Laws in Oklahoma require a business to either register as an LLC or incorporate. Failure to do so will result in the company being classified as a sole proprietorship. This can have implications on taxes, self-employment taxes, and other legal issues.
What is an LLC?
An LLC exists to operate on behalf of a single owner. The person who owns the property is called a member. The LLC is formed by filing forms with a state’s Secretary of State and paying the appropriate fees.
The person who files for the formation of the LLC (the “Organizer”) must be at least 18 years old, but an official does not have to be associated with the LLC in order to form it for legal purposes.
Membership in an LLC can be limited or unlimited. In order to form an LLC member, there must be a minimum of one member.
The owner of the assets of the LLC is called a member. If there are multiple members, each has a vote in how the company is run. However, there must be at least two people actively involved with the company for it to avoid being deemed as a sole proprietorship.
Forming an LLC in Oklahoma is easy
The only requirement to form an LLC is filing the paperwork with the secretary of state and paying a fee.
Many countries have an annual fee that must be paid in order to maintain the LLC status. In the United States, there is an initial fee that must be paid in order to establish the LLC.
After that, there are annual fees that must be paid in order to maintain the charter of the company. Incorporation has different steps and costs associated with it than formation of an LLC.
The ability to avoid these fees is one of the main reasons why many people prefer to form an LLC instead of incorporating.
STEP 1: Name your Oklahoma LLC
The first step in forming an Oklahoma LLC is to choose a name. In order to file the required forms, you must provide a name that doesn’t contain any of the following:
Because of the complexity and some of the complications associated with the state’s business laws, it is often best to hire a professional company to do the initial filing.
- There must be a letter “LLC” or “L.L.C.
- The name cannot be the same as a corporation that has been formed in the state.
- The name must end with an “L.L.C.” or “LLC”.
- The last name of a member can be used, but it cannot sound like a professional service or contain an abbreviation for a professional service.
Any name that doesn’t abide by these restrictions will be rejected and you will have to choose a new one.
Please keep in mind that you cannot choose a name that is already taken.
STEP 2: Choose a Registered Agent in Oklahoma
A registered agent must be appointed in the state of Oklahoma. This is the person who receives the official documents on behalf of the company. It is important to have an agent since they are a point of contact for official communications and legal matters.
You do not need to be a resident of Oklahoma to choose a representative, but they are required to have a physical mailing address within Washington County, OK.
The address will become the principal place of business that all official paperwork should be sent. If you don’t choose one, your LLC will be considered inactive.
Tips to choose a registered agent:
- Choose someone with a physical residence in the state of Oklahoma. An apartment is fine, but they cannot be a P.O. Box or post office box.
- Make sure that your agent has a physical address where they can receive official documents in the event that you cannot be reached.
- Make sure your agent is available in case there are legal documents that need to be signed by them on behalf of the company.
Things to keep in mind:
- Your agent must be at least 18 years old, but they do not have to be a member of the company.
- Your agent does not have to do business as a registered agent. This means they can still work with other companies or clients and be an official agent, as long as they are available when needed.
- Your Oklahoma registered agent can be anyone you choose, including a friend or family member.
STEP 3: File Articles of Organization
This is the first of three required forms that must be filed with the state’s Secretary of State. There are additional forms that you can fill out (see below). All three forms have fields asking for basic information about the company and the members.
The Oklahoma Articles of Organization form has fields for:
- Name of LLC
- Membership interests
- Articles or rules for members (optional)
- Documentation on how to terminate your membership interests in an LLC if it is sold or other situations where someone may want to quit.
- Filing fees
STEP 4: Create an Oklahoma LLC Operating Agreement
This form is used to create a document where the members will agree on the terms of how the LLC will be run. You can use this form to keep company minutes, or to detail how and when decisions will be made.
This form is optional, and it has no requirements or restrictions on what information can be included in it. However, it is best used as a way for the members to state their intentions before an initial meeting or other important decision is made.
STEP 5: Get an Oklahoma LLC EIN
Every company and sole proprietorship needs to have a federal tax identification number. This is used to pay taxes and keep track of the finances.
The EIN is assigned by the IRS, and you can apply for it online using IRS Form SS-4. You will also need to file an annual report with the IRS if you earn more than $50,000 during one calendar year.
