WELCOME TO THE Portland Business Handbook

Transcription

1 WELCOME TO THE Portland Business Handbook... a comprehensive collection of helpful information targeted to business owners looking to start or expand a business in Portland. Whether you are a first-time entrepreneur or a seasoned business veteran, this guide can assist you in navigating the regulatory and financial challenges of setting up or growing your business. The City of Portland s economic development agency, the Portland Development Commission (PDC), worked with local public and private organizations to compile this information, which is presented in two parts: 1) A Checklist for New and Expanding Businesses, and 2) A Directory of Business Resources. The Checklist offers both basic advice (e.g., tips on writing a business plan) and guidance on specific regulatory or legal requirements (permits, taxes, etc.) that may affect your business. The Directory lists organizations and programs that can provide you with assistance ranging from market data, management or employee training, financial help (loans or tax exemption programs) even recycling opportunities. You are also welcome to visit or contact us: PDC online at or by ing info@pdc.us. at PDC s offices at 222 NW 5th Avenue, City of Portland online at Portland Business Hotline, biz (4249) For questions about Portland permits or regulations, you can contact the city s Small Business Liaison (Bureau of Development Services), Ultimately, we hope this information helps you find answers or connect with resources that will help your business grow and prosper. Investing in Portland s Future 2010 Note: PDC does its best to keep this Handbook up to date. Please help us to update information by contacting info@pdc.us.

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3 Table of Contents Checklist for New and Expanding Businesses Checklist Overview A-4 Before You Begin A Business A-5 Tips on researching your business, developing a business plan, seeking professional advice and identifying financing. Creating Your Business A-8 Selecting your business name and structure, protecting your idea (patents/copyrights), and state and local licensing requirements. Locating and Setting Up Your Business A-11 Identifying your zoning and building requirements, and utility and insurance needs. Tax Requirements for Businesses with Employees A-15 Understanding and filing federal, state and local taxes that may apply to your business. Other Regulatory Requirements A-17 Other rules and regulations that may apply to your business, such as safety and health standards, disability accommodation requirements, affirmative action rules, etc. Directory of Business Resources General Information 3 City, state and federal agencies and other organizations providing general business information and assistance. Employment Services 11 Programs for employers and employees related to job placement, employee training, child care and compliance with employment regulations. Environmental Services 19 Contacts for street and sewer maintenance, pollution control, fire and crime prevention, and other services affecting the physical and social environment. Facilities for Events 27 Public facilities available for meetings, conventions and promotional events. Financial Assistance 31 Programs offering direct loans, loan guarantees, tax credits and other forms of financial assistance. International Trade (Import/Export) 39 Agencies, services and resources available to help businesses involved in trading overseas, or seeking to expand into international markets. Management Assistance 45 Services and training available to improve skills of business owners, managers and employees. Planning Assistance 51 Public agencies providing information and help with permits and code regulations for business, industrial and housing construction or expansion. Public Contracting Opportunities 57 Information on selling goods and services to governmental agencies. Transportation Assistance 61 Public agencies providing information and help with parking and traffic control, employee transportation alternatives and shipment of goods New Business Checklist A-3

4 Checklist for new and expanding business checklist overview The following pages cover many of the issues you will need to address if you are starting, relocating or expanding your business in Portland. Included is both general and Portland-specific information from defining your business structure and writing a basic business plan, to obtaining necessary licenses and permits and complying with federal, state and local tax obligations. Also included are references to appropriate agencies and organizations for additional information. Please note that this checklist is not a substitute for legal counsel and information is subject to change due to revisions in law and administrative policies. Before You Begin A Business n Determine what business is right for you. n Do your homework (recommended research). n Develop a business plan. n Seek professional advice. n Identify financing. Creating Your Business n Select your business structure. n Create and register a business name. n Protect your idea (patents/copyrights). n Check state and local license requirements. n Other considerations. Locating and Setting Up Your Business n Check zoning, building and safety requirements. n Make necessary utility and other service arrangements. Taxes Requirements For All Business Types n Obtain a federal tax ID number. n Prepare income tax and personal property tax information. n Check other potential tax requirements. For Businesses with Employees n File required federal forms. n File required state forms. n Check other employer requirements under federal and state law. Other Regulatory Requirements n Check other regulations that may apply. n Other employer requirements. A-4 Portland Business Handbook 2010

