How to Start an LLC in Oklahoma? (The Definitive Guide)
The process of starting an LLC in Oklahoma is a straightforward one. There are a few steps that you need to take and legal documents to file before the state can approve your business.
After helping clients form LLCs for over a decade, I’ll provide my insights and all pertinent information about starting an LLC in Oklahoma.
I also collaborated with our team of business consultants and legal experts in Oklahoma to help you clarify the rules set forth by the Oklahoma Secretary of State.
You might also consider one of these Oklahoma professional LLC services to set up an LLC in your stead.
Quick Summary:
- To start an LLC in Oklahoma, it would be necessary to register an available business name, hire a registered agent, file articles of organization, draft an operating agreement and obtain an EIN.
- An Oklahoma limited liability company can be taxed as a single-member, multi-member, S-Corp or C-Corp.
- According to U.S. Small Business Administration data, Oklahoma's economic landscape is conducive to small businesses, with 371,640 small enterprises comprising 99.4% of all state businesses, illustrating a robust entrepreneurial environment.
- In my view, this streamlined approach to forming an LLC encourages business formation and contributes to economic growth in Oklahoma.
How to Form an LLC in Oklahoma
To start an Oklahoma LLC, members should comply with state laws, submit all legal documents and draft an operating agreement.
There are a few things that owners need to keep in mind before they can register with the state, including how many members there will be and if your business name has already been taken.
1. Choose the Type of Your Oklahoma LLC (Mandatory)
As a business consultant, I've guided many clients through the decision of selecting the right LLC structure in Oklahoma.
For solo entrepreneurs, I often recommend a Single-Member LLC. Its simplicity in management and tax filing is a significant advantage.
However, I caution them about potential challenges in raising capital and the perception of less credibility with some banks.
For partnerships or businesses with several owners, a Multi-Member LLC is usually more suitable. It offers shared liability and a broader range of management skills.
However, it's important to be prepared for more complex operational agreements and the possibility of internal conflicts.
Drawing from my experience, the choice between these two structures hinges on the specific needs and dynamics of the business.
2. Choose a Name for Your Oklahoma LLC (Mandatory)
If you're ready to move forward with registering your Oklahoma LLC, the next step is choosing a name and then filing a trading name with the Oklahoma Secretary of State.
Think of a name and determine its availability on the Business Registry website [1].
If the name you want to take is available, register it with the Oklahoma Secretary of State and proceed to the next step.
3. Select a Registered Agent (Mandatory)
After coming up with a business name, you should employ an Oklahoma-registered agent.
A registered agent is an individual or business entity representing the company in legal matters, and they are necessary to maintain your business within state lines legally. They can file an annual report in your stead, for example.
You cannot register an Oklahoma LLC without a registered agent because it is required by law.
If you want to find your own registered agent, do an internet search for a registered agent service in Oklahoma.
You will have several options from companies that offer the registered agent service at different prices.
4. File Oklahoma Articles of Organization (Mandatory)
After you've chosen a registered agent, the next step is to file articles of organization with your county clerk. You can also file online with the Secretary of State.
Oklahoma LLC Articles of Organization need to contain the following information:
- Name of your LLC
- Its business address is in the state of Oklahoma
- A list of members
- The nature and purpose of your business
- Date of completion, if applicable
- Registered agent (Name and address)
- Management structure
You can submit articles in person or file online and pay the filing fee with the Secretary of State.
For more information, check out our article on the expenses incurred in forming an LLC in Oklahoma.
Steps to Take After Forming an LLC in Oklahoma
5. Create an Oklahoma LLC Operating Agreement (Optional, but Recommended)
An Oklahoma LLC operating agreement is an important document that sets up the operating rules for your LLC.
Technically, operating agreements are not legally required in Oklahoma.
However, they can be extremely helpful when it comes to keeping track of important information about your company and its members.
With an operating agreement, you won't be able to set clear rules and expectations.
An Oklahoma LLC operating agreement should contain some basic information, such as the following:
- Member names
- Management structure (members or managers)
- Roles and responsibilities of all people involved
- Operating procedures
- Operating capital
- Ownership percentages
- Adding, removing, retiring and death of members
6. Apply for an Employer Identification Number (EIN) (Optional, but Recommended)
An employer identification number serves as the business identification number for federal taxes. It is also known as an EIN or federal tax ID.
EIN can be obtained from the internal revenue service (IRS). It's necessary to have an EIN if a business has employees or operations in more than one state.
A federal employer identification number allows the company to have access to federal funds and tax benefits, such as withholding allowances for its employees.
