Small Business in Oregon: The LLC

This is an experimental public service post.  Depending upon feedback, the series may / may not continue.

Have you been thinking of starting an LLC in Oregon, but you didn't know quite where to start? This is one of my first small business themed post, but I hope you find the information offered helpful. Please note that this post is my personal work only, and it does not necessarily reflect the views or opinions of my employer. Visitor statistics and feedback will be reviewed later to see whether, or not, this will continue as a series. None of this information should replace the professional advice received from a reputable attorney or CPA.


As soon as you have met with your CPA and/or attorney, it's time for you to register your business name(s). This registration is done through the Oregon Secretary of State Corporation Division's Business Information Center. Besides registering your business name, you can also register at this same time for your Business Identification Number--used for state tax reporting. Alternatively, you can also use the paper form of the Combined Employer Registration and fax the completed form in as instructed. Bear in mind, though, that using the paper form will create a significant processing delay for you. Completing the online form will result in you obtaining your Business Identification Number (BIN) much more efficiently, but the decision is yours. The Oregon Department of Revenue (DOR) will issue the BIN, and the Oregon Employment Department (OED) will review and send a Notice of Determination (NOD) some time later. This explains how and when your company becomes subject to Oregon Unemployment Tax program. You don't need to wait for the NOD, however. As long as you have your BIN, you can file and pay your quarterly taxes. If you don't want to send checks, you can also pay using the DOR's EFT System.


You're already likely familiar with the federal taxes, but what about state taxes? What do you need to know? There are several different of categories of payroll taxes in Oregon, and it's possible that they won't all apply to you: Oregon State Withholding, Unemployment Tax, Workers Compensation, Tri-Met (Portland Metro), Lane Transit (Eugene Metro), and Canby Transit. Today, we're going to focus more on Unemployment Tax than the other tax programs. This may also be a good time to read the Oregon Business Guide.


Oregon LLCs


Did you know that, unless they elect to be covered, LLC members are excluded from Unemployment Tax by default? (See ORS 657.044(c) and Corporations and Limited Liability Companiesflyer.) This means, of course, that if it's only llc members working, you should not be reporting or paying Unemployment Tax. Leave column A blank; don't include zeros, or this will delay return processing at OED. Reporting correctly as an llc will save you a considerable amount of money each year, and it will also ensure that your reports are processed much more quickly and efficiently, because manual corrections won't be required.  


LLCs and the Federal Election

One other thing to remember concerns the federal election of the llc, since the limited liability company is a disregarded entity for IRS purposes.  This federal election has no bearing on how the OED recognizes your company.  In other words, it's like the IRS looks at the llc and sees a corporation, partnership, etc. (whatever you have elected), but Oregon looks at the llc...and sees an llc.  Since corporate officers are reportable employees in Oregon, this is a really important distinction for you to clearly understand.  The LLC is always an LLC with regards to the UI Tax program.  (DOR will recognize the entity the same as the IRS.)


A Few Word About Independent Contractors


One of the most confusing areas for new businesses is making the distinction between employee/employer or independent contractor. Making a mistake here can be expensive and time-consuming to correct. In order for someone to be correctly classified as an independent contractor in Oregon, the person must represent an independent and established business within the same industry in which they are providing services. If the potential "independent contractor," is just a fellow off the street, then you're likely looking at a relationship better categorized as employer/employee.



Ministers and Oregon Independent Contractor Law 

Because of this being an area of special interest, I am adding it here. As religious organizations would not usually be llcs, this may appear again if this series continues.

A Quick History Lesson

Before the Oregon Supreme Court’s decision in 2000 (See Newport Church of the Nazarene v. Gordon Hensley and the Oregon Employment Department.), ministers were excluded from Unemployment Tax, making ministers ineligible for unemployment benefits. A key part of the court’s decision is provided below.

In sum, we conclude that, in purporting to draw a distinction between church ministers and leaders of other religious organizations, ORS 657.072(1)(b) violates Article I, sections 2, 3, and 20, of the Oregon Constitution. In light of that conclusion, and in accordance with Salem College and Rogue Valley, we construe the statute consistently with OAR 471-031-0090 (1996) to include both ministers and leaders of other religious organizations in Oregon's unemployment compensation program…

Are Ministers Independent Contractors?

Since the above court decision, there’s frequently confusion when it comes to reporting ministers. The first thing to bear in mind is that ministers are no longer automatically excluded; that’s the result of the Oregon Supreme Court decision. If their compensation is to be excluded from unemployment tax at all, it would hinge on whether, or not, they are indeed independent contractors in accordance to ORS 670.600.

When it comes to ministers, however, it may prove difficult to establish that they are truly independent and free from direction and control in the services they perform. While the independent contractor flyer is an excellent reference, these services often require a more detailed review. Frequently, for example, most churches and religious organizations have doctrinal positions that are defined and established. The pastor who decides on a whim to preach counter to the established doctrinal beliefs of his denomination may risk censure or termination.