5 Checklist for new and expanding business n Determine what business is right for you. Ask yourself these questions: What do I like to do with my time? What technical skills have I learned or developed? What do others say I am good at? How much time do I have to run a successful business? Do I have any hobbies or interests that are marketable? n Do your homework. Research your business idea to answer the following questions: What services or products will I sell? Is there or can I create a demand for my business? Before You Begin A Business Starting a successful business requires a great deal of preparation. At a minimum, consider taking the five actions listed in this section. What or who is my competition? What is my business advantage over them? Can I deliver a better quality of service? What will be the name and legal structure (i.e., assumed business name, corporation, etc.) of my business? What skills and experience do I bring to the business? Note: If you don t have experience, consider working in the industry or with a successful owner/operator for at least one year. Do I have experience with managing people, bookkeeping or accounting? If not, what resources can I tap into? Am I eligible for certification under the state Disadvantaged, Minority, Women and Emerging Small Business Enterprise Program? Where will I be located? What equipment or supplies will I need? What financing will I need? What are my resources (financial, collateral, human, etc.)? Do I need a specially trained work force? If so, what local programs can help me? What insurance coverage will be needed? How will I compensate myself? What will I live on while my business grows so that I am adequately compensated? What are my legal requirements in terms of zoning, permits, licenses and taxes? Some resources to help with this research include: The City of Portland s web site: (click on the business tab). City of Portland agencies, such as the Revenue Bureau (for information about the city business license fee and Multnomah County business income tax), , Bureau of Development Services (for permits and zoning information, etc.), , and Portland Development Commission (PDC for financial assistance and other resources, including an online data center offering demographic, community and other information), , State of Oregon agencies, including the Secretary of State s Office (Corporation Division) and the Business Wizard on its web site, and the Department of Consumer and Business Services, (The Office of Minority, Women and Emerging Small Business web site is at The Oregon Business Guide, accessible online at is also very helpful. MercyCorps Northwest s online Entrepreneur s Center, accessible on its Portland Small Business Community web site, New Business Checklist A-5

6 The U.S. Small Business Administration and its programs (SCORE, Small Business Development Centers, etc.), which provide assistance with general start-up and financing issues to specific legal and regulatory challenges. which offers comprehensive information about properties within the city, including current zoning and improvements, taxes, urban renewal district (if applicable), business district, proximity of public transportation and more. Business related groups and trade associations. (See the Directory of Business Resources.) Your banker, who knows a great deal about the area including average income, level of competition, real estate and rental values. Developing a sound relationship with your banker is important in establishing a credit line. Insurance brokers, who can provide information about the coverage needed for your proposed business activity and approximate premiums. Be sure to obtain multiple quotes. Your local library, via online access or a call or visit to the librarian. Your thorough research is a critical first step in starting a business. You re now ready to put ideas on paper, which will serve as a blueprint for your business plan, detailing how the business will be operated, managed and capitalized. n Develop a business plan. Why go to the trouble of creating a business plan? There are several reasons: The process of putting together a business plan, including the thought involved before writing it, forces you to take an objective, critical, unemotional look at the business project in its entirety. A major reason for new business failures is lack of planning. A business plan is a road map and operating tool that can help you manage the business and work effectively toward its success. Lenders and other financing resources require one. A completed business plan communicates ideas to others and provides the basis for a financial proposal. A properly prepared business plan includes an analysis of the business or industry marketplace, detailed resumes of your management team, even if it is just you, and a financial plan with profit and loss and cash flow forecasts. Below is a suggested plan outline covering key elements: 1. Executive Summary. Provide an overview of the business plan. Because many people will not read past the summary, this section needs to be clear and convey excitement. 2. General Description. Explain the type of company. If this is an existing business, give its history. If it is a new start-up business, note some of the qualifications to start this business. Why is this business needed and what is its chance for success? 3. Products and Services. Describe the product and/or service. What are its unique features? Why will customers come to your business? 4. Marketing. Identify your target market consumers who will need your products or services and be willing to pay for them. Outline your marketing strategy and your competitive edge what will draw customers to you rather than your competition? List your primary competitors and provide an honest appraisal of their strengths and weaknesses and how you will compete successfully against them. 5. Competition. Identify and list businesses/products that your customers might patronize/purchase instead of yours and why your product is different or better. 6. Management. Identify the people who will be active in this business. Describe their skills and experiences. 7. Legal. Describe the legal organization of your business sole proprietorship, partnership, S corporation, limited liability company, corporation. Are patents or trademarks involved? 8. Finances. State your financial requirements and where you will get these funds. Project revenues, costs and profits. Your efforts in developing the financial statements will help you understand the cash flow of your business: your break-even point (when your revenues equal your expenses); the sensitivity of your business to fluctuations in business levels; and what happens if your revenues are below what you think they should be and how that affects your profits and need for working capital (money to pay for periods where expenses are greater than revenues). 9. Operations. Explain any systems or processes that will be used. What facilities will be used? What equipment and supplies will be needed and where can they be obtained? Who will provide the labor and how will it be accessed? What will be the hours of operation? The length of the plan will vary depending on the complexity of your business, but the more comprehensive, the better. However, an executive summary should not exceed four pages. A-6 Portland Business Handbook 2010