The EIN is used on some official documents filed with the state’s Secretary of State, so you should have it handy when filling them out if applicable.
Pros and cons of Oklahoma LLC
- There are no annual fees for an LLC, but the state will collect an annual report fee.
- Once formed, it is very easy to maintain. You can choose to do nothing and cease operations, or file annual reports each year.
- When comparing to corporations like C corporations, corporations, or S corporations (and limited liability partnerships), it is less expensive and has fewer responsibilities. This makes it a popular option for start up businesses who don’t have a lot of capital they can invest in their business.
- An LLC can be owned by one member, or a group of members. In order for it to be classified as an LLC, there must be more than one person involved.
- An LLC is considered a pass through entity for tax purposes. This means that the profits and losses are passed through the business itself and onto the owner’s personal taxes.
- The company is considered to be a separate business entity from the owner, however, they are still liable for any debts incurred by the business or damages or injuries caused. This means that they cannot seize your personal assets if you run out of funds and are unable to pay any debts.
- The first disadvantage is a personal one: many people prefer to not have their business name listed in public records.
- The other major disadvantage is that you will be personally responsible for paying any debts the company has accumulated, regardless of your involvement in the business.
- Since an LLC is considered a pass through entity, it can be harder to raise money in private investment rounds. This is because a lot of venture capitalists don’t like investing in LLC’s as they can’t get a tax benefit from them.
- Some business structures may have stricter requirements about how much ownership the members must have to be considered business owners.
- You may have to pay additional fees when filing taxes if you are a member in an LLC.
- In some cases, you will have to provide more information about your business. However, the amount and type of information will vary depending on what you are doing within the company.
- Your LLC is taxed like a sole proprietorship until it reaches $150,000 in revenue for the year. At that point, it becomes a partnership and is taxed differently.
- The rules for state filing fee and other official documentation can be confusing, even to the experienced business owner.
- There is more risk involved. If you sign a contract or agree to do business with someone, the company will be on the hook for any debt that is created, regardless of whether or not you were involved in or aware of it happening.
The cost of starting an LLC in Oklahoma
You can start an Oklahoma LLC for as little as $145. You will be required to pay any additional fees associated with the LLC formation, such us state and federal tax identification numbers, business licenses and permits. Some of these may cost more or less money depending on your circumstances.
The most important thing to keep in mind when setting up your business is to choose an Oklahoma registered agent service that is available when you need them.
The cost of maintaining your company is minimal as long as you are paying the annual report fees, and giving a minimum of one notice to the state.
- Annual report filing fee (due annually, not a one-time fee)
- Agent fees (if you choose to have one, $100/yr)
- Business licenses and other fees
- Paperwork, such as if you choose to set up an LLC Operating agreement or agreement of members.
- The cost of meeting with your agent to go over any paperwork and documentation needed.
There are also optional costs that are not associated with maintaining the company, but instead will benefit you by helping you to run things more efficiently.
- Filing and maintaining the tax identification number for your LLC.
- Filing of business and trade name change (if you use them often).
- Provision for a Successor LLC in case you wish to continue running it after your death.
Separate Your Personal and Business Assets
Some people don’t consider LLCs to be separate business entities, but in reality, it is possible to operate them as if they are separate. This allows someone to have their personal assets separate from their business assets so that it doesn’t affect it.
For tax purposes, it is considered to be your business, and you will need to file taxes for the company like any business would.
You can also take the same approach when you are combining funds with your spouse or other family members.
As long as the money stays within the LLC, there is no reason to worry about it affecting your personal finances and assets.
1. Opening a business checking account:
To separate your personal from your business bank account, you may need to open a business checking account. This should only be done if you are planning on keeping your business funds separate.
If you plan on paying for all of the company expenses from your personal account, then there is no need to open a new LLC bank account.
There are plenty of checking accounts out there that are geared towards business. You can also open two separate checking accounts for each of your personal and business funds.
For example, you can open a checking account for your business and one for your personal funds. You can use an ATM card to access the accounts and keep your personal funds separate from those of the company.
2. Getting a business credit card:
If you plan on using a credit card for business expenses, there are several things you need to keep in mind.
