If you’re currently self-employed in the state of Oregon, or if you’re looking to enter the world of one-person business ownership, you’ve probably looked into becoming a sole proprietor.
The sole proprietorship is the simplest business ‘format’ in America, but that doesn’t mean that there aren’t rules and regulations to follow when you operate one. In addition, there are some limits to the functionality of a sole proprietorship.
In this guide, we’ll help you determine whether or not the sole proprietorship is a good choice for your business.
What Is an Oregon Sole Proprietor?
As opposed to a corporation or limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.
Here are the three main things you need to know:
Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.
Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.
The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.
How to Become an Oregon Sole Proprietor
When it comes to being a sole proprietor in the state of Oregon, there is no formal setup process. There are also no fees involved with forming or maintaining this business type. If you want to operate an Oregon sole proprietorship, all you need to do is start working.
However, just because it’s so easy to get started doesn’t mean there aren’t some additional steps you should take along the way. While these parts of the process aren’t strictly required, many sole proprietors find that they are in their best interests.
A doing business as (DBA) name (which is often referred to in Oregon as an “assumed name”) is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.
That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.
In Oregon, if your desired name includes some variation of the real and true name of each owner, you are not required to acquire a DBA or assumed business name. Otherwise, you’re required to file an assumed name with the Oregon Secretary of State.
To do so, you must first confirmo the desired name is available by searching it on the Oregon Business Registry. The name must be “distinguishable on record” as dictated by the Oregon name availability guidelines. When it is confirmed that the name is available, you may claim it for use by filing an Assumed Business Name registration form which can be filed online or printed for submission here.
Determine Taxation Requirements
Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.
Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.
The good news is that Oregon has no general sales or use/transaction tax. It also has no tax on business purchases, inventory, intangible property or capital stock. However, it’s likely your sole proprietorship will still owe several state-level taxes.
A full guide to business taxes (including employer taxes, withholding tax, district tax, and other tax liabilities) can be found outlined in the Oregon Employers Guide. For more information on business taxation and how to register to pay them, you’ll need to visit the Oregon Department of Revenue’s Business Page.
Obtain Business Licenses and Permits
There isn’t a requirement in Oregon for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other licenses and/or permits to operate in a compliant fashion.
Oregon has more than 1,100 licenses, permits, and certifications. Depending on the nature of your business, it’s likely you’ll need at least one of them. If you’re looking for information on a specific license type, you’ll want to search it using the state’s online license directory.
For individualized help with determining your sole proprietorship’s licensing needs, you’ll want to consult the Business Information Center’s Business Wizard. Using details about your business, the Business Wizard help formulated an individualized list of licenses that may be applicable to you.
In addition, you should check to see if your business needs any licenses or permits on the local level.
Certain cities and counties may require specific local licensing outside of the state-issued licenses. To be sure your sole proprietorship meets all local requirements, you’ll want to contact your local government. A directory containing the contact information of the local licensing offices in the state may be found here.
While the sole proprietor is such a simple business classification that Oregon doesn’t even require a business registration process or any type of fees, depending on how you use your sole proprietorship and what industry you operate in, you still might have some important steps that need to be taken.
When it comes to issues of taxation, licenses and permits, or even the name you want to call your sole proprietorship, you do need to be vigilant to make sure you’re not overlooking anything.
We hope this guide helped you answer any questions you had for sole proprietorships in Oregon, and we wish you success with your business!