Differences between and LLC and Corporation in Oregon.

When starting a small business, whether in Oregon or in another state, one of the most important decisions you'll make is choosing the right legal structure. Two common types of legal structures are corporations and limited liability companies (LLCs). Each structure has its own advantages and disadvantages, so it's important to understand the differences between the two before making a decision.

Personal Liability

With a corporation, the owners, also known as shareholders, are generally not personally liable for the debts and liabilities of the corporation. This is because a corporation is a separate legal entity from its owners. However, shareholders can be held liable if they engage in illegal or unethical activities, or if they fail to follow certain formalities required by law, such as holding regular meetings and keeping accurate records.

The same is essentially true with an LLC.  With an LLC, the owners, also known as members, are also generally not personally liable for the debts and liabilities of the LLC.  However, the protection may not be as strong as with a corporation unless the LLC follows specific rules known as corporate formalities.  Our office can ensure you understand these differences for your LLC and ensure that you remain personally protected from any claims against your company. 

Taxes

Another important difference between corporations and LLCs is the way they are taxed. A corporation is taxed as a separate legal entity, which means that the corporation itself pays taxes on its profits. Additionally, the owners of the corporation pay taxes on any dividends or other income they receive from the corporation.

An LLC, on the other hand, is not taxed as a separate legal entity. Instead, the profits and losses of the LLC "pass through" to the owners' personal tax returns. This means that the owners pay taxes on the profits of the LLC, even if they are not distributed to the owners. This pass-through taxation provides some tax advantages, especially for small businesses.

Real Estate

When it comes to real estate, both corporations and LLCs have their advantages. A corporation can own real estate and can also provide liability protection for the owners. However, the corporate structure may not be the best choice for owning real estate because of the potential double taxation.

An LLC is a better choice for owning real estate because it provides the liability protection of a corporation without the potential double taxation. Additionally, an LLC allows for greater flexibility in ownership and management of the real estate.

Oregon Law

In Oregon, both corporations and LLCs are popular choices for small businesses. The Oregon Business Corporation Act governs corporations in the state, while the Oregon Limited Liability Company Act governs LLCs.

To form a corporation in Oregon, you must file articles of incorporation with the Oregon Secretary of State and pay a filing fee. You must also adopt bylaws and hold regular meetings of the board of directors and shareholders.

To form an LLC in Oregon, you must file articles of organization with the Oregon Secretary of State and pay a filing fee. You must also create an operating agreement that outlines the ownership and management structure of the LLC.

Our office can assist you in selecting the correct choice of entity for your business, and we are there along the way to answer questions and help ensure that you remain protected in the event of a claim against the company. 


By James Bruce

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