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Swyft Filings is committed to providing accurate, reliable information to help you make informed decisions for your business. That's why our content is written and edited by professional editors, writers, and subject matter experts. Learn more about how Swyft Filings works, our editorial team and standards, what our customers think of us, and more on our trust page.
Every Oregon entrepreneur should consider filing for S corp status with the Internal Revenue Service (IRS). It could save you and your small business money. This article covers the basics of S corp status and helps you understand if your Oregon business entity should become an S corporation.
When a qualifying small business decides to take advantage of S corp status, it files Form 2553 to the IRS, which is called an S corp election.
S corporation shareholders pay Oregon income tax on their personal tax returns.
The Oregon excise tax, or franchise tax, is $150 per year at minimum. The state excise tax on businesses with Oregon taxable income of $1 million or less is 6.6% and increases based on taxable income from there.
Unlock tax savings and ensure compliance with critical regulations with our assistance.
An S corporation is a business entity approved by the IRS to be taxed with S corp status. An Oregon limited liability company (LLC) or C corporation is eligible for S corp status if it meets specific requirements. When a business entity files for S corp status, it maintains its business structure.
• “I Thought an S Corporation Was a Business Structure. What Am I Missing?” |
• S corps are commonly grouped in with business structures like LLCs, sole proprietorships, and C corps. This makes sense, but there’s a critical distinction: S corp status is a tax status, not a business structure. Business entities that file for S corp status maintain their business structure, even if their S corp election is approved by the IRS. |
When a qualifying small business decides to take advantage of S corp status, it files Form 2553 to the IRS, which is called an S corp election. This notifies the IRS that the business entity wants to “elect,” or choose, to be taxed as an S corporation.
This chart can help you understand how S corp status relates to your business entity.
• S Corps | • LLCs | • C Corps | • Sole proprietorships |
• Are LLCs or C corps that qualify for S corp status and have filed Form 2553 with the IRS. | • Can qualify to become an S corp by meeting certain requirements and have the opportunity to file for S corp status with the IRS. | • Can qualify to become an S corp by meeting certain requirements and have the opportunity to file for S corp status with the IRS. | • Are ineligible for S corp status and need to incorporate as C corps or LLCs before filing for S corp status. |
If you file for S corp status, it will be for tax reasons. So here’s what your small business can expect for tax treatment as an Oregon S corp:
Oregon S corps are subject to the same taxation as any Oregon business in many ways. They must pay sales and other business taxes for the specific goods they sell. Mostly, S corporation shareholders pay Oregon income tax on their personal tax returns.
The amount that S corporation shareholders are taxed on depends on their resident or non-resident status and their share of ownership in the S corp. Filing requirements also differ whether or not you’re an Oregon resident.
Your Oregon S corporation tax returns are due to the Oregon Department of Revenue on the 15th day of the month after the month your Federal return is due. This applies to Federal tax returns that get granted extensions.
The Oregon excise tax, or franchise tax, is $150 per year at minimum. The state excise tax on businesses with Oregon taxable income of $1 million or less is 6.6% and increases based on taxable income from there.[1] S corp status gets you out of Federal corporate tax, but not this.
At the Federal level, S corporations are taxed as “pass-through” entities. Similar to an LLC, sole proprietorship, or partnership, S corp income and losses “pass-through” the business entity to the personal tax returns of the S corporation shareholders.
This way, S corporations avoid “double taxation” that C corporations have to pay because they are exempt from Federal corporate income tax.
A 15.3% self-employment tax for Medicare and social security applies to your income as an LLC member or S corporation shareholder. But S corporation status allows shareholders to pay themselves a “reasonable” salary for their work and then take distributions not subject to self-employment tax.
Only some Oregon corporations can become an S corporations. These are the filing requirements you must meet to qualify for S corp status:[2]
The S corporation must be “domestic” (incorporated in the United States).
There must be 100 or fewer S corporation shareholders.
Partnerships, corporations, and non-resident aliens cannot be shareholders. (Individuals, estates, and “certain trusts” are considered “allowable shareholders.”)
“Certain financial institutions, insurance companies, and domestic, international sales corporations” are ineligible for S corp status.
S corporations can issue only one class of stock.
A limited liability company or C corporation can elect S corp status with the IRS provided it meets these filing requirements. Let Swyft Filings handle your S corp election to be sure you meet these requirements and only file your election once.
To start an S corporation in Oregon, follow these steps. If you have an existing business and you want to elect S corp status, skip to step 6.
