Limited Liability Companies, known as LLCs, are business entities that may be taxed like partnerships but limit owners’ personal liability as do corporations. But unlike corporations, LLCs do not have to follow formal requirements for keeping minute meetings and do not need to have a management structure in the form of a board of directors. In Oregon, the Limited Liability Act sets out the rules for LLCs registered in Oregon.
Owners of an LLC are typically referred to as “members.” Members must file Articles of Organization with the Oregon Secretary of State to form an LLC. This document must be legible, in English and signed by one or more persons who intend to create the LLC. The Articles of Organization must contain the LLC's name and address, the name and address of the initial registered agent, and the name and address of each member. A registered agent is an individual who can accept official notices from the state and important legal notices on behalf of the LLC. In addition, the members must state whether they intend to manage the organization themselves or hire separate managers. Finally, they must indicate whether they intend to operate the organization indefinitely or for a set time period.
Name of Company
Members must choose a name for the LLC. Oregon law prohibits an LLC from having the same name as any other business in the state. Further, members must ensure that the name they choose is not deceptively similar to that of another Oregon business. The Oregon Secretary of State maintains a business name database at egov.sos.state.or.us. for members to use to determine if their chosen LLC name is already taken.
Members must state in the Articles of Organization whether they intend to manage the company themselves or hire or appoint separate managers. This aspect of forming an LLC demonstrates the flexibility of this form of business ownership. Members can choose to manage the organization themselves, like a partnership, or have outside managers and act more like shareholders in a corporation. In a typical corporation, shareholders only vote on major decisions that substantially affect the future of the company, while other individuals manage the day-to-day operations.
LLCs are taxed like partnerships where the income from the LLC is declared on the members' personal returns and the company itself is not taxed. The IRS essentially taxes corporations twice: First, the corporation pays corporate tax on profits; then the shareholders pay tax on any income or dividends derived from the corporation. An LLC can choose to be taxed like a corporation by filing the appropriate forms with the IRS.
Limits on Liability
Members in an LLC in Oregon enjoy limits on liability similar to shareholders in a corporation. Generally, they cannot be held personally liable for the debts of the LLC or for negligent acts or omissions of other members or managers. However, where members or managers engage in fraud or intentional violations of the law, they will lose the liability protections that an LLC generally provides.