7 Several brochures and books are available at libraries and bookstores for assistance in writing business plans, and most large accounting firms have manuals available. Another resource is the U.S. Small Business Association web site, which covers business plan writing in detail at Classes on and/or assistance with writing business plans are regularly offered through local Small Business Development Centers (SBDCs) and SCORE. Additionally the Oregon Entrepreneur Network provides a service to review your business plan for a modest fee. These and other local resources are listed in the Directory of Business Resources Management Assistance chapter. n Seek Professional Advice. At a minimum, consult with two professional people: An attorney. Consider having an attorney examine the papers you sign. Get advice on any legal questions pertinent to your business such as labor laws if you plan to hire employees or landlord-tenant laws if you plan to lease your place of business. If you do not have an attorney, you may call the Oregon State Bar toll-free at for referrals or visit their web site at Also, the Lewis & Clark Law School offers legal services to low-income and emerging businesses from its Small Business Legal Clinic in northwest Portland, , An accountant. A licensed tax consultant can review your business plan, help you with tax forms and provide other specific advice if you are buying or starting a business. If you do not have an accountant, ask around to get a referral from a business owner you know or call the Oregon Association of Independent Accountants at , the Oregon Society of Certified Public Accountants at , or the Oregon Association of Tax Consultants at n Identify Financing. Key to successful business start-up or expansion is your ability to secure appropriate financing. New business owners often underestimate the amount of money it takes to get a business started. An entrepreneur needs to identify both the start-up capital costs and the cash-flow requirements for a business. The total of the two, plus an additional cash reserve, is the capital recommended for starting a business. There are several resources to consider when looking for financing. It is important to explore all of your options before making a decision. Personal savings. The primary source of capital for most new businesses comes from savings and other forms of personal resources. While credit cards are often used to Check Blue Sky Laws Governing Security Sales finance business needs, there may be better options available, even for very If you plan to finance your business with funds other than your own, you may be small loans (such as micro enterprise involved in the offer and sale of securities. The most common types of securities lenders). are stocks, bonds and limited partnership interests; however, any type of agreement that obligates you or your business to pay another person part of your entrepreneurs look to private sources Friends and relatives. Many profits or to make interest payments probably involves a security. You should such as friends and family when starting contact the Corporate Securities Section of the Oregon Department of Consumer and Business Services, , before you talk to anyone about is loaned interest free or at a low interest out in a business venture. Often, money helping to finance your business. The staff can explain Oregon Securities Law, rate, which can be beneficial when getting started. potential exemptions, and forms required for registration. You can also find this information at the Corporate Securities web site at Banks and credit unions. Banks and credit unions will provide a loan if you can show that your business proposal is sound. To be successful in obtaining a loan, you must be prepared, organized and know exactly how much money you need, why you need it and how you will pay it back. You must be able to convince your lender that you are a good credit risk. While many banks require that a business be in operation for years before they will consider extending a loan, some banks, governmental agencies, trade associations and non-profit institutions have financial assistance programs for new businesses, such as those offered through the U.S. Small Business Administration (SBA). Keep in mind that each bank participating in the SBA program may have different requirements. Venture capital firm and angel investors. These firms generally help fast-growth businesses in exchange for equity or partial ownership. See the Business Resource Directory Financing Assistance chapter for a list of funding resources, including tax credit programs, available in the City of Portland and Oregon New Business Checklist A-7

8 Checklist for new and expanding business Creating Your Business n Select Your Business Structure. A business may be conducted under one of several organizational structures. You may choose to operate the business yourself (sole proprietorship), with another person (general partnership) or as a separate legal entity (corporation, limited liability company, limited liability partnership, or limited partnership). Each business structure has advantages and disadvantages and is generally chosen for liability and/or tax reasons. The most common business structures are briefly described below. For more complete descriptions, access the Oregon Business Guide online at or the U.S. Small Business Administration (SBA) web page on business structures, Sole Proprietor. One person operating a business as an individual, with complete control but also unlimited liability for its debts. All income is included on the individual s personal tax return. General Partnership. An association of two or more persons doing business. Each partner is liable for all debts of the business. All profits are taxed as income to the partners based on their percentage of ownership. Limited Partnership. Consisting of at least one general partner and one limited partner. General partners control the business and are liable for all debts; limited partners are liable only for the amount they ve invested in the business. Corporation. A legal entity created under Oregon laws by filing articles of incorporation with the state s Business Registry. It is owned by its shareholders, sometimes referred to as equity owners, whose personal assets are shielded from business debts and liabilities. Corporation exists separately from its owners and must file its own tax returns. Managed by a board of directors. Limited Liability Company (LLC). An unincorporated association having one or more members. An LLC can be managed by managers or members. Managers can be compared to the board of directors, and members to shareholders of a corporation. The internal affairs of the LLC are governed by operating agreements. A qualified tax consultant or attorney can best advise you about the appropriate business entity to form. An SBA-sponsored Small Business Development Center (SBDC) or local SCORE chapter may also offer literature, classes or other assistance to help you compare different organizational options. If you are a construction or landscape contractor, the state Construction and Landscape Contractors Boards can provide some information on the advantages and disadvantages of different business structures for those business activities. n Create and Register a Business Name. Check Liabilities When Buying an Existing Business If you are purchasing an existing corporation, you need to be aware of hidden liabilities. You may be held responsible for a previous owner s liabilities, regardless of any contractual language to the contrary. Make sure the seller of the business provides proof that there are no hidden liabilities. It is wise to obtain a copy of a Tax Clearance letter, which must be requested by the seller, prior to the closing date or signing any purchase agreements. The seller may request a Tax Clearance Letter by sending a written request to the Oregon Department of Revenue, P.O. Box 14999, Salem, OR Every business must have a legal name. Depending on the type of business and name chosen, the name may need to be registered with the state Corporation Division. As a general rule: A business name that lists all owners full legal names may be registered, but registration is optional. For example, a sole proprietor choosing to conduct business under his/her own name ( John Smith, CPA ) does not need to register with the state. Operating under an assumed business name requires registration. When you are ready to select a business name or assumed business name, you can check the Business Registry Database for name availability online at or by calling the Oregon Secretary of State s Business Registry office at To register, you must submit an application and a nonrefundable processing fee to the Business Registry. Application forms are available at A-8 Portland Business Handbook 2010

