Are you looking to form a professional limited liability company (PLLC) in Oregon, but you’re not sure how the formation process works? There are several important steps when it comes to creating an Oregon PLLC that is compliant and able to do business in the state.
What is an Oregon Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In Oregon, a professional LLC is an LLC formed for the purpose of rendering professional services, such as those services rendered by accountants, architects, attorneys, chiropractors, dentists, landscape architects, naturopaths, nurse practitioners, psychologists, physicians, medical imaging licensees, and real estate appraisers.
The Oregon PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Oregon have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Oregon (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In Oregon, the name of a professional LLC, like other LLCs, must contain the words “limited liability company” or the abbreviation “L.L.C.” or “LLC.” The name may not contain words or abbreviations indicating it is a different type of entity, such as “cooperative,” “corporation,” “corp.,” “incorporated,” “Inc.,” “limited partnership,” “L.P.,” “LP,” “Ltd.,” “limited liability partnership,” “L.L.P.” or “LLP.”
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. To confirm if a name is available, you can use the Business Name Search application on the Oregon Secretary of State’s website. If the name is available, you can reserve it for 120 days prior to forming your professional LLC by submitting an Application for Name Reservation with the filing fee of $100. This helps ensure that no one will be able to use the name before you’re ready to file your Articles of Organization as described below in Step Three.
Step Two) Designate a Registered Agent
Every PLLC in Oregon is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
In Oregon, your professional LLC’s registered agent can be an individual or a business entity located at a physical street address in Oregon. Your professional LLC cannot designate itself as its own registered agent. Note that the physical street address in Oregon of your registered agent’s business office will also be your company’s registered office.
Without a registered agent, you could lose your good standing with the state of Oregon, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Oregon professional limited liability company, you will fill out the Articles of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of your professional LLC
- Duration of your professional LLC’s existence
- Street address of the principal office
- Name and street address of the registered agent
- Address where the Secretary of State’s Corporation Division can send notices
- Whether your professional LLC will be member-managed or manager-managed
- Professional services to be rendered by your professional LLC
- Any optional provisions agreed to by the members
- Name(s) and address(es) of the organizer(s)
- Name(s) and address(es) of the member(s) and manager(s), if any
- Name and address of one individual with direct knowledge of the professional LLC’s business activities
- Name(s) and signature(s) of the organizer(s)
You can file the Articles of Organization with the Oregon Secretary of State by mail, by fax, or online through the Oregon Business Registry.
Cost to Form a PLLC
The filing fee for the Articles of Organization is $100.
Online filings are generally processed the same day. Filings by mail or fax are generally processed within 1-2 business days. Current processing times are available on the Oregon Secretary of State’s website.
Step Four) Create an Operating Agreement
After you register a PLLC in Oregon, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
Your professional LLC’s tax obligations in Oregon will depend on how your professional LLC is classified for tax purposes as well as the nature of its business activities. More information about business taxes in Oregon is available on the Oregon Department of Revenue’s website. You can also find links to various tax resources, tax forms, and information on filing options on Business Xpress, Oregon’s “one stop” website for businesses.
Depending on where in Oregon your business is located, you may also need to pay some local taxes. It’s a good idea to contact the city and county in which your professional LLC is located to confirm whether your business will be subject to any local taxes. Businesses located in the four largest cities in Oregon can find business resources for those cities at the following links: Portland, Salem, Eugene, and Gresham.
Step Six) Obtain Business Licenses and Permits
Oregon doesn’t issue general business licenses, but your professional LLC may still need to obtain certain licenses, permits, or certificates from state agencies or boards depending on its business activities. The State of Oregon maintains an online license directory where you can get information about these licenses, including application procedures. You can also use the Oregon Business Wizard to help you determine which licenses and permits may be required for your professional LLC.
Note that many cities and counties require certain licenses or permits as well. You should contact the city’s licensing office or city hall to confirm whether any local licensing requirements apply to your business.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Oregon
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
If you plan to hire any employees for your professional LLC, keep in mind that Oregon requires most employers to carry workers’ compensation insurance. More information about workers’ compensation in Oregon, including how to obtain it if needed, is available on the State of Oregon’s website. Certain state licensing boards may also require certain types of insurance related to specific professions. You should be sure to contact your profession’s licensing board to confirm whether there are any insurance requirements for your business. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
In Oregon, your income is reported on an income tax return. Which specific income tax return form you use will depend on your professional LLC’s tax classification. You can find these forms and related instructions on the Oregon Department of Revenue’s website.
Understand annual reporting
Every business entity in Oregon is required to file an annual report, or “renewal,” every year on the anniversary date of the business entity’s original filing. This filing can be completed online through the Secretary of State’s website and helps keep your professional LLC’s information on file with the Secretary of State current. The Oregon Secretary of State will automatically send a renewal notice to your professional LLC about 45 days in advance of the due date.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.