The Portland metro small business tax guide

The whole stack, in one table

Start with the entity, but do not over-think it

An LLC is a liability structure. It changes nothing about federal tax on its own — a single-member LLC files a Schedule C exactly as a sole proprietor does. The tax question is whether to elect S-corporation treatment, and the honest answer is that it helps some businesses substantially and others not at all. See LLC vs S-corp in Oregon for the arithmetic.

Registration: the part nobody tells you about

1. 1Register the business with the Oregon Secretary of State if you are forming an entity.
2. 2Get an EIN from the IRS — free, and takes minutes.
3. 3Register with the Oregon Department of Revenue for the taxes that apply to you.
4. 4Register with the City of Portland Revenue Division if you operate in the city or county — generally required whether or not tax is owed.
5. 5Register for Oregon CAT once commercial activity approaches the registration threshold.
6. 6Register payroll accounts before your first payroll run, not after.

Apportionment, and why the same profit is taxed three ways

Each local jurisdiction taxes the share of your income attributable to its own territory, using market sourcing — broadly, where the customer receives the benefit. That produces three different percentages on the same profit: a Portland percentage, a Multnomah County percentage, and a Metro district percentage. This is why books that cannot show where revenue was sourced create a March scramble every year.

CAT deserves its own paragraph

The Corporate Activity Tax is levied on commercial activity rather than on profit, which means a business can owe it in a loss year. Low-margin businesses — distribution, construction, food, contract manufacturing — feel it hardest. Sourcing is the whole game: sales delivered to Washington customers are generally not Oregon commercial activity, though they may create Washington B&O exposure instead.

Payroll, from the first hire

• Federal withholding, Social Security, Medicare and FUTA
• Oregon withholding and unemployment insurance
• Paid Leave Oregon contributions
• Statewide transit tax, and the TriMet payroll tax inside the district
• Metro SHS and Multnomah PFA employer withholding — the two most commonly missed
• Workers’ compensation coverage

The full detail is on Oregon payroll compliance. The short version: the compliance burden barely scales with headcount, so one employee triggers nearly all of it.

The annual rhythm that keeps it manageable

1. 1Monthly — reconcile everything, and watch the threshold indicators.
2. 2Quarterly — payroll returns, estimated payments, a look at where the year is heading.
3. 3October to November — year-end planning, while decisions are still available.
4. 4January — 1099s and W-2s by 31 January; new rates and thresholds take effect.
5. 5March — S-corp and partnership returns.
6. 6April — individual returns, the Arts Tax, Q1 estimates, and the local returns.