On the other end of the religious spectrum, some denominations may assert that their ministers are free to preach any teaching at all. Even for universalists, however, the acceptance of all pathways leading to the same spiritual end is a position which excludes other religious beliefs and positions. In other words, even if an organization were to make the argument that they have no particular set of core beliefs, that they’re open to considering all other faiths and religions, this lack of adherence to a central doctrine becomes (in effect) their doctrine. It’s also difficult to say that you are accepting of everything, because many faiths and traditions are inherently contradictory in nature. In short, then, it’s not an easy thing to establish complete freedom from direction and control for ministers. It may not be readily apparent, but there are almost always either defined or undefined expectations to consider.

What about housing allowances, stipends, and reimbursements?

For UI Tax purposes, housing allowance payments will always be subject. Even if the parsonage was owned by the church and the minister was simply allowed to live there rent free, the fair market value of the rent should be reported as wages for UI Tax.

Stipends are considered subject wages and should always be reported. Honorariums paid to the minister directly are subject if paid by the church or employing enterprise.

Actual reimbursements are excluded as long as there is a valid and written accountable plan, which is consistently followed.

The IRS’ Minister Audit Technique Guide may be of some use, but bear in mind that federal income tax rules often are different from state unemployment tax rules.

Understanding the Abuse Controversy

The essay below began as a simple article, but I have decided to scratch the project for now. For one thing, the latest developments make this particular approach less timely than it was, and I have neither the time nor inclination to re-write this. Think of it as a stream of consciousness of sorts on the current controversy.  Please note that all photos are my own.  Perhaps this essay will be of some use or help to you!

(Unfortunately, for several reasons including possible future publication options, a couple sections of this essay have been removed from the blog.)

     

   
     Once I first became aware of the nightmarish news out of Pennsylvania, I felt ill.  Since learning of the crimes, I’ve been dealing with alternating feelings of  shock, anger, and embarrassment for the immoral and criminal behavior of some of our clergy and leadership.  Where do we begin?  

     It seems that we must endeavor to address the victims of these crimes first.  But what can we possibly say to them besides sincerely seeking their forgiveness as members of the Church?  They already understand all too well that there are no perfect earthly institutions.  The Catholic Church betrayed them so completely, so scandalously, that one wonders if any of them remain Catholic today.  While it is true that institutions are run by imperfect people, and that we should endeavor to avoid letting negative experiences unduly color our larger view of an institution like a church, this is an essentially worthless and tone-deaf argument to try to make to a suffering victim.  Victims already understand perfectly well the evil that can come from otherwise good institutions, but what can we possibly offer them today?

     Perhaps it’s worth considering something like the safety message we are all familiar with hearing when we fly.  Remember the warning we receive to remember to put the oxygen mask on first in the event of a depressurization before trying to assist someone else?  That advice seems to be in accordance with common sense. In an emergency, it is sometimes prudent to attend to ourselves before we can adequately provide aid for those who depend upon us.  We are all in shock here, and it makes a modicum of sense to suggest that it’s too early for most of us lay people to offer much in the way of constructive words for the victims—other than we are terribly sorry for what happened. Meanwhile, may I suggest that we take hold of the mask and breathe in some fresh air to counter the growing stench of shock and anger?  As we begin to make sense of the larger picture, perhaps other meaningful, substantive words will be forthcoming for those who suffered evil at the hands of these ordained men of our church.

     One dimension of this tragedy that warrants particularly careful reflection and prayer is the way this issue keeps recurring within our history; it’s hardly new. In the 11^thcentury, for example, Saint Peter Damian wrote the following.

Listen, you do-nothing superiors of clerics and priests. Listen, and even though you feel sure of yourselves, tremble at the thought that you are partners in the guilt of others; those, I mean, who wink at the sins of their subjects that need correction and who by ill-considered silence allow them license to sin. Listen, I say, and be shrewd enough to understand that all of you alike are deserving of death, that is, not only those who do such things, but also they who approve those who practice them.

     The following related passage was purportedly written by Basil the Great within an early compilation of canon law known as the Decretum Gratiani. Its recognition today, however, seems to stem more from references made by Saint Peter Damian within hisown writings rather than this original compilation or collection of canon law. As a consequence, this quote is often misattributed to Saint Peter Damian rather than Basil the Great.

Any cleric or monk who seduces young men or boys, or who is apprehended in kissing or in any shameful situation, shall be publically flogged and shall lose his clerical tonsure. Thus shorn, he shall be disgraced by spitting into his face, bound in iron chains, wasted by six months of close confinement, and for three days each week put on barley bread given him toward evening. Following this period, he shall spend a further six months living in a small segregated courtyard in the custody of a spiritual elder, kept busy with manual labor and prayer, subjugated to vigils and prayers, forced to walk at all times in the company of two spiritual brothers, never again allowed to associate with young men for purposes of improper conversation or advice…

     Of course, even before Basil’s strong words from the 4th century, the New Testament itself seems to foreshadow this particular evil within the Church with the following passages from Mark 9:42 and Luke 17:2.