It also makes it possible to open bank accounts with ease so the company can keep track of its earnings.
Once you have an EIN, you will be informed about available tax classification options.
Most LLCs opt for the default tax status, but C-corporation status is also an option.
7. Open an LLC Bank Account (Optional, but Recommended)
Once you get an EIN, you can get a bank account. It's a requirement even when you're a foreign LLC or an LLC offering professional services.
You can easily open business bank accounts by contacting your local financial institutions and setting up an appointment with a business banker to discuss the account options available for LLCs.
You'll need to provide all of the relevant business information, such as business name, EIN number, trade name, if applicable, location of business office or headquarters, etc.
The main advantage of having a separate bank account for your LLC business is that business bank accounts offer a lot of liability protection.
Having an LLC bank account can protect your personal assets from being attached in case your business fails to pay the debts it owes to others or if someone successfully sues you for damages caused by negligence on the part of your LLC business.
You can also take advantage of business credit card benefits while enjoying complete personal liability protection.
8. File Your Oklahoma LLC Annual Report (Mandatory)
As a business consultant specializing in LLC formation, I want to emphasize the importance of filing an Oklahoma LLC Annual Report, also known as the Annual Certificate. This is a mandatory requirement for all LLCs operating in Oklahoma.
Every Oklahoma LLC must file an Annual Certificate with the Oklahoma Secretary of State annually to maintain compliance and good standing. The common due date for this filing is the anniversary date of the LLC's formation.
There are two options for filing the Annual Certificate: online or by mail.
The online filing process involves visiting the Oklahoma Secretary of State's official website, accessing the 'Online Services' or 'Business Services' section, providing necessary LLC information, paying the filing fee, and submitting the report electronically.
For mail filing, download and complete the form from the website, prepare a check for the filing fee, and mail it to the specified address.
The filing fee for the Annual Certificate is \$25, whether you file online or by mail.
For mail filings, it takes about 7–10 business days to process. Online filings are faster, with a processing time of 1-2 business days.
Failure to file the Annual Certificate within 60 days of the due date can result in the LLC being marked as 'not in good standing.' If the filing is not completed by the 3rd anniversary of its due date, the LLC status may change to 'Cancelled'.
This can have significant implications, such as the inability to maintain legal actions or file documents in court.
The Secretary of State sends reminders via email 60 days before the Annual Certificate is due. It's advisable to file at least a month before the due date to avoid any last-minute issues.
I recommend that LLC owners in Oklahoma stay vigilant about these requirements to ensure their business remains compliant and avoids any potential legal or financial pitfalls.
9. Obtain Business Licenses and Permits
You need a business license for your Oklahoma LLC, depending on the nature of the business and its location.
Certain types of businesses require business licenses before they can operate in Oklahoma.
Business licenses and permits are two terms used interchangeably to show that a certain business entity has permission to conduct business in the state of Oklahoma.
While Oklahoma doesn't have a general business license, it does require different types of permits and business licenses for companies depending on their business structure and the services provided.
Some of the most common types of businesses that need a business license include:
- Contractor/construction companies
- Professional offices (i.e., lawyers, accountants)
- Restaurants or bars
Retailers, resellers, and other businesses that sell tangible goods need a sales tax permit. Keep this in mind during business formation.
10. Choosing Your Tax Structure
In Oklahoma, LLCs can choose from several tax structures:
Disregarded Entity/Partnership Taxation: These default options in Oklahoma allow pass-through taxation, where profits and losses are reported on owners' personal tax returns. This avoids double taxation but requires owners to pay self-employment taxes on all business income.
S-Corp Election: Beneficial for Oklahoma LLCs with sufficient income to justify a reasonable salary to owners, reducing self-employment taxes on distributions. It does require adherence to payroll tax obligations and stricter operational guidelines.
C-Corp Election: Suitable for Oklahoma businesses planning significant reinvestment of profits or seeking external investors. It involves double taxation (corporate level and on dividends) but offers flexibility in profit distribution and reinvestment.
Based on my experience as a consultant in Oklahoma, I often recommend the S-Corp structure for LLCs with growing income due to potential tax savings on self-employment taxes.
Remember, the election for S-Corp in Oklahoma must be filed with the IRS by March 15th of the tax year in which it is to apply.
Related Articles:
- How to Close an LLC in Oklahoma
- Looking Up an LLC in Oklahoma
- Oklahoma LLC Filing Services
- How Long Does It Take To Form an LLC in Oklahoma
Benefits and Drawbacks of an LLC in Oklahoma
Benefits:
- Limited Liability Protection: In Oklahoma, LLCs provide their owners with personal liability protection. This means personal assets are typically safe from business debts and lawsuits.
