compliance

Regardless of the business entity type you choose, to stay in good standing with the state and maintain the legal protections and tax advantages of that structure you will also need to:

• Keep business licenses and permits current.
• Submit your annual report to the state.
• Notify your state of changes to your business.
• Maintain a registered agent.
• Keep your business and personal finances separate.
• Pay income tax, sales tax, and payroll taxes.

Again, different states have different rules, and requirements can vary depending on the nature of what a business does.

What’s Right for Your Company?

Which business entity type will benefit you and your company? With so much to think about, I recommend talking with an attorney who has expertise in business law and consulting an accountant or tax advisor. The legal and tax considerations associated with selecting an LLC vs. S Corp vs. C Corp can affect your business financially, administratively, and operationally.

Have you been thinking about making your dream of starting your own business in the beautiful Pacific Northwest a reality but not sure how to begin?  This post will help guide you through the process of registering a business in Oregon.

That said, let’s get started exploring the steps needed for registering a business in Oregon.

1. Decide on a Business Name

Before you submit the necessary forms to register your business, you will need to choose a name for your business. Then you’ll need to check to see if the name is available and meets Oregon’s rules and regulations. Do an Oregon corporation search on the name to make sure no other business has claimed it. The state won’t approve a name that’s too similar to another registered business name or if the name might mislead the public.

CorpNet’s free online corporate name search tool makes it a breeze to check the availability of a name, so there’s no reason to skip this critical step in starting a business.

2. Decide on a Business Entity Type

In Oregon, you can register your business as one of various business entity types. The most common are the Oregon Limited Liability Company (LLC) and the Oregon Business Corporation (C Corporation). The Oregon Secretary of State Office has online registration forms for filing a business entity.

If you don’t register as one of the business types, then you will by default be considered a Sole Proprietorship or Partnership. While Sole Proprietorships and Partnerships come with the least complexity and costs as related to startup and ongoing compliance requirements, they’re not all they’re cracked up to be. Unlike LLCs and corporations in Oregon, these default business types are not considered separate legal entities from their owners. That means owners are held personally liable if someone sues the sole proprietorship or partnership. Also, the pass-through taxation of Sole Proprietorships or Partnerships might work against business owners financially. With all business profit and loss flowing through to owners’ personal tax returns, all business income (after allowed deductions) is taxable and subject to self-employment taxes.

Oregon also recognizes other business structures, too, including Oregon Nonprofit Corporation, Foreign Business Corporation, and Foreign Limited Liability Company. All of these business types can be registered online. You can also register as a Limited Partnership or Professional Corporation, but these structures require filing by paper rather than electronically.

3. Officially Register Your New Business

When you form an LLC or incorporate your business in the state of Oregon, you automatically gain some protection of your business name (within the state, no other LLC or corporation may use your name). You also get limited liability protection. Because your company is considered a separate legal entity from your personal self, your personal assets (such as your home, vehicle, retirement accounts, etc.) will typically be insulated from becoming used as restitution in the cases of lawsuits against and unpaid debt of your business.

You may also discover tax advantages by forming an LLC or incorporating. Definitely, talk with a tax professional to find out how each option will affect you from a tax perspective. The difference may have a significant impact on your bottom line.

Registering an LLC in Oregon

After you’ve confirmed your desired business name is available, you will want to appoint a registered agent that has a physical street address in Oregon. The state requires you have a registered agent before it will approve your request to form your LLC. For in-depth information about what requirements a registered agent must meet and what its responsibilities are, consider reading my article What Is a Registered Agent.

Next, you can officially register your LLC by filing Articles of Organization with the Secretary of State Office in Oregon. The state’s form requests the following information and some other details:

• Name of your LLC
• How long you want your LLC to be in operation
• Registered agent information
• Names and addresses of people forming your business
• Management structure of your LLC – LLCs may be member-managed or manager-managed
• Description of services being rendered – You must provide this if your LLC is providing licensed professional services
• Members’ names and addresses
• Managers’ names and addresses

Although not required by Oregon, I advise also creating an operating agreement for your LLC. This will define the roles and responsibilities of members and managers as well as lay out the internal operating procedures of your LLC. In short, it will make sure everyone working in your organization is on the same page.

Officially registering your LLC with the state is a big step but not the only one you must take. You’ll also need to take other essential tasks to set up your business, including:

• Obtain your Employer Identification Number (EIN), which is also referred to as a Federal Tax ID Number.
• Open a business bank account. As an LLC, you’re required to keep your personal and business finances separate.
• Apply for any required business licenses and permits.
• File for trademark protection of your business name. If you wish to protect your business name in all 50 states in the U.S., file for a federal trademark through the United States Patent and Trademark Office.

Depending on the nature of your business, other requirements may apply, too. Make sure you check with the state and your local municipality to make sure you have covered all the bases.

Get professional help in registering your Oregon LLC.

Registering a C Corporation in Oregon

Just as an LLC does, you will need to designate a registered agent before registering a Business or Professional Corporation in Oregon.

