How to set up an LLC for your rental property in Oregon

If you own or plan to buy rental property in Oregon, you’ve probably heard that setting up an LLC can be a smart move. Many landlords wonder if an LLC is right for them, how to create one, and what it actually protects. Oregon has its own rules and fees around LLC formation, so it helps to understand the local details.

In this guide, we’ll walk through how to set up an LLC for a rental property in Oregon, breaking down the process step-by-step, costs, timelines, and ongoing requirements. Plus, we’ll cover some common questions landlords have, like whether you need a lawyer, how to get an EIN, and the difference between an LLC and other options like an S corp or umbrella insurance.

What is an LLC and what does it protect you from as a landlord?

A limited liability company (LLC) is a business structure that separates your personal assets from your rental property business. An LLC generally aims to shield your personal bank accounts and belongings if someone sues your rental property business or it owes debts.

However, an LLC isn’t a magic shield. It won’t protect you from all risks—like personal negligence or failing to maintain the property safely. It also doesn’t replace the need for good landlord insurance. But it can be a valuable layer of protection and help organize your rental operations under one entity.

If you want to dive deeper into the pros and cons, check out our article on whether or not landlords should use an LLC.

Step-by-step: how to set up an LLC for a rental property in Oregon

1. Choose a name for your LLC. Your name must be unique and include “Limited Liability Company” or an abbreviation like “LLC.” You can check name availability on the Oregon Secretary of State Business Name Search.
2. Designate a registered agent. Oregon requires your LLC to have a registered agent with a physical Oregon address who can receive legal documents on behalf of the LLC.
3. File your Articles of Organization. This is the official form to create your LLC with the state. You’ll file it through the Oregon Secretary of State’s website.
4. Pay the LLC filing fee. The state charges a fee to file your Articles of Organization.
5. Create an operating agreement. While not required by Oregon, this document outlines how your LLC will be managed and is highly recommended.
6. Obtain an EIN from the IRS. Your LLC will generally need an Employer Identification Number (EIN) for tax purposes and to open a bank account.
7. Register for Oregon state taxes if needed. Depending on your rental business, you may have to register with the Oregon Department of Revenue.
8. File your annual report. Oregon requires LLCs to file a report every year to stay in good standing.

How much does it cost to set up an LLC in Oregon?

The main upfront cost is the LLC filing fee. As of now, Oregon charges a $100 filing fee when you submit your Articles of Organization online. If you file by mail, the fee is $100 as well.

There’s also an annual report fee of $100 due every year after your LLC is formed. This fee keeps your LLC active with the state. The website LLC University breaks down the fees in all 50 states.

Other potential costs include:

• Registered agent fees if you use a service instead of acting as your own agent.
• Business licenses or permits depending on your local city or county.
• Optional professional help like a lawyer or accountant.

For more on ongoing expenses, see the Oregon Secretary of State’s page on LLC annual reports.

How long does it take to set up an LLC in Oregon?

Once you file your Articles of Organization online, the Oregon Secretary of State usually processes them within 1 to 3 business days. If you file by mail, it can take up to 10 business days or longer.

Many find filing online to be faster, so you may want to consider that option for quicker processing.

What are articles of organization and how to file them in Oregon

Articles of Organization are the formal documents you file with the state to create your LLC. They include basic info like:

• LLC name
• Registered agent’s name and address
• Principal office address
• Whether your LLC will be managed by members or managers

In Oregon, you file Articles of Organization online through the Secretary of State’s Business Registry portal. You can also download a paper form and mail it in.

Filing online is simpler and faster, and you’ll pay the $100 filing fee at that time.

Do I need a lawyer to start an LLC in Oregon?

Many landlords successfully form LLCs on their own by following Oregon’s clear guidelines and using the online system. While you can start an LLC without a lawyer, consulting one may be beneficial depending on your situation.

If you want help drafting an operating agreement or ensuring your LLC structure fits your investment goals, a lawyer can be worth consulting. Also, tax implications and asset protection strategies can get complex, so talking to a tax professional is smart.

Many landlords find the DIY route manageable, but individual circumstances vary.

How to get an EIN for an LLC that owns rental property

After your LLC is formed, you will generally need an EIN (Employer Identification Number) from the IRS. This is like a Social Security number for your business and is often required to open bank accounts, file taxes, and handle payroll if you have employees.

You can apply for an EIN online for free on the IRS website: apply for an EIN.

The process is quick and usually you get the EIN immediately after completing the online application.

Do LLCs need annual reports and other ongoing compliance in Oregon?

Yes. Oregon requires all LLCs to file an annual report with the Secretary of State. The report updates your business info and confirms your LLC is still active.

The annual report fee is $100 and must be filed during the calendar month your LLC was originally registered. Oregon sends reminders, but LLC owners should be aware of filing deadlines to avoid penalties.

Other ongoing compliance may include:

• Maintaining a registered agent in Oregon
• Keeping business licenses current if required locally
• Filing any applicable state taxes

S corp vs LLC for landlords in Oregon

Many landlords wonder about the difference between an LLC and an S corporation (S corp).

An LLC is designed to provide personal asset protection and offers flexibility in tax classification options, subject to IRS rules. An S corp election may help reduce self-employment taxes for some landlords, depending on eligibility and specific tax situations.

Pros of LLC:

• Simple to set up and maintain in Oregon
• Flexible management structure
• Provides liability protection for personal assets

Pros of S corp status:

• May save on self-employment taxes for some landlords
• Allows for paying yourself a salary and taking distributions

Cons of S corp:

• More paperwork and stricter IRS rules
• Potentially higher accounting costs

Deciding between LLC and S corp status depends on your rental income, number of properties, and tax situation. A tax professional can help you decide what’s best.

LLC vs umbrella insurance for rental property risk management

An LLC limits your personal liability by separating your assets legally. But it doesn’t cover everything.

Umbrella insurance adds an extra layer of liability coverage beyond your landlord insurance policies. It can protect you if a tenant or visitor sues you for more than your policy limits.

You can learn more about the differences between LLC vs umbrella insurance and how they work together.

For Oregon landlords, combining an LLC with solid landlord insurance and umbrella coverage often provides the best protection.

When does setting up an LLC make sense for landlords in Oregon?

An LLC makes sense if you:

• Own multiple rental properties and want to separate liability
• Want to keep your personal assets safe from rental business risks
• Plan to bring in partners or investors
• Want more professional credibility

An LLC may not be necessary if you have just one property with low risk or you’re comfortable with your existing insurance and asset protection.

Whatever your choice, be sure to review your insurance coverage carefully. Oregon has some unique landlord insurance requirements and options to consider. See our guide on landlord insurance in Oregon to learn more.

Final thoughts

Setting up an LLC for your Oregon rental property can be a smart step to help protect your personal assets and organize your business. The process is fairly straightforward thanks to the Oregon Secretary of State’s online services, and fees are reasonable.

Remember, an LLC is just one piece of the puzzle. Good insurance coverage, including landlord and umbrella policies, is essential for managing risk.

Good luck with your rental property journey in Oregon!