Small businesses are vital to Oregon's economy. The Small Business Profile from the U.S. Small Business Administration, Office of Advocacy reports that small businesses make up 97.6 percent of employers and 55.5 percent of the workforce in the private sector in Oregon. As of 2010, the most recent data available, small businesses in the state employed 750,293 workers.
Entrepreneurs starting new businesses have likely considered whether or not to incorporate their business. The key questions for any entrepreneur are:
- What corporate structure will best protect me from personal liability for my business?
- What type of entity will best accommodate business growth?
- What are the tax implications of the entity I select?
- Will the drawbacks justify the benefits?
Having a basic understanding of the process can help an entrepreneur decide what business entity is best for his or her business needs.
Incorporation: the basics.
Essentially, businesses that are incorporated are seen in the eyes of the law as independent legal entities. Arguably, the most important feature of incorporation is the fact that it generally protects the owner from personal liabilities. Although the assets tied to the business could be at risk, the owner's personal bank accounts and properties are usually safe. This is helpful in a variety of instances, generally safeguarding owners against debt incurred by the business and lawsuits filed against the business.
Entrepreneur magazine notes that a primary drawback to incorporation is the amount of record keeping that is required particularly for tax purposes. Additional considerations include certain formalities, such as annual meetings, and potential filing fees.
However, once incorporated, businesses can also take advantage of raising capital through the sale of securities or stocks. In some instances, corporations can also provide owners with tax benefits.
The requirements for formation vary depending on state law and which business entity is chosen. For example, businesses in Oregon generally need to file articles of incorporation when incorporating their business. These documents may also be referred to as a charter and include a declaration of the desire of the owner to become a corporation. According to Kate Brown, Oregon's Secretary of State, this document must provide information about the business. This can include the owner's name, business address and the number of shares the corporation will issue.
In order to operate as a corporation, a business must have at least one share held by at least one shareholder.
Incorporation: legal counsel can help.
These are just a few of the questions that should be reviewed prior to moving forward with incorporation. Even after deciding to move forward with establishing a business entity, the entrepreneur must still decide which type is best for his or her business. In some cases, a corporation may work best while others are more successful as a limited liability company.
Navigating through these choices can be overwhelming. As a result, those who are looking to further grow and protect their businesses are wise to seek the counsel of an experienced Oregon business law lawyer. A savvy business lawyer will be able to answer your questions, guide you through the process and better ensure you chose an option that is best suited for your business needs.