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Editorial 6 MIN READ

Oregon in late 2022: the fees are modest, the CAT is not

A $100 formation, a $100 annual report, and a 0.57% gross-receipts tax that quietly rewrote the math

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 7 sections
  1. What the Secretary of State charges
  2. The statute you are operating under
  3. The Corporate Activity Tax is the story
  4. Sales tax, which Oregon does not have
  5. Delaware compared, honestly
  6. Who Oregon actually suits
  7. Sources

n Oregon LLC costs $100 to form and $100 a year to keep. Those are the headline numbers, and they are more than you pay in Colorado or Arizona and roughly double what Wyoming charges. They are also the least interesting numbers in the Oregon file.

The interesting number is 0.57%. That is the rate of the Corporate Activity Tax, imposed on Oregon commercial activity above $1 million and stacked on top of the existing corporate excise tax. If you are looking at Oregon as a formation state, the CAT is the figure that governs the decision, not the filing fee.

What the Secretary of State charges

You form an Oregon LLC by filing Articles of Organization with the Corporation Division of the Secretary of State. The fee is $100, whether you file online through the state's business registry or mail a paper form. There is no expedited tier at the low end the way Delaware sells; Oregon processes online filings quickly enough that most formations clear within a business day or two during normal periods.

The articles themselves are short. You provide the LLC's name, its principal office address, a registered agent with an Oregon street address (no P.O. boxes), the duration, management structure (member-managed or manager-managed), and the organizer's signature. Oregon requires a registered agent under ORS 63.111 and will reject filings without a compliant one.

Oregon's distinguishing feature on the maintenance side is that the state charges an annual report fee equal to the formation fee: another $100, due on the anniversary of formation. This is unusual on the West Coast. California's LLC annual franchise tax is a flat $800 (set under R&TC § 17941) on top of a Statement of Information fee every two years. Washington's annual report runs $60 for a domestic LLC. Nevada's annual list and business license combined run several hundred dollars. Against that neighborhood, Oregon at $100 plus $100 is neither the cheapest nor the most expensive; the real divergence is the tax system, not the filing counter.

Miss the anniversary and Oregon administratively dissolves the LLC after a grace window. Reinstatement is possible by filing back reports and paying fees, but contracts signed during the dissolution window are personally yours to explain.

The statute you are operating under

Oregon LLCs are governed by the Oregon Limited Liability Company Act, ORS Chapter 63. Member liability is limited under ORS 63.165, default fiduciary duties are codified, and most defaults can be modified in an operating agreement. The Act dates to 1993 with incremental modernization since. Oregon does not require the operating agreement to be filed with the state, and ORS 63.431 permits oral operating agreements, which is a legal but bad idea. Put it in writing.

The Corporate Activity Tax is the story

In 2019 the Oregon legislature passed HB 3427, creating the Corporate Activity Tax codified at ORS 317A. It took effect January 1, 2020. The CAT is a gross-receipts tax imposed on Oregon commercial activity, and for tax years 2022 the structure works as follows.

A taxpayer with Oregon commercial activity above $1 million owes the CAT. The tax is $250 on the first $1 million, plus 0.57% on Oregon commercial activity above that threshold, with a subtraction for 35% of the greater of cost inputs or labor costs apportioned to Oregon. The net result on a business with modest margins can be meaningful: 0.57% of gross is not a 0.57% income-tax equivalent when your profit margin is 10%; it is closer to 5.7% of profit.

The CAT sits on top of Oregon's corporate excise tax, not instead of it. The excise tax under ORS 317.061 is 6.6% on the first $1 million of taxable income and 7.6% on income above that, paid by C-corps and by LLCs that have elected to be taxed as corporations. Pass-through LLCs don't pay the excise tax at the entity level, but they do pay the CAT, because the CAT attaches to the activity and not to the entity's federal tax election.

A few practical consequences follow. A consulting LLC with $1.2 million in Oregon fees and low cost-of-goods will write a four-figure CAT check on top of whatever its owners owe on their personal returns. A reseller with $5 million in Oregon receipts and slim margins can end up owing more CAT than federal income tax in a given year. The legislature built in the cost subtraction precisely because a pure gross-receipts tax crushes low-margin sellers, but 35% is a ceiling, not a full offset.

As of this writing in late 2022, Oregon has not enacted a pass-through entity tax election of the kind that about thirty states have passed to work around the federal $10,000 SALT cap. Bills have been discussed; nothing has become law. Oregon LLC owners who are running into the SALT cap on their Oregon personal income tax are, for now, running into it.

Sales tax, which Oregon does not have

Oregon is one of five states without a general sales tax. For retailers, the in-state compliance burden is genuinely lower than in California or Washington: no registration, no collection, no remittance. If you sell into other states you still owe their sales tax under the post-Wayfair economic-nexus regimes, and Oregon being your home state doesn't insulate you. But the in-state side is one less thing.

Delaware compared, honestly

A Delaware LLC costs $90 to form and $300 a year in franchise tax, as covered in our Delaware formation guide. Oregon's $100 plus $100 is within rounding distance of that. On the filing counter, the two states are comparable. The divergence shows up in the tax system around the entity.

Delaware imposes no state corporate income tax on a Delaware LLC that does not do business in Delaware, which is why holding companies park there. Oregon imposes the CAT on commercial activity sourced to Oregon, so an Oregon LLC actively operating in Oregon faces the gross-receipts math regardless of what box it checks on Form 8832. If your business operates in Oregon, you pay Oregon's tax structure whether you are organized in Oregon or Delaware. Forming in Delaware while operating in Oregon buys you Chancery jurisdiction and costs you a second set of filings (foreign qualification, a second registered agent, Delaware's $300 plus Oregon's annual report on the qualified foreign entity).

For a purely in-state operating business, Oregon formation is usually the right call. For a venture-track company or a holding vehicle with multi-state reach, the Delaware premium is still small enough to justify.

Who Oregon actually suits

Oregon works well for three kinds of formations. A local operating business (a restaurant group, a construction firm, a regional services business) with Oregon customers and Oregon payroll belongs here; there is no tax advantage to organizing elsewhere and a meaningful compliance cost to foreign-qualifying back in. A small professional practice under the $1 million CAT threshold gets a low-friction state with no sales tax and a statute that is well understood by Oregon counsel. A founder who values living in Oregon more than the last basis point of tax optimization.

Oregon is a poor fit for a gross-receipts-heavy, thin-margin business that could operate from elsewhere. A drop-shipper pushing $10 million through an Oregon LLC will pay the CAT on most of it, and the cost subtraction will not save them. If the business can be sited in Washington or Nevada or Texas without losing customers, the CAT is a good reason to do so.

If you are forming this week and your business is local to Oregon, file the Articles online, pay the $100, calendar the anniversary, and turn your attention to the CAT threshold analysis for next April. That is where your attention is going to be needed.

Sources

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