9 n Protect your idea. If your business depends on a new service or product, you may want to protect it by applying for a patent or copyright. Similarly, if you use a trade or service mark to identify your goods or services, you may want to register the trade or service mark. Below are brief descriptions of patent, copyright and trademark options. U.S. Patents. A patent is an exclusive property right to an invention and is issued by the Commissioner of Patents and Trademarks, U.S. Department of Commerce. If you decide to apply for a patent, you should seek professional assistance from a patent attorney or patent agent because patent procedures are detailed and technical. You might also consider performing a preliminary patent search to determine if your invention qualifies for a patent. The Boley Law Library What is an Assumed Business Name? A business name must be registered with the state Business Registry as an assumed business name if the legal name of each person involved with the business is not conspicuously disclosed to the public in the business name. A person s legal name includes both the first and last names. Nicknames are not legal names and must be registered as assumed business names. If there are words that suggest additional owners, such as company or associates, the name must also be registered. It is important to note that if you fail to register your assumed name, you may be prevented from carrying on a lawsuit for the benefit of your business. or call or New Business Checklist A-9 of the Northwestern School of Law at Lewis and Clark College in Portland, a designated Oregon Patent & Trademark Depository Library, can help you with this search. Call ahead for library hours at or visit its web site at U.S. Patent information is also available online at by calling the U.S. Commissioner of Patents and Trademarks in Washington, DC, at U.S. Copyrights. A copyright protects literary, dramatic, musical, artistic, or other intellectual creations from unauthorized copying or exploitation. Items such as written materials, works of art, musical compositions, and computer programs are protected by copyright. No registration or other action in the copyright office is required to secure a copyright; the copyright is secured automatically when the work is created. However, there are advantages to registering a copyright with the U.S. Library of Congress. For more information and copyright application forms, visit the web site Trademarks and Service Marks. A trade or service mark identifies a source of goods or services. It can consist of letters, words, pictures, designs or any combination of these. The mark must be in use before it can be registered, but registration is optional. Registration prevents the registration or use of an identical or similar mark, and helps prove the date of first use. It s a good idea to check for conflicts with federally registered trade and service marks before registering your own. The booklet Basic Facts about Trademarks is available from the U.S. Commissioner of Patents and Trademarks by calling ; accessing the U.S. Patent and Trademark Office s web site at Forms to register a federal trade or service mark can be downloaded from or by calling the patent commissioner s number above. You can obtain the Oregon Trade and Service Marks registration form by calling the Corporate Division at or downloading it from There is a nonrefundable processing fee in Oregon. n Check State and Local License Requirements State License Requirements. The state of Oregon does not have a general business license. However, many occupations and business activities require special licenses, permits, or certifications from state agencies or boards. These licenses, permits or certifications may regulate an industry s rates or determine how individuals and businesses in those industries operate. In addition, certain industries require continuing education or training. For more information visit You can also refer to Oregon Licensed Occupations, a publication of the Oregon Employment Department, which provides descriptions of occupations requiring a license in Oregon including requirements, fees, examinations and licensing agencies. A free copy can be downloaded at (click on Publications ). City of Portland License Requirements.* Anyone doing business in the City of Portland and grossing more than $25,000 annually is required to have a City of Portland business license. Insurance agents and individuals and associate brokers whose only activity is real estate sales are exempt. The license cost is a percentage of net income from business activity performed within the city, or a minimum annual fee. Applications are available by calling the Revenue Bureau at or can be downloaded at