Your S corporation in Oregon needs a unique business name. Start with a business name search from the Oregon Secretary of State, or use our free name search. Ensure your name is compatible with an available domain and social media handle that you can use across platforms.
• Distinguishing Oregon Business Names |
• To get your business name approved, you only need to make sure that your business name is not an exact copy of another registered name. A different spelling, letter, or ordering of words or letters is enough to make your name different from a similar registered business name.[3] |
If you’re not yet ready to incorporate but have found an available name, apply for a name reservation that lasts 120 days using this form. The filing fee is $100, and you can only file by mail.
Trademarking is a crucial way to protect the use of your name. Check that your name isn’t already trademarked in Oregon or at the national level, and if it isn’t, consider registering your own trademark to avoid legal troubles down the line.
Your S corporation is required to have a board of directors which needs to meet annually.[4] To form your board, S corporation shareholders—the company’s owners, which could be just you[5]—need to appoint at least one director[6]—which could also be you—to take responsibility for the company’s operations.
S corp directors typically hire officers to run the business on the ground. If you are an S corp of one, then you are a shareholder who owns 100% of the company, the president of the board of directors, and the company’s chief executive officer.
By contrast, LLCs have a simpler structure: they are owned by members who may hire managers to run the business.
Standard S Corp Organizational Structure
• Shareholders: Own a percentage of the business; usually don’t work on the business day-to-day |
• Directors: Elected by shareholders; responsible for strategy and long term well-being of the business |
• Officers: Hired by directors to carry out day-to-day operations |
Before you form your S corporation, you’ll need an Oregon registered agent. This office receives critical legal documents on behalf of your business. Registered agents for Oregon S corporations need to have a physical street address in Oregon.[7]
An officer of your company can be your registered agent, but a registered agent service is the most reliable way to protect your business from legal disaster. If your business gets served with a lawsuit, you’ll want the files to be delivered somewhere discreet, and you’ll want whoever handles those documents to be an experienced professional.
While Swyft Filings does the paperwork for your S corp, we can also serve as your Oregon registered agent. We store your documents online with top-notch security and provide experienced, reliable support to your business.
Articles of Incorporation are the documents you file with the Oregon Secretary of State to register your business officially. You can mail the Articles of Incorporation or file them online at the Oregon Business Registry. The filing fee is $100.[8]
The Articles of Incorporation will state the business name and the names and addresses of its registered agent, incorporators, initial president and secretary (if required by your bank), and at least one “individual with direct knowledge” of the business, whether a director, controlling shareholder, or an authorized representative of the new corporation.[8]
Once filed, these names and addresses are a matter of public record.[9]
So You’ve Filed Your Articles of Incorporation. Then What?
• Order a certificate of existence (in some states it’s a “certificate of formation”) for $10.[10] |
• You will owe Oregon excise tax (known as a franchise tax in some other states) for the current year. |
• You are required to file an annual report to the secretary of state within 30 days of the anniversary of your incorporation.[11] The filing fee is $100.[12] |
Step 4: Create S Corp Bylaws
Business owners should agree on and maintain some governing document that outlines essential procedures for their business. For LLCs, this is called an operating agreement. When it comes to corporations, they’re called bylaws, and they’re required for Oregon corporations.
Swyft Filings can help you draw up some robust bylaws. Generally, bylaws outline where and when the board of directors will meet, hiring practices for officers and appointment procedures for directors, how and when the company will dissolve, who owns the company, how to allocate distributions, and other vital details about your business.
Your Employer Identification Number, or EIN, is also called your Federal Tax ID. Issued by the IRS, businesses have to use their EIN for several critical business operations, from opening a bank account to registering for state licenses and permits, as well as employment taxes and state income tax.[13]
You can get your EIN from the Internal Revenue Service website for free. Swyft Filings can also do it for you.
This step is the one that makes you an S corporation. The S corporation election Form 2553 is your business entity’s official request to the IRS for S corp status. The form verifies that you qualify to be an S corporation.
When Should You File Form 2553?[14]
• For S corp status in the current tax year | • For S corp status in the coming tax year |
• File by the 15th day of the second month of that tax year. | • File anytime in the current tax year. |
If you’re an LLC that’s missed your deadline, you must file Form 8832 at the same time you file Form 2553.
Swyft Filings can help you file your S corporation election quickly and protect you from costly mistakes.
Now you know what it takes to bring an S corporation into existence. But is it worth the hassle? That will depend on the business in question. Below we compare an S corporation with an LLC that hasn’t chosen to be taxed as an S corp.
