It is possible, and commonly done, to have a categorical predictor variable with 3 or more levels in regression. You simply use dummy variables. You have k-1 dummies where k is the number of levels of the original variable. So if you have 3 levels there will be two dummies. This works fine with any other predictor.

There is nothing theoretically wrong with having dummy variables with a higher percentage of responses in some level. If you get beyond 90 percent in one level (this might be a higher its been a while) then there is a danger that the slope of the dummy may be attenuated (too small) but you should be ok with 12 percent. Note that this is not actually violating an assumption of regression, its a problem that has been detected in practice tied to reduced variation.