- Flexibility in Taxation: LLCs in Oklahoma have the option to choose how they are taxed—as a disregarded entity, partnership, or corporation (S-Corp or C-Corp), providing flexibility to optimize tax liabilities.
- Ease of Formation and Maintenance: Oklahoma LLCs are relatively easy to set up and maintain, with fewer formalities and compliance requirements compared to corporations.
- Management Flexibility: LLCs in Oklahoma can be managed by members (owners) or managers, offering flexibility in how the business is run.
- No Ownership Restrictions: Unlike S-Corporations, there are no restrictions on the number or type of owners in an Oklahoma LLC.
- Vibrant Small Business Ecosystem: According to U.S. Small Business Administration data, Oklahoma is home to 371,640 small businesses, making up 99.4% of all business entities in the state [2].
"The competitive environment in Oklahoma stems from several elements, such as business-oriented regulations and taxation, affordable skilled labor, and a favorable legal framework. Oklahoma's policies and approaches are designed to foster business growth, expansion, and comprehensive development."
- Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
Drawbacks:
- Self-Employment Taxes: Profits from an Oklahoma LLC may be subject to self-employment taxes unless the LLC elects to be taxed as an S-Corp.
- Limited Life: In some cases, LLCs may have a limited lifespan, dissolving when a member leaves, unless the operating agreement specifies otherwise.
- Raising Capital: It can be more challenging for Oklahoma LLCs to raise capital compared to corporations, as they can't issue stock.
- Franchise Tax: Depending on the LLC’s earnings, it may be subject to Oklahoma’s franchise tax.
DIY vs. Professional LLC Formation
DIY LLC Formation
Pros:
- Cost-Effective: Generally cheaper as it avoids professional fees. For DIY enthusiasts, it's reassuring to know that Oklahoma's cost of living—only 83.7% of the national norm as per Sperling's Best Places—thanks mainly to affordable housing—ensures lower overhead for SMBs and fair wages for employees [3].
- Control and Learning: Offers a hands-on approach, providing a deeper understanding of your business's legal structure.
- Speed: Can be quicker if you're familiar with the process.
Cons:
- Time-Consuming: Requires significant time investment to learn and complete all steps correctly.
- Risk of Errors: Without professional guidance, there's a higher risk of mistakes in filing and compliance, which can be costly to rectify.
- Limited Legal Knowledge: May overlook important legal considerations or state-specific requirements.
Professional LLC Formation
Pros:
- Expertise and Accuracy: Professionals are knowledgeable about state laws and can ensure accuracy and compliance.
- Time-Saving: Offloads the work to experts, freeing up your time to focus on other business aspects.
- Peace of Mind: Reduces stress knowing that the formation process is handled correctly.
- Ongoing Support: Many services offer continued legal support and assistance with annual compliance requirements.
Cons:
- Cost: More expensive due to service fees.
- Less Hands-On: You might not learn as much about the LLC process if it’s handled by someone else.
- Dependence on Service Providers: Relying on professionals might lead to dependency for future legal and administrative tasks.
Both DIY and professional LLC formations have their merits, and the best choice depends on individual preferences, expertise, and resources.
If cost-saving and gaining a deep understanding of the process are priorities, DIY might be suitable. However, for those who value time, accuracy, and legal expertise, professional services offer significant benefits.
Assessing your own business needs, knowledge level, and the complexity of your LLC structure will guide you in making an informed decision.
FAQs
How do I Handle Foreign Qualification if My Oklahoma LLC does Business in Other States?
To foreign qualify your Oklahoma LLC in another state, first check if your activities there require it. Then, get a Certificate of Good Standing from Oklahoma and submit the necessary forms and fees to the new state. Also, appoint a registered agent in that state and comply with its ongoing tax and legal requirements
Can I Start an Oklahoma LLC on My Own?
You can start an Oklahoma LLC on your own, provided that you stay compliant with state laws. However, it is advisable to seek legal consultation.
Are There Any Specific Industries or Business Types That Cannot Form an LLC in Oklahoma?
In Oklahoma, most business types and industries can form an LLC. However, certain regulated professions, like lawyers or doctors, may have specific rules governing their business structure. It's best to consult relevant state licensing boards or a legal professional for industry-specific regulations.
References:
- https://www.secstates.com/OK_Oklahoma_Secretary_of_State_Corporation_Search
- https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-OK.pdf
- https://www.bestplaces.net/cost_of_living/state/oklahoma