If anyone causes one of these little ones—those who believe in me—to stumble, it would be better for them if a large millstone were hung around their neck and they were thrown into the sea.

and

It would be better for them to be thrown into the sea with a millstone tied around their neck than to cause one of these little ones to stumble.

Between the preceding stern warnings and passages such as 1 Corinthians 11:27, concerning the eating of the bread and drinking “of the cup of the Lord in an unworthy manner,” or the warning concerning the “stricter standard” with regard to the teacher found in James 3:1, one can hardly deny that both holy Scripture and sacred tradition concretely warn of the fruits of this kind of immorality.  For those ministers who would dare lead Christ’s precious sheep astray, it would likely have been better for them, like Judas, if they had never been born.

     This dimension of stark severity, however, seems strangely absent within today’s modern Church: replaced often with dimensions of popular psychology or echoes of the Sexual Revolution.  Voices such as Father James Martin, the at-large editor of the once great America, The National Catholic Weekly, seem bent on moving the Catholic Church to an altogether different place—e.g. expressing “reverence” for homosexual unions and even the encouraging of transgenderism.   Unflinching orthodoxy, on the other hand, sees clearly that each act of abuse like those that took place in Pennsylvania, represents an act remarkably similar to Judas’ betrayal of Christ, actions that attack not only the living person of our Savior, but also His followers, and the Gospel itself.  

     Bishop Fulton Sheen, a particularly inspiring communicator for Christ’s Church, puts it this way in Radio Replies, Volume 1.

If I were not a Catholic, and were looking for the true Church in the world today, I would look for the one Church which did not get along well with the world; in other words, I would look for the Church which the world hates. My reason for doing this would be, that if Christ is in any one of the churches of the world today, He must still be hated as He was when He was on earth in the flesh. If you would find Christ today, then find the Church that does not get along with the world.

It doesn’t take a genius to see that the closer the Church moves to embracing the world, the worse things become. It seems that we have exchanged being the salt of the world for the…flour, but where does this leave us today? I suggest that we first must acknowledge that something is seriously wrong with the structure and spirit of any church in which these crimes can be tolerated and overlooked. I have heard recently that Pope Francis may be prepared to call for a change to our Catechism to reflect the perceived immoral nature of the death penalty—and even more baffling pronouncements concerning a belief now that life sentences are tantamount to torture. Yet, so far as have heard, the relatively small section addressing sexual abuse (CCC 2389) does not appear to be headed for any similar expansion.

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     Given the numbers and historical context of this—not to mention a sense that things have grown worse as steps towards liberalization have been more greatly tolerated—I think we as Catholics must demand that the Church’s own published instructions be more closely followed. Below is an excerpt from “On Priesthood and Those with Homosexual Tendencies, Instruction from the Congregation for Catholic Education.”

From the time of the Second Vatican Council until today, various documents of the Magisterium, and especially the Catechism of the Catholic Church, have confirmed the teaching of the Church on homosexuality. The Catechismdistinguishes between homosexual acts and homosexual tendencies.

Regarding acts, it teaches that Sacred Scripture presents them as grave sins. The Tradition has constantly considered them as intrinsically immoral and contrary to the natural law. Consequently, under no circumstance can they be approved.

Deep-seated homosexual tendencies, which are found in a number of men and women, are also objectively disordered and, for those same people, often constitute a trial. Such persons must be accepted with respect and sensitivity. Every sign of unjust discrimination in their regard should be avoided. They are called to fulfill God's will in their lives and to unite to the sacrifice of the Lord's Cross the difficulties they may encounter.8

In the light of such teaching, this dicastery, in accord with the Congregation for Divine Worship and the Discipline of the Sacraments, believes it necessary to state clearly that the Church, while profoundly respecting the persons in question,9 cannot admit to the seminary or to holy orders those who practice homosexuality, present deep-seated homosexual tendencies or support the so-called "gay culture."10 

Such persons, in fact, find themselves in a situation that gravely hinders them from relating correctly to men and women. One must in no way overlook the negative consequences that can derive from the ordination of persons with deep-seated homosexual tendencies…

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     If I were to endeavor to offer concrete advice going forward it would be to safeguard all vulnerable populations as if our spiritual lives depend upon it, take a one strike, you are out approach to abuse, embrace the cleansing quality of light and transparency in all of these affairs, and take meaningful steps towards reconciliation and forgiveness with those victims the Church has wounded so terribly.  Perhaps some of the wisest commentary concerning this spiritual crisis, however, is found within Archbishop Alexander Sample’s recent pastoral letter to the faithful of the Archdiocese of Portland. In this important letter, Archbishop Sample outlines four recommendations that include: increasing accountability of bishops in concrete and meaningful ways, initiating an outside investigation, bringing investigation to bear not only upon the perpetrators, but also those in authority who knew but failed to act, and ensuring that new reports of concern are never again whitewashed or ignored. These recommendations of accountability, if enacted, would take us far along the road of healing, reconciliation, and justice, because what we need today is unflinching orthodoxy and not false promises.