Then you’re ready to file Articles of Incorporation with the Oregon Secretary of State. The information the state asks for via the form includes the following details in addition to a few other items:

• Name of your corporation
• Your registered agent information
• Number of shares your corporation is issuing – Corporations are owned by shareholders, and their percentage of ownership in the company is determined by the percentage of shares they hold
• Description of services rendered – You must provide this if you’re registering as a Professional Corporation
• Names and addresses of people forming the corporation

Other critical startup tasks to take care of after you’ve officially registered your corporation include:

• Start a records book to keep all your corporate papers, such as bylaws, stock certificate ledger, and meeting minutes, in one central place.
• Prepare your bylaws. This document will establish the ground rules for operating your corporation along with board meeting directions, the protocol for issuing stock, and other procedural information. Bylaws help everyone in an organization know how to run different aspects of the business and how to handle different circumstances. They also indicate to investors and the IRS that you operate a responsible, well-organized company.
• Appoint your directors and officers and hold your first board meeting. Corporations must have a board of directors to oversee the company and vote on strategic decisions.
• Issue company stock. Check with the Oregon Secretary of State to make sure you understand all rules and regulations that apply to you before issuing stock to your shareholders.

In addition to the corporation-specific details I mentioned above, corporations in Oregon must also tend to standard business tasks, such as:

• Applying for an EIN
• Opening a separate bank account for the business
• Filing for any applicable business licenses and permits
• Filing for a federal trademark if you want your business name to receive protection in all 50 states.

Get professional help in registering your Oregon C Corporation.

Opting for S Corporation Election

LLCs and C Corporations in Oregon may elect to have S Corporation tax treatment. With the S Corp election, business income is typically taxable on the members’ or shareholders’ individual federal tax returns. That information must then appear on the S Corp’s informational tax return via Schedule K-1. While S Corp owners pay income tax on business profits, the business must pay an excise tax for the privilege of doing business in Oregon (unless the company does not conduct business within the state). According to the Oregon.gov website, S Corporations might also need to pay state corporate income tax if they obtain income from a source within Oregon (from property located in or via business activities carried out in the state).

3. Stay In Good Standing

Officially registering your business and tackling all the startup tasks is just the beginning. To ensure you don’t lose your limited liability protection and the tax advantages that come with being an LLC or corporation, you need to follow through with Oregon’s business compliance requirements.

Contact the Oregon Secretary of State Office to find out what activities you must carry out and the filings you must make and when they’re due. The shortlist will likely include filing income tax returns, submitting annual reports, holding shareholders’ meetings, and more.

Get Help Registering Your Business

I’ve mentioned this before, but it’s worth revisiting: Rather than going it alone and making uninformed decisions, consult an attorney and tax advisor for insight and expert guidance as you embark on registering your business. Making the right choices from the start will save you a lot of time and money down the road.

And rather than handle all the details and document filings on your own, consider asking CorpNet to help you. With the expertise to file virtually all your business formation documents and track your compliance requirements and deadlines (and file your compliance paperwork) in Oregon (and the other 49 states), we can save you a heap of time and do the job more cost-effectively than if you’d enlist a lawyer to execute your filings.

Contact us today and we’ll make sure registering a business in Oregon is fast, painless, and flawless!

Many freelance professionals and independent contractors operate as Limited Liability Companies (LLCs). The requirements for when a business should send a 1099 form to an LLC vary, as does the 1099 form to send.

Generally speaking, this is when LLCs should or should not receive a 1099:

• When a single-member LLC is taxed as a Sole Proprietorship or a multi-member LLC is taxed as a Partnership, any business that pays the LLC $600 or more for services in the year must send it a 1099-NEC (Nonemployee Compensation) form.
• If a business has sold $5,000 or more of consumer products to an LLC for resale, it may send Form 1099-NEC or 1099-MISC.
• If an LLC is taxed as an S Corporation or a C Corporation, no 1099 is necessary under most circumstances.

Let’s look a little more closely at the various 1099 forms and their usage.

How Do You Know if an LLC Needs a 1099?

The name of a Limited Liability Company alone won’t tell you if it’s taxed as a disregarded entity (Sole Proprietorship or Partnership) or a C Corporation. So how can you know whether a 1099 form is necessary? Request a W-9 (Request for Taxpayer Identification Number and Certification) form.

Along with other pertinent information, Form W-9 requests the vendor’s federal tax classification. If S Corporation or C Corporation is noted on the form, then it’s likely no 1099 will be required.

1099-NEC vs. 1099-MISC

The two most commonly issued 1099 forms to self-employed individuals (including owners of LLCs) are the 1099-NEC and 1099-MISC. Both are considered “information returns,” as they supply details to support what the issuing businesses and self-employed recipients report on their tax returns. You can find a complete list of the types of payments reported on those forms and other details on the IRS’s website. Below, find an overview of each form’s purpose and a list of common situations when the IRS requires one or the other.

Types of 1099-NEC Payments

The 1099-NEC is used mainly for reporting compensation of $600 or more for services rendered.