10 * At the time of printing, adjustments to the Portland License fees were under consideration by the Portland City Council. Please contact the City of Portland Business Licenses, , for current information. Note: The City of Portland also administers the Multnomah County Business Income Tax (BIT) program, collecting both city license fees and BIT payments using a combined form. BIT is discussed more fully in the Tax Requirements section of this Checklist. City of Portland Temporary (seasonal/limited) Licenses. Temporary business licenses are issued by the Revenue Bureau for vendors and promoters operating within the City of Portland for a limited duration or on a seasonal basis. Vendors conducting limited, seasonal sales (including but not limited to Christmas trees or fireworks) in temporary locations are required to obtain a temporary license. Certain exceptions apply. For additional information or to get a temporary licenses, contact the bureau or visit its web site, Note: If you are locating in another municipality, be sure to check local licensing requirements. n Other Considerations Insurance. Contact an insurance agent to determine the types of insurance the business should purchase or may be required to purchase. Consider not only property loss coverage but general liability insurance, as appropriate. Shop around because insurance rates and type of coverage vary greatly among insurance carriers. Employee Health Coverage. Businesses are not required to provide health insurance to employees. However, several resources exist to encourage businesses to do so. For example, the state Office of Private Health Partnerships (OPHP) helps self-employed and small employers (with up to 50 workers) sort out available private, small-group insurance programs. A trained health insurance agent can review your options. Additionally, OPHP administers the state Family Health Insurance Assistance Program (FHIAP), which helps uninsured, lower-income employees pay their share of the monthly premium of employer-sponsored insurance. For more information on small employer health insurance plans and the FHIAP, visit the web site or call (toll-free). Restaurant Licenses. Multnomah County s Health Department requires all food service facilities to obtain a license and be inspected. For more information, call or visit the department s web site at More detailed information about starting up a restaurant can be found on the Oregon Restaurant Association s web site, (click on Running Your Business ). Street Vendors. Businesses operating from vending carts in city rights-of-way must obtain a permit from the City of Portland Office of Transportation and meet certain requirements. For more information, visit the office s web site at (click on permits ) or call In addition, street vendors selling food must be approved, licensed and inspected by the Multnomah County Health Department. Contact the health department at A-10 Portland Business Handbook 2010

11 Checklist for new and expanding business LOCATING AND SETTING UP Your Business n Check Zoning, Building and Safety/Health Requirements Be sure the location you choose for your business is properly zoned for your business activity. If you are considering acquiring a building or piece of property for your business, relocating your existing business, making an addition on your existing business, or opening an additional outlet, there are several factors you should take into consideration. If you are thinking about operating your business out of your home you should refer to the City of Portland s Bureau of Development Services (BDS) Small Business Guide to Development Services (referenced below) or contact the BDS directly for information on home occupations (see box on this page for contact information and box on next page about home occupations). n Zoning Issues When determining your business site, be sure to research the following: How is the property zoned? How is the building use classified? What uses are legally allowed within the guidelines of the city s zoning code? Will I be required to make code improvements? Is the site within a special district or part of an approved neighborhood plan? What are parking and landscaping requirements? The BDS Planning and Zoning staff can help you determine the existing zoning of any piece of property or building in the city. (You can also find zoning information at They can also tell you the permitted uses within that zone, or help determine where your particular business may locate. BDS also publishes the Small Business Guide to Development Services to help you understand some of these issues. The guide is available online at or by calling n Building Issues Besides zoning issues, you need to consider the following building issues when choosing a business location: Will a change of occupancy be necessary? Will I need a permit to make improvements? To remodel? Will I need to bring the building up to code? Will I need to make changes to comply with the Americans with Disabilities Act (ADA)? (See Other Regulatory Requirements on page A-17) Will I need to make seismic improvements? Can I put up a new sign or awning? (A permit is required for all signs in the city. In addition, any business locating a sign visible from a state highway must get a permit from the Oregon State Highway Division.) Will I need to pay a System Development Charge (SDC)? Contact the Development Services Center for assistance with these issues as well. Portland s Development Services Center: Your One-Stop Information Resource The City of Portland Development Services Center, located on the ground floor at 1900 SW 4th Avenue, houses the Bureau of Development Services (BDS). BDS is responsible for ensuring all buildings are used properly and for reviewing and issuing building, mechanical, electrical, plumbing and sign permits. This includes making sure all buildings are brought up to code prior to occupancy. You can contact BDS staff by visiting the center between 7:30 a.m. and 3:30 p.m., Monday-Friday, and 5:00 p.m to 7:30 p.m. on Thursdays; calling or the BDS Small Business Liaison at ; or accessing the center s web site at New Business Checklist A-11