Tips on getting a credit card:
- Make sure that the card is in the name of your company, not just yourself. This will ensure that if there is any trouble with the credit card, it will be easier to sort out.
- If you have more than one business partner, each of you should have a card so it is easier to divide up.
- Think about the type of credit card you choose. You should go with a business card that will benefit your personal finances and your business. For example, some cards offer discounts on certain products or business services as well as cash back.
- If you don’t want to have to keep track of your spending, there are many cards that offer online and mobile applications that will help you keep track of everything.
3. Hiring a business accountant:
If you are starting up a business, it is probably a good idea to hire someone to do all of your accounting for you. This way, you don’t have to worry about missing important tax forms or having to calculate various fees and expenses.
When hiring an accountant for your business, make sure that they are familiar with LLC’s and another business structure. Chances are that they will be dealing with many different types of businesses, so make sure that your accountant is able to handle everything you need before hiring them.
Create Your Business Website
If you are planning on creating a business website, it is important that it is easy to navigate and look nice. You will want to make sure that your website reflects the type of work that you do as well as who you are.
Depending on what you plan on using your website for, there are several different options available.
Options on using the website
- First of all, if the majority of your business is local, then it would be best to get a local host like godaddy.com. This will help you to rank higher in local searches. You can also decide how much you are willing to spend on hosting.
- You will need a domain name for your website, and the type of domain name you get is also important.
- Depending on the type of business you are in, you may want to stick with a .com or .net as your domain name. While there aren’t any rules against using other types of domains, it is generally recommended that you stick with one of these two if it is relevant to your business.
Send Out a Press Release
As you start to build your business, you will want to send out a press release. You can do this by using an online press release service, or you can get one printed and send it out yourself.
Once you choose how you are going to distribute the press release, you need to decide what information to include. There are a few different things that should be in virtually every press release: who, what, when, where and why. Anything else that is involved with your business should also be included.
Oklahoma LLC Business Permits & Licenses
Oklahoma does not require a license to start an Oklahoma limited liability company (LLC), but they do require you to have a business license if you want to operate a business in the state.
Business Permits & Licenses Requirements
I. When forming an LLC in Oklahoma, you will need to file with the state and get your LLC approved by the Secretary of State.
The state will require that you pay $75 for this. After doing so, your company will be issued “certificate of incorporation” papers allowing you to do business as an LLC.
II. If you plan on operating your business in Oklahoma, you will also need to register for a state tax ID and account number. This is done through the state’s Tax Commission.
III. Once you register for that account number, you will be able to file your Oklahoma taxes online or by mail. The website for the Oklahoma Tax Commission is: http://www.tax.ok.gov/
IV. Once you are approved by the Secretary of State and have registered with the IRS, you will receive your Federal Employer Identification Number (EIN) from the IRS. This is the number used by businesses to report income, pay taxes and file forms.
V. Once you have this information, you will be able to open a bank account for your business. Your bank will require this information before they will set up the account for you.
VI. If you want to run any type of advertising or promotion for your business, you will also need to register with the state as an LLC. This can be done through the Oklahoma Tax Commission office, and it costs $100 per year.
VII. If you plan on selling any type of product or service to the public, you will need to make sure that your business officially registers with the state. This can be done through the Secretary of State office, and it costs $100 per year.
Oklahoma LLC Tax Filing Requirements
Once you have created your Oklahoma LLC, it is important that you file a number of taxes with the state.
You do not need to file for each tax, but you will need to file certain taxes with the state.
- You will need to file your Oklahoma personal income tax returns with the IRS. This is done through the IRS E-file System.
- You will also need to pay Oklahoma sales tax on any products or services that you sell. You will need to file for this through the Oklahoma Tax Commission. It does not cost anything to apply, and it is usually a one-time thing that takes less than an hour to complete.
- If you have employees working for your LLC, you will have to report their income and withhold federal and state taxes from their paychecks. It is recommended that you use an payroll service like payroll-direct.com instead of doing it yourself, as most payroll services offer free setup and management tools.
Oklahoma Sales Tax
Every state has different rules and regulations when it comes to sales tax. In Oklahoma, the state sales tax is 4.5%.
Businesses selling items to another business have to pay a state sales tax. When this happens, the total amount of the sale should be calculated first before adding in any other taxes that may apply.
