Step one: decide the entity, for the right reason
Choose the entity for liability, ownership and how you intend to run the business. Then decide the tax election separately. An LLC is not a tax structure; a single-member LLC files a Schedule C exactly as a sole proprietor does. Whether to elect S-corporation treatment is a numbers question you can revisit — see entity selection.
Step two: register, in this order
- 1Oregon Secretary of State — entity formation and assumed business name.
- 2IRS — EIN. It is free and takes minutes; do not pay a service for it.
- 3Oregon Department of Revenue — the tax programs that apply to you.
- 4City and county — Portland Revenue Division registration if you operate in the city or the county.
- 5Oregon CAT registration, once Oregon commercial activity approaches the registration threshold.
- 6Payroll accounts, before the first hire.
Step three: set the books up properly the first time
This is the step people skip, and it is the one that costs most. A chart of accounts built around how the business actually operates, revenue tagged so sourcing questions can be answered, and owner draws kept separate from wages from day one. See QuickBooks setup.
- A separate business bank account, always
- A chart of accounts that reflects your actual operations
- Revenue coded by where the customer receives the benefit — this is what CAT and city apportionment need
- Owner compensation separate from distributions
- A monthly close, from the first month
Step four: know which thresholds you are heading toward
| Threshold | What crosses it | What happens |
|---|---|---|
| $400 net self-employment earnings | Sole proprietors | Self-employment tax applies |
| $1,000 expected tax owed | Anyone without withholding | Quarterly estimates generally required |
| $1 million Oregon commercial activity | Any business | Oregon CAT applies |
| City and county gross receipts floors | Portland-area businesses | Local business taxes apply |
| First employee | Any business | The entire payroll stack |
Step five: plan the first year, not just file it
The first year is when equipment purchases, retirement plan choices, entity elections and estimated payment patterns all get set — and most of them are easier to set than to change. A planning conversation in the first quarter of trading is worth more than a good return at the end of it.
Do I need an LLC to start?
No. You can trade as a sole proprietor immediately. An LLC provides liability separation, which may or may not matter for your business — it does not change your tax on its own.
When do I need to register in Portland?
Generally when you begin operating in the city or county, whether or not tax will be owed. Registration and tax liability are separate questions.
How much should I set aside for tax?
For a sole proprietor with no other income, roughly 30% of net profit is a defensible starting point. Refine it once there are real numbers.
Should I get bookkeeping from day one?
Setting it up correctly from day one is cheap. Fixing three years of it is not.
Questions this guide does not answer
Guides are general. Your return is not. An appointment costs less than a wrong assumption.
Written by
Enrolled Agent, Oregon Licensed Tax Consultant
License number: Enrolled Agent 00160070-EA · Oregon Licensed Tax Consultant 35746-C
Heather has spent more than a decade preparing individual and business returns across the Portland metro and the Columbia Gorge, and holds unlimited rights to represent taxpayers before the IRS.
Last reviewed
This page is general information about Oregon, Washington and federal tax rules, not advice about your own return. Thresholds and rates change every year. Figures were verified as of August 2026 — check the linked official sources, or talk to us about your situation.