12 n Safety and Health Regulations Fire Safety. Fire inspectors from Portland Fire & Rescue (PF&R) can help you assess a building s fire safety prior to purchase or lease. In addition, PF&R inspectors can provide information about purchasing and maintaining fire extinguishers and sprinkler systems. Contact PF&R at or visit its web site at Hazardous Materials. Any business that stores or Doing Business in your home uses substances classified as If you plan to operate a business from your home, you first need to determine hazardous materials must if there are restrictions on home-based businesses in your area. Portland has meet specific requirements regarding their storage. Storage of hazardous materials is uses his/her home as a place of work but has no employees or customers that defined two categories of home-based businesses: Type A, in which a resident subject to review by the Bureau come to the site; and Type B, in which an employee or a few customers come to of Planning and Sustainability the home. Type A does not require a permit. Type B requires obtaining a Home and PF&R. In addition, companies must notify the State Fire Occupation Permit and completing a Neighborhood Notice of Home Occupation, which is distributed to adjacent property owners. Contact the city s Development Services Center for more information (see box on previous page). Marshal s office by calling the Hazardous Substance Information Hotline at and file a Hazardous Substances Survey Form downloadable from If you are not sure if the materials you are using are considered hazardous, contact PF&R at Public Safety Inspections for Food Handlers. As noted earlier, Multnomah County s Health Department requires all food service facilities restaurants, bed and breakfast establishments, street vendors, etc. to obtain a license and be inspected. Contact the department at or visit its web site at n Make Necessary Utility and Other Service Arrangements. Utility Service. Check with the utility companies to ensure prompt delivery of service, including gas, electricity, garbage, recycling, telephone and internet, and to obtain the cost of service, the amounts of any required deposits, and written price and supply agreements. n Tax Requirements: For All Businesses It s a fact of life: Operating a business and earning income means paying taxes. When you start a business, it is important to determine your tax obligations and keep on top of them. This section offers brief discussions of basic business tax obligations, but should not be considered comprehensive. Unless you are a tax whiz, you are advised to use the services of a tax advisor or accountant to help you understand your obligations and/ or prepare your returns. BUSINESS INCUBATORS OFFER NURTURING OPTION Depending on the type of business you are establishing, you may want to consider locating in an incubator. Business incubators are facilities designed to help startup businesses become established and profitable, usually by offering economically priced flex space for offices, shared administrative staff and other resources. In Portland there are several incubators catering to high-technology businesses, food product development, and minority- and women-owned or emerging small businesses. See the Directory of Business Resources General Information chapter for a listing of local incubators. A-12 Portland Business Handbook 2010

13 n Obtain A Federal Tax ID Number (EIN). All employers, except sole proprietorships with no employees, must apply for a federal tax identification number, also called an employer identification number (EIN). Most banks and other companies will require an EIN before opening a business account. If you become the new owner of a business, you cannot use the EIN of the previous owner. An existing business adding, opening or acquiring a second operation may use its current EIN for both the existing and the new operations unless the new establishment is an entirely different line of business (the latter requires a separate and new EIN). To obtain an EIN, you must complete and submit an SS-4 Form. The form can be obtained by calling Form (3676) or downloading from the IRS web site at SS-4 Forms are also available from local IRS and Social Security Administration Offices, and often at banks. Submittal instructions (via fax or mail) are included on the form. n Prepare Income Tax and Personal Property Tax Information. Federal Taxes. All businesses are required to pay taxes to the federal government. The legal structure and type of business determine what taxes apply and when tax payments are due. Most businesses are required to make regular payments of estimated tax throughout the year. Information and tax forms for businesses can be found on the IRS web site, or by calling the IRS at or its Forms Distribution Center at The IRS web site also offers a variety of helpful online tools, including A Virtual Small Business Tax Workshop (downloadable or available to order on DVD, Publication 1066C) and The Small Business Resource Guide (downloadable or available on CD, Publication 3207). State of Oregon Taxes. Similar to federal taxes, the type of return is dependent on the structure of the business. For information on Oregon taxes, call the Oregon Department of Revenue at or visit them online at Self Employment Tax. Everyone is responsible for paying federal Social Security Tax. When working for someone other than yourself, you pay half of your Social Security Tax and your employer pays the other half. When you are self-employed you pay both portions of your Social Security Tax through the Self-Employment Tax. Based on net earnings, Self-Employment Tax payments may need to be made throughout the year. For more information, call the IRS, , or visit its web site at Multnomah County Business Income Tax (BIT). The business income tax is assessed on persons doing business in Multnomah County and grossing more than $25,000 per year (there are a few exemptions). If you conduct business in multiple counties, you pay an apportioned tax based on your percentage of revenue earned in the county. The City of Portland Revenue Bureau collects both BIT and City of Portland business license fees. More information and forms are available from the bureau s web site at com/licenses or by calling Multnomah County Personal Property Tax. Business personal property (including equipment, furniture and supplies) exceeding $12,500 in value is subject to property tax in the State of Oregon. Persons doing business in Multnomah County on January 1, each year must prepare a personal property return and submit it to the county assessor s office no later than March 1. Personal property filing forms are available by calling the Multnomah County Division of Assessment and Taxation at or visiting its web site at (If your business has personal property in more than one county, you must submit a separate return in each county.) Personal Income Tax. If you are a sole proprietor or general partner, you must pay taxes on the income from your business on a personal income tax return with the state and federal governments. You will also file a schedule that identifies income and expenses of the business. Partners file an additional partnership return that distributes profits and losses between the partners according to the partnership agreement. Corporations pay taxes on the business income at corporate tax rates. Shareholder and employees (including paid corporate officers) pay individual income tax on any salary and dividends received from the corporation. Transit District Taxes. All employers that pay wages for services performed in the Tri-Met transit district, and self-employed persons performing services within the Tri-Met district, must pay an excise tax on those wages earned within the district. These taxes are collected by the Oregon Department of Revenue. Self-employed persons pay the tax annually using Form TM. Employers pay the tax through the Combined Employer s Registration Report described in the next section, Taxes Requirements: For Businesses with Employees. For more information, contact the Oregon Department of Revenue at or visit its web site at New Business Checklist A-13