You have two options if you are already paying federal and state income taxes:
- You can file an Oklahoma return with your federal and state income tax returns. This will allow you to file your taxes once a year and have them all ready in one package.
- You can also choose to file a monthly sales tax return. This is only necessary if you have already filed your federal and state income taxes.
This is an online system that allows you to update your sales tax information in Oklahoma on a regular basis. This helps you avoid penalties that can be applied if you are not up to date on your sales tax payments.
The most important thing you should know about sales tax is that it is not voluntary. No matter how much money you make, or what type of business you are in, you still have to pay sales tax on the items or services sold.
If a business does not charge sales tax, then the state requires them to collect a 9% use tax on any items or services purchased. This is basically like paying cash for your purchase instead of using a credit card.
Oklahoma Employer Taxes
Several different types of taxes have to be paid if you are an employer in Oklahoma.
If your business is subject to state income tax, you will have to pay a variety of taxes:
- Social Security Tax – this is 6.2% on all gross wages that are paid out.
- Medicare Tax – this is 1.45% on all gross wages that are paid out.
This tax pays for the unemployment benefits program in Oklahoma. You only pay this tax if you have employees that earn more than $7,000 in a year. If your business makes less than $500,000 each year in gross receipts, you can file a quarterly return.
The Department of Labor requires every business to pay unemployment taxes on time. The state also charges penalties for late payments and assessments for delinquent accounts.
Employers are also required to file quarterly reports and quarterly wage reports. The state makes these available online at: http://www.labor.ok.gov/doc_link/business_wage_reports.
Payroll taxes are another class of fees that businesses have to pay in Oklahoma. They are different from income taxes because they are based on how much you pay your employees.
You will only be required to pay payroll taxes if you have at least one employee that is over 18. The amount of tax you owe will depend on the wages paid to the employee. The state also requires a variety of forms to be filed for any employees over 16 years old, including a simple W-4 form that all employees fill out.
Don’t be caught off-guard by all of your tax responsibilities. By starting your business with the knowledge of what comes along with taxes, you can focus on other more important parts of your business.
While it is a good idea to talk to a professional CPA or accountant, learning about tax requirements may also save you time and money.
Besides income taxes, there are a number of other taxes that may apply to your business.
File Your Oklahoma Annual Certificate
The state of Oklahoma requires that all LLCs file an annual certificate. The certificate has to be filed by the first day of March, and it must be filed with the Oklahoma Secretary of State’s office.
There is no state fee to register your company, but there are a few things you need to submit in order to get your company registered.
The documents that you will need to submit include:
- Three (3) originals
- Minimum of three (3) ovals with your LLC name and street address in Oklahoma,
- One original signature of the person who is registered to do business for your LLC,
- Proof of permission from the Oklahoma Secretary of State’s office, and
- A list of all LLC members, partners or members that are required to make payments through your LLC.
- If you have members in your company, each one of them will need to make a payment. If you have employees, they will also have to make a payment.
If you need more information on how to file your Oklahoma LLC annual certificate, you can visit: https://www.okregistry.com/forms/hnr_v8i5ci5mkc8cmjfwq/
The annual certificate is one of the most important documents that will be filed by your LLC each year. If you do not submit it every year, then the state will not recognize your company as being valid.
Filing Your Oklahoma LLC DBA
The state of Oklahoma also requires that all LLCs have the word “Inc.” in their name. This helps to identify the company as an LLC, and it is required by other states and the Internal Revenue Service.
If you have a DBA, though, you do not need to use this abbreviation when filing your Oklahoma LLC annual certificate. However, it is still a good idea to file your tax information with the state every year.
The DBA is filed by the company when you file your LLC annual certificate with the Secretary of State’s office in Oklahoma. You can also choose to file it online at https://www.okregistry.com/forms/hnr_v8i5ci5mkc8cmjfwq/
Oklahoma city has a lot of different laws regulating the creation and operation of LLCs and corporations in the state. If you are planning on doing business in Oklahoma, you need to know what these laws are.
If you would like more information on how to operate your business in Oklahoma, or if you want to learn more about how taxes affect your company, you can find a list of useful resources online at: http://smallbusiness.chron.com/guide-to-oklahoma-business-laws-40461.html