There are several options available when deciding how to structure your company. These options range from very formal structures like corporations to very lax structures like sole proprietorships.
A limited liability partnership (LLP) is somewhere in the middle in terms of formality. LLPs require at least two owners or partners, and they must register with the Oregon Secretary of State. The company can be run equally by all of the partners. Those partners have their personal assets protected from the company’s actions through limited liability.
What Are the Requirements for LLPs?
A company can be an LLP in Oregon if it meets certain requirements. The company must first have a vote in which the company elects to become an LLP. In Oregon, a company can only vote to become an LLP if it offers a professional service or offers complementary services to another LLP that does professional services with which the company is already affiliated. LLPs have a name that contains “Limited Liability Partnership,” “LLP,” or “L.L.P.” at the end. The name cannot contain any of the following:
- Corporation
- Cooperative
- Incorporated
- Limited partnership
- Ltd.
- Limited liability company, or
- Any abbreviation of any of these terms
Any LLP seeking to do business in Oregon must file the necessary paperwork with the Oregon Secretary of State.
What Paperwork Do I Need to Form an LLP?
To register an LLP with the Oregon Secretary of State, the necessary paperwork must be filed either online or via the mail to register an LLP with the Oregon Secretary of State. There are separate forms for a domestic LLP. A domestic LLP is established in Oregon. A foreign LLP is an LLP established elsewhere. A domestic LLP must complete an Application for Registration – Limited Liability Partnership.
A foreign LLP needs to fill out an Application for Authorization – Foreign Limited Liability Partnership. Both forms require similar information, including the LLP’s name, the address of the principal office of business, a mailing address, the names and addresses of two LLP partners, and a statement about the main business activity the LLP will provide.
A domestic LLP must describe any professional services that it intends to provide. A foreign LLP must disclose where and when the LLP was originally registered in another jurisdiction. Foreign LLPs must also disclose either their registry number from their original jurisdiction or a Certificate of Existence. All LLP partners must sign whichever form the LLP files.
What Benefits Does Oregon Give to LLPs?
Oregon does not require LLPs to have a registered agent for service of process. All official documents can go to the company directly instead of going to a third party.
LLPs are rarely used outside of certain industries. Oregon has guidelines that restrict the use of LLPs to professional partnerships and their affiliates. Only professionals such as accountants, architects, lawyers, dentists, and so on are permitted to open LLPs. Like limited partnerships, LLPs must register with the State of Oregon. LLPs are managed more like a general partnership since all partners are allowed to participate. One major benefit is that all partners have limited liability protection. Not all states recognize LLPs. The states that don’t recognize LLPs treat them like general partnerships.
Are LLPs Flexible?
A limited liability partnership is easy to financially structure and restructure. Partners can come and go freely. The business can grow and shrink. Even the way a partner’s salary is decided can vary.
Financial structures change from business to business. LLPs have the option to change the company’s structure fairly often without altering its business entity type. The way partnerships want their LLP to be run can be customized by drafting a partnership agreement.
How Does the Law Vary by State?
The laws regarding limited liability change from state to state. What kinds of businesses can form a limited liability partnership and what limited liability means varies across the country.
Some states are stricter than others when it comes to partner liability. Many states recognize partners as protected from obligations in contracts and torts, though some only allow protection against negligence claims.
These laws become complicated when a limited liability partnership works across state lines. Some states don’t recognize limited liability partnerships from other states. Other states may recognize them, but only if they conform to those states’ rules. One state might consider a company a general partnership instead of a limited liability partnership, which could cause legal issues if a partner’s liability is questioned.
States define limited liability in different ways. Not all states recognize the limited liability partnerships of other states.
What Are the Disadvantages of an Oregon LLP?
An LLP must renew its status every year by filing an annual report. The fee for filing the annual report for domestic LLPs is $100. Foreign LLPs are charged $275. If you do not file the annual report, your company may lose its LLP status.
Liability & Tax Considerations
In Oregon, partnerships are generally taxed as pass-through entities, meaning the profit and losses from the businesses pass directly into the partners’ personal incomes.
Oregon requires a yearly minimum tax from each partnership within state borders. This return can be done online through the Oregon Department of Revenue’s website. The Internal Revenue Service has useful information about the federal requirements for partnerships.
How Can I Determine if I Need an EIN, Additional License, or Tax ID?
If you plan on hiring employees, you’ll need an Employer Identification Number (EIN) from the IRS. Even if you don’t plan on hiring employees, an EIN is necessary for opening business bank accounts and credit lines.
Some partnerships require additional licenses from the state to do business. Plumbers, electricians, and other contractors usually need licenses to do business. Additional taxes may also need to be paid. Check with the Secretary of State for more information.
How Can I Get My Day-to-Day Business Affairs in Order?
Once the Secretary of State approves your paperwork and sends you a certified, stamped copy of the paperwork back, you’re in business. As you get started with your business, consider the following:
- Will you open a bank account in your business’s name to keep your liability protection intact if your partnership type offers liability protection?.
- Where is your physical address where the business can receive mail and legal notices?
- Is your partnership agreement drafted?
A partnership agreement is a document that outlines how the partnership will be run. A partnership agreement includes details on how to deal with partners that leave, add new partners, change the business, or shut the business down.
Should I Hire a Lawyer?
It is not easy to establish a company as an LLP. An Oregon corporate lawyer can help you with your LLP paperwork and ensure that the process of transitioning your company to an LLP in Oregon goes smoothly.
When opening your own business, you’ll want to ensure that you’ve paid all the necessary fees and taxes. An Oregon business lawyer can help you file the necessary paperwork to open your LLP. Don’t find yourself in trouble with the IRS or your state authorities because you failed to file the proper paperwork. Use LegalMatch to find an Oregon lawyer near you. There is no fee to schedule a consultation.