14 n Check Other Potential Tax Requirements. Some federal taxes apply to specific commodities, products or services. To determine if there are other federal taxes that apply to your business activity, visit the IRS web site at or call toll free at There are also other state taxes that may affect you. Research the Oregon Department of Revenue s web site at othertaxes.shtml or call for information on: Amusement device tax: paid by owners of establishments with Oregon Lottery video poker machines. Cigarette tax and tobacco products tax: paid by distributors, manufacturers, and consumers of cigarettes and tobacco products in Oregon. Dry cleaning fee: paid by owners of dry cleaning businesses and dry stores. Dry cleaning solvent tax: paid by owners of dry cleaning businesses and distributors of dry cleaning solvents. Emergency communications (911) tax: paid by customers of telephone and cellular companies providing telecommunication access to the Oregon 911 Emergency Reporting System. Forest products harvest tax: paid on timber cut from any land in Oregon. Hazardous substance fee: paid by possessors of non-petroleum hazardous substance. Petroleum load fee: paid by petroleum suppliers and importers to Oregon. WHEN QUARTERLY TAX PAYMENTS ARE REQUIRED The amount of your business revenues will determine whether you or your business are required to make estimated quarterly tax payments for state or federal income taxes and self-employment tax. In most cases, if you expect to owe $1,000 in federal taxes for the year after subtracting any withholding and tax credits, you must file Form 1040 ES each quarter with the IRS. Generally, if you expect to owe $1,000 or more in the tax to pay line on your Oregon tax return, you are required to file Form 40 ES each quarter with the Oregon Department of Revenue. If you have questions, call the Oregon Department of Revenue at or visit its web site at For taxes related to alcoholic beverages, contact the Oregon Liquor Control Commission at (toll free in Oregon) or For information on gasoline taxes paid by persons licensed to operate as motor vehicle fuel dealers in Oregon, contact the Oregon Department of Transportation (ODOT) Fuels Tax Group at or visit its web site at The ODOT Motor Carrier Transportation Division can provide information on weight-mile taxes paid by for-hire and private motor carriers operating into, within, and through the state of Oregon if you call or visit the ODOT web site A-14 Portland Business Handbook 2010

15 Checklist for new and expanding business Tax requirements For Businesses with Employees Any employer of one or more persons must withhold federal and state income taxes from the wages paid to employees. (If the business is a corporation, anyone who performs services for the corporation or receives compensation, including an owner, is considered an employee.) Employers are also responsible for paying into the Social Security and Medicare systems, as well as withholding a matching amount from employees wages. State and federal unemployment insurance payments must be paid entirely by the employer. No deduction is allowed from an employee s wages. Here are some of the tax, insurance and regulatory requirements you should be aware of as an employer. n File Required Federal Forms. Federal Income Tax Withholding, Social Security Contributions and Medicare Taxes. Most employers are required to withhold both federal taxes and Social Security contributions from each employee s paycheck, although certain organizations such as religious, educational, charitable and governmental bodies may be exempt. Employers base these withholdings on information provided by each employee on IRS Form W-4, employee earnings, and federal withholding tax tables. For more information, call the IRS at (800) or visit its web site at To order a supply of W-4 forms, call OREGON S MINIMUM WAGE Note: Obtain or download a copy of the IRS Employer s Supplemental Tax Guide for information on ally for inflation by the state Bureau of Labor and Industries Oregon has a legal minimum wage, which is adjusted annu- how to determine if an individual providing services (BOLI). To reach BOLI s Technical Assistance for Employers Program, call or go to is an independent contractor or an employee. Payments to independent contractors do not require tax withholdings, but do require reporting to the IRS. TA/index.shtml. Federal Unemployment Tax. Employers are required to pay a percentage of each employee s wages as a federal unemployment tax. Once you have filed for an EIN, you will automatically be sent unemployment tax reporting forms. For more information, call the IRS or visit its web site, shtml. Immigration and Naturalization Form I-9. Employers must require each employee to fill out Form I-9 supplied by U.S. Citizenship and Immigration Services (USCIS). Employees must also show their employer their birth certificate, Social Security card or other identification proving they are a U.S. citizen or have permission to work in the United States. Forms and a booklet explaining Form I-9 rules and regulations can be downloaded from the USCIS web site at employerinfo/index.htm. For questions or to request a form, call n File Required State Forms. Combined Employer s Registration Form. The Oregon Department of Revenue requires all Oregon employers to file a Combined Employer s Registration Form which consolidates reporting and payment of state income tax, unemployment tax, Workers Compensation assessments and Tri-Met taxes. When an employer first files the form, his/her business is issued a Business Identification Number (BIN) that is then used to track state reports and payments. Combined Employer s Registration Forms are available by calling the Oregon Department of Revenue at or visiting forms.shtml. State Income Tax Withholding. Employers are required to withhold a portion of each employee s paycheck for state taxes. Upon filing your Combined Employer s Registration Form you will receive wage bracket withholding tax tables prepared by the Oregon Department of Revenue to help you determine each employee s withholding. You are then required to report the amount of taxes withheld and total taxable wages paid to the Department of Revenue on a monthly, quarterly or annual basis. For more information, including exemptions from withholding, call or visit the Department of Revenue s web site at Note: Oregon requires some employers to withhold state taxes even if they do not have to withhold federal taxes. State Unemployment Tax. Employers are required to pay quarterly unemployment taxes which finance unemployment insurance and payment of benefits to unemployed workers. Each employer is assigned a tax rate based on the amount of unemployment claims charged to their account (fewer claims = lower tax rate). New employers begin with the same rate, which is later adjusted as required. For more information, visit the Oregon Employment Department s Unemployment Insurance Tax web site at gov/employ/tax/index.shtml or call (downtown Portland) New Business Checklist A-15

