Starting a Business in Bend? Consider Forming an LLC
By Eric Taylor, attorney, EagerLaw PC
As a new Bend business owner, you’re faced with many considerations, from banking to insurance to an online presence, along with countless other activities and costs. Even for experienced entrepreneurs, the start-up process can be overwhelming: What needs to come first, and what can be pushed to the back burner? Today, we’ll look at the option of forming an LLC and examine how it can help you avoid some common pitfalls as you start your first (or next) Oregon business venture.
What is an LLC?
Most people have heard of an LLC, or limited liability company. You see it tagged onto the end of business names or hear people talk about forming LLCs. However, you may not know exactly what it is and whether it’s right for your business.
An LLC is an entity that you register with the Oregon Secretary of State so you can have a distinct legal entity with which to conduct your business. Once you form the LLC, the business is no longer just you. You contract, employ staff, and conduct your day-to-day business under the name of the LLC.
That’s an important distinction because, as the name implies, an LLC limits the liability of the individuals operating it. When a business is operated as either a sole proprietorship or a partnership, the parties operating the business are personally on the hook for the legal liabilities that come with running the business. That means if your business gets sued, your personal assets are fair game. But if someone sues your LLC, they can usually only get at the business’s assets. This is by far the biggest reason to form an LLC. Doing so could save you thousands of dollars, as well as your home, your car, and any other assets.
Even small businesses can be sued
You might think your business is too small to be at risk, or that you won’t be subject to a lawsuit because you treat people well and do the right thing. However, numerous legal technicalities and complicated laws nearly guarantee that no business is in full compliance. One of the largest issues I see relates to employment law. For example, in Oregon, employers are required to pay time and a half for overtime to all employees working beyond 40 hours a week. Many people know this law, but most of us don’t know about some of the complexities in how those hours are computed.
Under Oregon law, if an employee works over 40 hours a week you must pay time and a half, period. What this means is that even if you tell the employee not to work overtime, but they come in and do so anyway, you are required to pay them time and a half for the additional hours. This is counter-intuitive and frustrating for many employers and could subject them to a lawsuit from a vindictive employee. Oregon law also does not allow employers to use comp time to satisfy overtime requirements. If an employee works 45 hours in one week, he or she is required to receive five hours’ overtime pay for that week. If you only have the employee work 35 hours in the next week, you are certainly being a generous employer—but you are not complying with the law unless you pay the previous week’s overtime.
Like many small business owners in Bend, you might be unaware of these twists on the law, but it is exactly this type of small distinction that could subject you to a wage and hour claim by the employee. While the actual amount the employee is owed could be small—just five hours at time and a half in the above example—the cost of defending a lawsuit, even if it is baseless, can easily get up into the $10,000 range before you really get going. On top of that, Oregon law allows for the employee’s attorney fees to be paid if they prevail, which would astronomically increase the cost of the suit. All of these costs are borne by the business, not you personally, if you have an LLC.
No employees? There are other risk areas
Another area of exposure includes potential injuries to customers from your products or services. Suppose you are an auto mechanic and you complete an extensive repair on a customer’s vehicle. While driving down Highway 97, the customer is injured because a part you installed comes loose and causes an accident. If the injured party sues you and wins, then you are personally liable to pay if you don’t have an LLC or other business entity. If you cannot afford to pay, the prevailing party could foreclose your home or sell off your other assets. With an LLC, on the other hand, the business will usually be responsible for the debt.
LLC: Flexible protection for Bend businesses
Overall, I hope these examples help illustrate the usefulness of an LLC, even for a very small business in Central Oregon. Operating as an LLC adds a great deal of peace of mind and protection for the business owner. The LLC has also gained in popularity, as it’s a very flexible entity and allows flexibility in how its income is taxed. Simply put, the LLC offers Bend businesses significant legal protection without adding a lot of cost or complication.
Want to start an LLC? The Oregon Secretary of State’s website provides information if you wish to do so on your own. If you’d rather not worry about the details of forming a business entity in Oregon, the seasoned Bend business attorneys at EagerLaw PC, via the firm’s LLC Bend service, will make sure you’re off to the best start possible with an affordable flat-fee, customized set-up tailored to your business. We’ll even give you a free half-hour consultation so you can see if LLC Bend is a good fit for your company. Call or click today to schedule: (541) 323-9726.
Eric Taylor is a business attorney with EagerLaw PC. He regularly represents business in a wide range of issues including formation, dissolution, real estate transactions, and employment law issues. Call him at (541) 323-5851. Stay up to date on all Bend business matters with EagerLaw PC on Facebook.