Although Tel-Law information is periodically reviewed, it is important for you to realize that changes may occur in this area of law. This information is not intended to be legal advice regarding your particular problem, and it is not intended to replace the work of an attorney.

If you do not have an attorney, the Oregon State Bar Lawyer Referral Service can help you. Online Lawyer Referral Service information and a fill-in form is available. Or you may contact the service by phone: The number to call from the Portland area is 503-684-3763 or toll-free from anywhere else in Oregon, 1-800-452-7636.

The following information regarding starting a business in Oregon is brought to you as a public service by the lawyers of the State of Oregon. The material presented is general legal information intended to alert you to possible legal problems and solutions.

You should ask yourself the following questions if you are thinking about starting a business in Oregon. 1. Is there a need for the proposed business? 2. Are there a sufficient number of potential customers? 3. Do you have the requisite background, experience and education? 4. Do you have the temperament and dedication? 5. Have you selected a good location? You also must decide whether or not your chances for success would be greater if you purchased an existing business rather than starting a new business from scratch.

The financial aspects of starting a new business venture must be considered. You must develop a business plan that includes basic financial information about yourself and your business with at least the following:

• A personal expense budget for one year;
• Your current net worth;
• How much cash you can invest in your business;
• Estimated start up cost for your business;
• Estimate of first year business expenses;
• Estimate of your total cash requirements;
• Estimate of how much you will need to borrow and your ability to borrow that amount;
• Estimate of your break even point; and
• A contingency plan if you need additional funds.

Unless you are independently wealthy, you will have to seek out borrowed capital. You may wish to borrow funds from friends or relatives where repayment can be more flexible. If not, you must be prepared to approach a commercial lender for the necessary funds. Most lenders are reluctant to loan funds for new business ventures unless there is a high proportion of invested capital on the part of the owner. You must be prepared to make a detailed written presentation to a lender emphasizing your character, background and experience, and prospects for success. Collateral is also important to lenders, and you may need to offer your own assets as collateral, even assets not used in the business. The business plan, including the previously listed items, also should be presented to the lender.

Lenders are particularly impressed with financial data presented in a complete and understandable form. Before your presentation to the lender, you should ask an accountant how to set up adequate company books, prepare cash flow projections, and assemble a beginning balance sheet. The accountant can offer constructive suggestions to minimize your income tax burden when the business becomes successful.

Another important factor to consider is the legal form your business organization will take.

Your business may be in the form of a sole proprietorship, a partnership, a corporation or a limited liability company. There are advantages and disadvantages to each form of business organization, and you should ask your attorney and accountant which form would best suit you and your proposed business venture.

The sole proprietorship is the simplest form of business organization, and has the lowest start up costs. The owner makes all of the decisions, retains all of the profits, and is personally liable for all of the business debt. This form of business may limit growth if the owner is the only source of capital and know-how.

The partnership, which includes two or more persons, may offset this growth limitation, by permitting other people with experience and financial resources to participate in the business and share its profits. A partnership agreement may be oral, but it should be in writing and prepared in final form by an attorney. Partners must be chosen carefully, because each partner can bind the others and make them each personally responsible for actions taken in conducting business. Conflicts between partners may become so serious they could threaten the existence of the business.

The corporation is the most complex form of business organization and it exists totally under the provisions of state law, both as to its formation and as to its scope of operation. It is an entity separate and apart from the individuals who hold the ownership shares. Two of the disadvantages of the other forms of organization are overcome by use of the corporate form. First, stockholders may invest in the business and may share in the profits, but unlike sole proprietorships and partnerships, stockholders will normally have only limited liability for the corporate debts. Second, a corporation provides continuity of the business, because the entity is unaffected by the death of a shareholder or by a transfer of shares.

These two factors can be very important in some types of business. Your attorney should be consulted for more information about incorporation of the business, its costs and its possible tax consequences.

The limited liability company, or LLC is also a statutory entity. It is generally simpler to administer than a corporation and is taxed either as a partnership, sole proprietorship or as an entity, like a corporation.

No matter which form you choose, if you intend to use a business name other than your own name or the name of your corporation, or LLC, you must register an assumed business name with the Corporation Division in the Secretary of State's office.

What about government regulations that may affect the conduct of your business? The State of Oregon does not impose a sales tax, but it does impose an income tax on every person and an excise tax on all corporations doing business within the state. Also, most businesses are required to make contributions to the state's unemployment compensation trust fund in addition to providing workers' compensation insurance for their employees. Likewise, the federal government will impose a tax on all income from the business. Social Security taxes also will be payable on every employee. For tax purposes, you must keep careful records of, and understand the differences between, ordinary and necessary business expenses, travel and entertainment expenses, capital expenditures, depreciation, investment tax credit, and other matters relating to your assets and your income. Generally, your attorney or accountant will be available to assist you in complying with government regulations and minimizing the tax burden at all levels.

You will find that the city or county in which you are located may assess an annual business license tax. You must conform to local zoning laws relating to the location of your business and you should check with the town or county planning department before selecting a location. Your business also may be subject to other state and federal laws and regulations. For instance, the regulation and control of air, noise, water and solid and hazardous waste is governed by the Oregon Department of Environmental Quality. Oregon also has laws dealing with minimum wages, length of hours of work, and working conditions. Your employees will be subject to federal and state labor laws. The Bureau of Labor's Technical Assistance may help. Their number is (971) 673-0761.

These are a few of the things that must be considered when anyone is thinking of going into business. Additional information about going into business and assistance in preparing financial records or a business plan can be obtained from the Small Business Administration. The local office is located at 1515 SW 5^th Ave., Portland, Oregon, 97201-5494. The telephone number is (503) 326-2682. You also may wish to contact the State of Oregon, Economic and Community Development Department in Salem at (503) 986-0123 or toll-free (within Oregon) at (800) 735-2900. The Department's website offers a publication called "Doing Business in Oregon," which you may download here. In addition, you should talk to your accountant and your attorney regarding some of the decisions that need to be made prior to starting your business.

This information is from the Oregon State Bar's Tel-law service, a collection of recorded legal information messages prepared by the lawyers of Oregon. In addition to being online, the Tel-law service is accessible by telephone at 503-620-3000 or toll-free in Oregon only, 1-800-452-4776. A touch tone phone allows direct access 24 hours a day, 7 days a week. To receive a free Tel-law brochure listing the subjects available call 503-620-0222, ext. 0.