Guide to Starting an LLC in Oklahoma
Are you thinking about starting your own small business? If so, you’ll need to decide what organizational structure to use. One option is a Limited Liability Company (LLC). An LLC offers several benefits, including limited liability for its owners and flexibility in how it’s taxed. In this guide, we’ll provide an overview of the process of starting an LLC in Oklahoma. We’ll also highlight some of the key things you need to know before you get started. So if you’re ready to take the plunge into entrepreneurship, read on!
Why do people choose LLCs?
An LLC is a type of business structure that offers its owners personal liability protection. This means that if your LLC is sued, the owner’s personal assets are generally safe as the assets of the LLC are at risk. While LLCs are similar to corporations in this respect, they are much easier to set up and maintain. In addition, LLCs can be taxed as either sole proprietorships or corporations, depending on the circumstances.
As you can see, there are many advantages to forming an LLC.
Steps to Form an Oklahoma LLC
Let’s break down the steps to complete the Oklahoma LLC formation process.
Total Time: 10 minutes
Step 1: Choose an LLC Name
The first step in forming an Oklahoma Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Oklahoma. The Oklahoma Secretary of State makes it easy to search and verify if your LLC name is available. Here is more information on how to do an Oklahoma LLC name search.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
– Limited Company
The word limited may be abbreviated as Ltd., and the word company may be abbreviated as Co.
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
If there is a name you want to use, but are not ready to register the LLC, you can file the Name Reservation Application. The name reservation filing fee is $10 and will hold a name for up to 60 days.
Before settling on a name, you may want to see if a domain name is also available to match your business name and website address.
Step 2: Appoint an Oklahoma Registered Agent
Every LLC in Oklahoma is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The basic requirements to be a Registered Agent in Oklahoma include:
– The agent must be an Oklahoma resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.
Learn more about the requirements for a Registered Agent in Oklahoma
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Step 3: File the Oklahoma LLC Articles of Organization
The paperwork to officially create an LLC in Oklahoma is called the Articles of Organization. To submit the paperwork, either file online through the Oklahoma Secretary of State’s website or download and mail the Oklahoma LLC Articles of Organization (SOS Form 0074).
When filling out the Articles of Organization, a few sections and terms can be confusing. Let’s go over a few of these sections to help get your LLC started right.
Effective Date – If you want the LLC to start immediately, choose “Filing Date.” If you want the LLC to start later, enter a date less than 90 days in the future to start. The main reason for delaying the LLC start date is when the LLC filing is being made close to the end of a calendar year, and the business isn’t going to have any activity until the start of the next year. By delaying the start date, they eliminate the need to file a partial-year business tax return.
Most people choose “Filing Date.”
Principal Office Address – In this section, enter the street address, city, state, and zip code of the initial principal place of business. This address can be the LLC’s physical address, or it can be the address where the business records are stored. You may not use a PO Box for the designated office. This address is where the annual certificate reminder will be sent.
Duration – In this section, you can indicate how long the LLC intends to remain in existence. Most LLCs will choose a Perpetual duration; however, some businesses (usually investment-related) will have a specific closure date.
Estimated Cost: 100 USD
IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!
You have an Oklahoma LLC! Now what???
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare an Oklahoma LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Elect the LLC’s Form of Federal Income Taxation
One of the significant benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.
Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- Occasionally when registering a new LLC, the bank may require an Oklahoma Certificate of Good Standing to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
- Sales Tax Permit – In order to sell products and certain services, registration with the Oklahoma Tax Commission will be necessary.
File the Annual Certificate
LLCs are required to file an annual certificate with the Oklahoma Secretary of State. The annual report updates ownership information and other details.
Common Questions To Starting An LLC In Oklahoma
How much does it cost to start an LLC in Oklahoma?
To cost to start an LLC in Oklahoma is $100 for the Secretary of State’s filing fee.
How long does it take to start an LLC in Oklahoma?
Approval for an Oklahoma LLC is typically under two weeks when filing by mail or 1-2 business days when filing online. Walk-in expedited filing is available, and for an additional $25 filing fee, the LLC is approved in about 1 hour.
How long is an LLC good for in Oklahoma?
Oklahoma LLCs will need to be renewed each year with the Secretary of State by filing an annual report and the $25 filing fee.
Can you be your own registered agent?
Yes – anyone can act as a registered agent, provided they are at least 18 years old, reside in the state of Oklahoma, and are generally available to receive documents during normal business hours.
Does an LLC need a business license in Oklahoma?
It’s sometimes thought that the LLC and business license are the same in Oklahoma, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.
What is a Foreign Limited Liability Company?
A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state (domestic LLC) but wants to physically operate in Oklahoma. Physically operating means having a presence, such as having an office or hiring an employee.
Related: What is the difference between a domestic Oklahoma LLC and a foreign LLC?
What is a Professional Limited Liability Company?
Businesses that require occupational licensing in Oklahoma, such as accountants, architects, veterinarians, etc., can form a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.