16 Worker s Compensation Insurance. Most employers doing business in Oregon must obtain Worker s Compensation Insurance before they hire employees. (Sole proprietors are not required to have Worker s Comp coverage. There are other exceptions.) This insurance covers all medical expenses incurred by workers injured on the job, including payments to workers who become temporarily or permanently disabled. It also provides payments to dependents if a worker dies as a result of an occupational injury or disease. Employers may acquire insurance from the State Accident Insurance Fund (SAIF), any commercial insurance company qualified to write Workers Compensation Insurance, or by self-insuring. For more information, including exemptions from this requirement, call the Oregon Worker s Compensation Division at , or visit its web site at emp_info.html. You may also contact the Small Business Ombudsman for Workers Compensation, an independent advocate for small businesses, at , or visit the ombudsman web site at A-16 Portland Business Handbook 2010

17 Checklist for new and expanding business Other Regulatory Requirements n Check Other Regulations That May Apply. Environmental Permits. Certain business activities require Oregon Department of Environmental Quality (DEQ) permits such as: discharge of materials into waters of the state; discharge of storm water associated with industrial activity; discharge of emissions into the air; owning an underground storage tank; storage, use or transportation of waste tires; disturbing five or more acres of land with clearing, grading, excavation and/or construction activities; and building a parking lot. The DEQ provides a DEQ Permits Handbook available online at or by calling in Portland or toll-free at Job Safety and Health Regulations. The Oregon Occupational Safety and Health Division (OR-OSHA) sets and enforces job safety and health regulations for business and industry. Call or or visit OR-OSHA s web site at to determine your compliance requirements. Disability Accommodations. The Americans with Disabilities Act (ADA) is a federal law that prohibits discrimination against disabled persons in employment, public accommodation and public services. Most businesses are considered public accommodations, meaning their facilities and services must be accessible to disabled customers. Businesses with more than 15 employees must also ensure they accommodate the needs of any qualified individual with a disability in all aspects of employment, including needed modifications of work stations. (Businesses with more than six employees are subject to Oregon s disability laws.) For more information about the federal law, call the U.S. Department of Justice, , or visit these web sites: or For information on state disability laws, contact the state Bureau of Labor and Industries (BOLI) , or visit this web page, n Other Employer Requirements. Discrimination in the Workplace. It is illegal for employers to make decisions regarding employees based on gender, race, age (if the employee is over 40 years old), national origin, or religion. As an employer, you are advised to familiarize yourself with the many state and federal discrimination laws. For more information, call BOLI at or visit its Civil Rights Division web site at Affirmative Action. Companies contracting with the federal government may be required to have an affirmative action plan. There are two thresholds to determine an employer s responsibility: If the contract is in excess of $10,000 per year, companies are required to promote equal employment opportunities within their organization. Companies with contracts of more than $50,000 and that employ more than 50 employees must develop and maintain a written affirmative action plan. For more information, call the U.S. Department of Labor at or , or visit its web site at affirmativeact.htm New Business Checklist A-17

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19 Portland Directory of Business Resources Portland Directory of Business Resources 2010 Portland Director y of Business Resources 1

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