Examples of 1099-NEC Usage:

• Compensation for services provided, which may also include payments for materials the LLC used to perform the services.
• Payment for professional services provided by providers such as attorneys, architects, engineers, accountants, freelance writers, and graphic designers.
• Commissions paid to contracted salespeople.
• Direct sales of $5,000 or more in consumer products to the recipient for resale (this may instead be reported on Form 1099-MISC).

Types of 1099-MISC Payments

Form 1099-MISC is used for reporting payments to self-employed individuals (owners of LLCs included) for various incomes not captured on 1099-NEC.

Examples of 1099-MISC Usage:

• Payment of $10 or more for royalties or broker payments.
• Payment of $600 or more in rent, prizes or awards, payments (such as settlement fees) connected with legal services (but not for an attorney’s services).
• Payment of $5,000 or more in direct sales of consumer products to the recipient for resale (this may instead be reported on Form 1099-NEC).

Deadlines for Sending 1099s to LLCs

The IRS has due dates for when 1099 forms must be filed so that recipients receive them in plenty of time before their tax return filing deadlines.

• 1099-NEC Filing Due Date – Forms must be furnished to recipients and filed with the IRS by January 31 whether filed by paper or electronically.
• 1099-MISC – Forms must be furnished to recipients by January 31* and filed with the IRS by February 28 if filed by paper or March 31 if filed electronically.

If a due date falls on a weekend or holiday, the IRS moves the deadline to the next business day.

Along with copies of all the 1099 forms a business has sent to recipients, it must also submit Form 1096 (Annual Summary and Transmittal of U.S. Information Returns) if filing paper forms by mail. If using the IRS Filing Information Returns Electronically (FIRE) system, form 1096 is not required.

*Deadline is February 15 for forms reporting gross proceeds of at least $600 paid to attorneys or substitute dividends and tax-exempt interest payments reportable by brokers.

What Happens if You Don’t Send a 1099 to an LLC that Needs One?

There are penalties for each information return that is filed late or not sent. The charges vary depending on the lateness of the filing and whether the business intentionally ignored its responsibility. The business required to send the 1099 forms is the one that receives the penalty. Vendors and contractors are not held responsible if their clients fail to send a 1099 to them as long as they still report their income to the IRS despite not receiving a 1099.

In some cases, the IRS may grant an extended due date for filing 1099-NEC and 1099-MISC forms. An extension must be requested by filing Form 8809 (Application for Extension of Time to File Information Returns), and the filer must meet one of the following criteria:

• Suffered a catastrophic event in a federally declared disaster area, making it not possible to resume operations or obtain necessary records
• Death, serious illness, or unavoidable absence of the individual responsible for filing
• Fire, casualty, or natural disaster which affected the filer’s operations
• In the first year of operating the business
• The filer did not receive data on a payee statement in time to prepare an accurate information return

Where to Turn for Assistance With 1099s

Because failing to send 1099 forms, sending the wrong forms, or completing forms inaccurately can create confusion and inconvenience for your vendors and cause additional costs for you, it’s important to handle them correctly. I encourage you to talk with your tax advisor or accountant about any 1099 responsibilities you must fulfill now and to keep up with any changes the IRS makes in the future.

Think you’re the only business owner who wants to incorporate or form an LLC before the end of the year with your Secretary of State? Think again. Registering a business at the end of a calendar year can take longer than any other time of the year. Because everyone waits until the end of the year to change their business structure for the New Year, there’s a lot of competition. What might normally take just a few weeks to get approved can take a lot longer.

Waiting until December to register your business with the Secretary of State could mean that your application gets backed up into February or later. Here’s how to avoid this end-of-year crush.

How to Register a New Business to Go Live on January 1, 2023

The secret here is being proactive and getting a head start. The sooner you submit your paperwork for incorporation or an LLC, the sooner your Secretary of State can review your application and approve it. But just because your paperwork is approved doesn’t mean your new business entity has to kick in immediately, if you don’t want it to. You can designate the first day you want your new business structure to take effect.

Many businesses opt for January 1st as their activation date so that they start the New Year with a clean slate. This is also good for tax purposes. If your new business structure goes into effect during the calendar year, you essentially have to file two tax returns: one for the part of the year when you operated as a Sole Proprietor, and a second for the portion of the year that you have the new business structure.

How to File Other Paperwork With the Secretary of State

If you have other documents you need to file with the Secretary of State, such as your annual report and filing fee, DBA, or updates to your business profile that need to be amended before December 31, make sure to submit these as soon as possible.

It’s always a good idea to allow for error because there is so much mail flooding the United States Postal Service this time of year. You really don’t want your important paperwork to get lost in the sauce, so you have to plan ahead.

If there is an option to file your paperwork online, do so. You avoid the potential “lost mail syndrome” and you should be able to track the progress of your documents as they get approved.

Remember to Allow for a Margin of Error

If registering a company before year-end is something you are relying on in order to launch your business come 2023, it’s important that you start the process early enough. Mistakes do happen. You may find that you need to resubmit paperwork if you fill it out incorrectly. Don’t let your own errors get in the way of this important task.

Another option is to hire a business filing service like CorpNet. Because we have experience registering a company for thousands of businesses, we know how to get it done right the first time. We also offer expedited services that can fast-track your application and get it moved along to the top of the list.