So you want to start a business? Great! But a lot has to be decided and filed before you can start the company of your dreams. First up: what kind of formation is right for your business? There are plenty of structures to choose from, including sole proprietorship, general partnership, limited partnership (LP), limited liability partnership (LLP), limited liability company (LLC), cooperative, or corporation (of which there are several different structures). Plainview Legal Group is a PLLC, which is a professional limited liability company. PLLCs are for licensed professionals, like attorneys, doctors, accountants, and more. It’s best to consult an attorney when you begin setting up a business to help you choose a structure that best meets your needs. A business attorney will ensure thorough completion of all the legal necessities of start-up. 

Today, we will talk about LLC formation in Oklahoma. A limited liability company, or LLC, is a type of business structure that combines the limited liability of a corporation, which limits personal liability for company debts, and the informal nature of sole proprietorships and partnerships, which offers owners more freedom in running their business (corporations are more rigidly structured and have greater reporting requirements than LLCs). LLCs are a good choice for smaller businesses, and ones who want to reduce the personal financial liability that could fall on them in a sole proprietorship or partnership structure. LLCs can be any business except for a bank or insurance company, and can elect to file income tax returns on an individual level or file taxes as a corporation at the business entity level.

LLC vs. Corporation Ownership

Although LLCs and corporations share the same liability protections and sometimes the same tax requirements, the type of ownership differs between the two structures. Corporations, which are owned by shareholders, are separate entities from those owners. Shareholders do not manage the corporation; a board of directors is elected by the shareholders to manage. When a shareholder leaves a corporation, the corporation can generally continue without disturbances because (1) they do not manage the business, and (2) shareholders own stock in a company and that type of ownership can be passed around quite easily. Shareholders can sell their stock back to the corporation, sell it to another person, or buy more stock to increase their ownership percentage if more stock is available. 

LLCs are formed and owned by members. LLCs are more closely tied to those members, who are often the managers. If the members manage the business, the loss of a member has much more of an impact on the operation of the business. Members can also appoint managers, more like a corporation, which might help keep operations afloat if a member leaves or dies. However, all members have to agree to changes in ownership percentages or adding new owners, so it’s not as easy to transfer ownership as it is in a corporation. In the case of a membership loss, the LLC’s operating agreement will specify what happens to the LLC. The operating agreement has plenty of options since an LLC offers more flexible management. The agreement could state that the LLC dissolves in the event of a death or separation, it can list circumstances requiring appointment of substitute members, or it can outline what a separation agreement might look like to keep the company running in the separated member’s absence. Founding members have the freedom to decide what the future will look like.

Pick a Name

So what are the requirements of LLC formation? The first thing you need to do is pick a name for the company. In Oklahoma, an LLC name must include the words "Limited Liability Company" or "Limited Company," or the abbreviations "LLC," "LC," "L.L.C.," or "L.C." The word "Limited" may be abbreviated as "Ltd.," and the word "Company" may be abbreviated as "Co." The name has to be distinguishable from businesses already registered with the Secretary of State. The Oklahoma Secretary of State (SOS) maintains important state records, and therefore most of your business filings will go through the SOS office. All fees associated with filing are available to view on the Oklahoma SOS website. The website also has a searchable database to check for name availability. You can then reserve a name up to 60 days before the legal formation of the business entity on the SOS website’s “Entity Filing” page.

You can optionally register a trade name as well, which is any name your company does business under other than its legal name. In the case of an LLC, you may choose to register a trade name so you can drop the LLC designation in business dealings. As such, a trade name can provide you with protection from misidentifying your business. Other reasons for using a trade name are if your preferred name is too close to an already registered business name, or to shorten a lengthy, legal business name.

Appoint a Registered Agent

The next step is appointing a registered agent for your LLC. A registered agent will receive official communications on behalf of the LLC, like tax and registration paperwork, or legal documents should the LLC be sued. The registered agent is required to have a physical Oklahoma address and can be a resident of Oklahoma, the LLC itself, or any entity authorized to do business in Oklahoma.

Create Articles of Organization and an Operating Agreement

After appointing a registered agent, you will need to file your business’ Articles of Organization with the SOS. The Articles of Organization need to include: (1) the name of the LLC, (2) the address of the LLC’s principal place of business, (3) the email of the LLC’s primary contact, (4) the registered agent’s name and address, (5) the LLC’s term of existence (which can be either perpetual or set to expire at a certain date), and (6) the signature of a member, manager, or some other representative of the LLC.

After filing the Articles of Organization, you can optionally prepare an operating agreement. While an operating agreement isn’t required in Oklahoma, it’s a good idea to have one. An operating agreement will outline how your business will be structured, who the members and managers are and what their obligations and contributions to the business will be, how the ownership in the company will be split among members, procedure for dissolution and wind-up activities, and any other general provisions necessary to ensure the business operates smoothly. An operating agreement is strongly advised to protect you and the other members and prevent miscommunication between members with clearly outlined specifications and expectations. If no operating agreement is formed, the articles of organization, company control, limited liability company agreement, and/or another agreement that defines the company will become the operating agreement. This agreement does not need to be filed with the SOS; it is purely for internal use. 

Determine Taxes and Licensing

 Next, you will need to determine your tax and regulatory requirements for whatever type of business you will have. For companies with more than one member, this includes an Employer Identification Number (EIN) even if you have no employees. If it’s a single member company, you will still need an EIN if you plan to have employees or file taxes as a corporation. You can obtain an EIN from the IRS. If you plan on having employees, you may have additional tax requirements like an income tax withholding account, an account for employee unemployment taxes, and a worker’s comp insurance policy. Like most of the information outlined here, you can find links to register for all of these requirements on the Secretary of State website. 

In addition, you may need to obtain other licensing depending on the type of business you’re forming. The most common requirement will be a sales tax permit. If you’re selling tangible property on a regular basis, you’ll need to get a sales tax permit from the Oklahoma Tax Commission (OTC). You must create an account on the Oklahoma Taxpayer Access Point (OkTAP) to register for the sales tax permit. You can view other licensing and permit requirements at the Department of Commerce’s website.

Annual Upkeep

Finally, all Oklahoma LLCs and foreign LLCs authorized to do business in Oklahoma must file an annual certificate with the SOS on the Entity Filing page. It must be filed by the anniversary of your LLC’s creation each year. There are penalties for filing late, and if you fail to file within 60 days of the due date, your LLC will cease to be in good standing as a limited liability company in the state of Oklahoma. There are other annual filings (e.g. filings with the IRS, OTC, etc.), so it’s smart to keep a list of expiration dates and filing cut-off dates.

As you can see, starting an LLC is an intensive process, and while all the forms are available, remembering and managing all the requirements and licenses and timing to file can be difficult. If you’re looking to form an LLC and it seems daunting to go at it alone, Plainview Legal Group is well-equipped to help. Our team has helped build businesses from the ground up—even our own PLLC. It’s a bumpy ride on the way to form a business, but our experienced attorneys will ensure a smooth arrival. Ready to start? Give us a call at (405) 310-0183, or request a free consultation on our website.