How to Start an S Corp in Oregon

Is an S Corporation the Best Strategy for Your Business?

For help with choosing the right structure for your business, visit ourChoosing a Business Structureguide.

S Corporation Restrictions

S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read ourWhat Is an S Corporation指导全德tails.

Are S Corp Tax Advantages Right for You?

An S corporation is a tax designation that can be elected by an LLC or corporation. With an S corp, business owners are considered employees of the company and must receive areasonable salary. Since all S corps technically have employees, the s corp must run payroll.

In order to benefit from an Oregon S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take largedistributionsin addition to their salary.

To learn more about the tax advantages of an S corp, read ourLLC vs. S corpguide and take a look at ourS Corp tax calculator.

Steps for Forming an LLC and Electing S Corp Status in Oregon

Starting an Oregon LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider likeNorthwestto guide you through this process.

There are five basic steps to start an LLC and elect S corp status:

Step 1:Name Your LLC

Step 2:Choose a Registered Agent

Step 3:File the Articles of Organization

Step 4:Create an Operating Agreement

步骤5:Get an EIN and File Form 2553 to Elect S Corp Tax Status

Step 1: Name Your LLC

Choosing a company name is the first and most important step in starting your LLC in Oregon.

Be sure to choose a name that complies with Oregon naming requirements and is easily searchable by potential clients.

1. Follow the naming guidelines for an Oregon LLC:

• Your namemustinclude the phrase “limited liability company” or one of its abbreviations (LLCorL.L.C.).
• Your namecannotinclude the following:
  
  • cooperative, corporation, corp., incorporated, Inc., limited partnership, L.P., LP, Ltd., limited liability partnership, L.L.P., and LLP.
• Your namemayinclude the following special characters:
  
  • asterisk (*); “at” sign (@); backslash (/); left brace ( { ); right brace ( } ); caret (^); dollar sign ($); “equal to” sign (=); “greater than” sign (>); “less than” sign (<); number sign (#); percentage sign (%); plus sign (+); tilde (~); and underscore (_).
• Your namemayinclude the following punctuation:
  
  • apostrophe ( ‘ ); left bracket ([ ); right bracket( ]); colon (:); comma (,); dash or hyphen (-); exclamation point (!); left parenthesis (( ); right parenthesis ( ) ); period (.); question mark (? ); single quote mark (“ ); double quote mark ( “ ” ); semicolon (;); and slash ( / ).
• Your namecannotimply in any way that the business is an agency of the state or any of its political subdivisions without approval.
• Certainrestricted words(e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual to be part of your LLC.
• Your namemust be distinguishablefrom any existing business in the state. This includes Oregon reserved names.
• You can readgeneral business naming ruleson the Secretary of State’s website.

You can also read theOregon state statuteabout LLC naming guidelines for more information.

2. Is the name available in Oregon?You can use the business name search on theOregon Secretary of Statewebsite to see if your desired LLC name is available.

3. Is the URL available?We recommend checking to see if your business name is available as a网络域. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.

Oregon S Corp Annual Report

Oregon requires businesses tofile an annual report— also known as a business renewal — with the Oregon Secretary of State. This report provides updated information to the state each year, such as details about who owns the business, its address, and its contact information. Your business must file its annual report by the anniversary date of your original business formation filing with the state of Oregon.

Visit ourOregon Annual Reportguide for a step-by-step overview of the filing process.

Oregon S Corp Taxes

S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from theirreasonable salaryanddistributions, and Oregon S corp owners can expect to pay the following taxes:

Federal Self-Employment Taxes

Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.

Oregon Income Taxes

Oregon has a graduated income tax rate, ranging from 4.75% to 9.9%. Some jurisdictions in the state also collect local income taxes.

Opening a business in a state with a graduated income tax can prove advantageous because your business will pay the income tax rate that corresponds with its total income in a given tax year. The higher your income, the higher your income tax rate. But, you’ll pay less tax in years when your business earns a lower income.

Oregon Sales and Use Tax

One key benefit of starting your business in Oregon is that the state has no sales and use tax. That can save you a lot of money in the overall cost of running your S corp. Despite its lack of a sales tax, Oregon does have other taxes your business may need to pay to remain compliant.

Additional State Taxes

The Oregon Department of Revenue provides details on a number of state-specific taxes that may apply to your business. Some examples include:

• Bicycle Excise Tax
• Tobacco Products Tax
• Insurance Excise Tax
• Amusement Device Tax
• Vehicle Privilege and Use Tax

Visit theOregon Department of Revenuewebsite for more information.

Oregon Local Taxes

In Oregon, local municipalities may levy their own taxes on businesses. Check with your local government to ensure your business remains compliant and up to date with all local taxes.