A limited liability company (LLC) is a lean, mean business machine.
LLCs are flexible to manage.
They require little paperwork or oversight.
Members have pass-through taxation and personal asset protection.
LLCs can make the ownership transfer a hassle because their existence depends on individual members rather than shareholders. They are also limited in their ability to raise capital, and they can’t go public.
Additionally, even entrepreneurs making money hand over fist will owe self-employment tax on all their distributions. This simple tax treatment works for many business owners, but sometimes S corp status can unlock an advantage.
Because S corps are a special tax status, you’d form one for tax purposes. You’re likely to see a tax advantage from S corp status if:
Your business is highly profitable (you’re drawing more than “reasonable” compensation for the labor you’re putting into the business).
You don’t want to put that profit back into the business.
As an S corp shareholder, you can pay yourself a “reasonable” salary and avoid self-employment tax on additional distributions. This is an important reason to form an S corp, but it doesn’t apply to every business.
The Oregon S corp limitations are simple but often a dealbreaker for entrepreneurs.
They require significant paperwork and put you at greater risk of audit
You have to run payroll, a considerable expense for small businesses
You are strictly limited in the number of shareholders and who can invest
Starting an S corporation in Oregon is an exciting but complicated process. Getting caught up in the paperwork—or worse, having to re-file forms or get stuck on hold with government offices—can distract a business owner from building their small business.
Luckily professionals are standing by to take this off your hands and make sure things get done the right way the first time. Take advantage of Swyft Filing’s S corp filing service to get back to the important work—finding and serving your customers the best you can. We’re fast, reliable, affordable, and experienced.
Maximize Tax Benefits: Experience pass-through taxation with Oregon S corp status and avoid double taxation.
Access a One-Stop Solution: Establish an LLC or C corporation easily and then transition to S corp status, all within our platform.
Stay Compliant: Our compliance alerts help keep you up-to-date on all the complex compliance requirements of an S corp so you can stay on the government’s good side.
An Oregon S corporation is an LLC or C corporation based in Oregon that files Form 2553 to the IRS, receiving S corp tax status.
Oregon acknowledges S corporations and taxes them accordingly.
The IRS says that it will let you know if your S corporation election is accepted within 60 days of filing the form.[14]
S corp is a tax status; LLC is a business structure. LLCs and S corps both receive pass-through tax treatment from the IRS, but they are taxed differently.
S corps must issue only one class of stock, have 100 or fewer shareholders, and are limited in who those shareholders can be, among other requirements. S corps must File Form 2553 to the IRS to receive S corp status.
LLCs and S corps are taxed slightly differently, though they both are generally pass-through entities.
Oregon S corps pay excise tax to the state of Oregon, that varies based on their taxable income. Federal income taxes for S corps are typically paid by shareholders, which would change based on the portion of shares they own and their personal income tax situation.
S corps should follow the dissolution procedure outlined in their bylaws and then file articles of dissolution with the Oregon secretary of state. The filing fee is $100.
Oregon Department of Revenue. “Corporation Excise Tax and Income Tax.” Accessed February 14, 2023.
Internal Revenue Service. “S Corporations.” Accessed February 14, 2023.
Oregon Secretary of State. “Name Availability.” Accessed February 14, 2023.
Oregon Secretary of State. “Oregon Business Corporation Requirements.” Accessed February 14, 2023.
Oregon Secretary of State. “Business Types.” Accessed February 14, 2023.
Oregon Legislature. “Chapter 60—Private Corporations.” Accessed February 14, 2023.
Oregon Secretary of State. “Registered Agents and Service of Process.” Accessed February 14, 2023.
Oregon Secretary of State. “Articles of Incorporation—Business/Professional.” Accessed February 14, 2023.”
Oregon Secretary of State. “Oregon Business Corporation.” Accessed February 14, 2023.
Oregon Secretary of State. “Business Registry Certificates.” Accessed February 14, 2023.
Oregon Legislature. “Chapter 60—Private Corporations.” Accessed February 14, 2023.
Oregon Secretary of State. “Business Registry Fee Schedule.” Accessed February 14, 2023.
Oregon Department of Revenue. “Form OR-20-S Instructions Oregon S Corporation Tax.” Accessed February 14, 2023.
Internal Revenue Service. “Instructions for Form 2553 (12/2020).” Accessed February 14, 2023.
No matter the business type, Swyft Filings can help you form your new company.