How to Form an LLC in Oklahoma: The Affordable Way

Before starting your business journey in Oklahoma, you must first decide on the business structure you are trying to form. Incorporating as a Limited Liability Company, or LLC, is an excellent option for a new business. It gets the benefits of a corporation, like limited liability and a partnership’s flexibility in taxation and operational flexibility.

Forming an LLC is unique in each State, including Oklahoma. Missing a step, or filing the wrong documents, could mean repeating the process. You do not want to waste precious time and money. A detailed understanding of the process of forming an LLC in Oklahoma will ensure you do not.

Let us look at the steps needed to establish an LLC in Oklahoma.

Name Your Oklahoma LLC

The first step in forming an Oklahoma LLC is deciding on a name. You should select a name that is easy to search and remember for potential clients. A good name will help your LLC to have brand value in the market.

While naming your LLC, you must follow all the naming guidelines the State of Oklahoma has laid down.

Naming Guidelines

Under Oklahoma law, the expressions “Limited Liability Company” or “Limited Company,” or one of its abbreviations (LLC, L.L.C., L.C., LC) are required to be included in the name of your LLC.

The name of your business cannot contain terms that indicate a relationship with a government entity. Therefore, you cannot use terms like “Police,” “Treasury,” “State Department,” etc.

Similarly, usage of certain words, like “Bank” or “University,” is restricted and involves obtaining the written consent of concerned authorities and additional paperwork and compliance requirements.

In Oklahoma, your LLC must have a name that is neither identical nor similar to the name of any existing entity that has been permitted to conduct business in the State.

Does Your Business Require a DBA?

A DBA (doing business as) enables you to operate your LLC under a different name. In Oklahoma, DBA is referred to as a “trade name.” A business opts to use it when it does not want to use the official name of the LLC, as given in the incorporation documents, for undertaking business.

Over time, you may wish to diversify your business. For example, you may enter new market areas or decide to sell new products. Your name currently for your LLC may not suit this new product or business area. This is where you can opt for a trade name.

But remember that the trade name alone does not protect your personal assets. To avail of the protection of limited liability, you need to form an LLC.

Doing a Name Search and Name Reservation

The name of your LLC has to be different from any other organization registered in the State. You must conduct a name search using the Oklahoma Secretary of State Business Search portal to ensure your LLC’s name is unique.

You can reserve a name for 60 days if you want to hold on to a name for your LLC but still need time to form it later. You have to file an application with the Oklahoma Secretary of State to get your name reserved.

Registering your Business Domain Name

You should check to see the availability of the domain name that you want for your LLC. The address of your website is how customers find you online.

So before you select a name for your LLC, it is recommended that you ensure that the domain name you need is also available. Search for and register a domain name that suits your LLC the best.

Choose a Registered Agent in Oklahoma

A Registered Agent is an individual or another business entity responsible for receiving all official communication on behalf of the LLC. The registered agent shall also receive any process service concerning a lawsuit against your company.

Oklahoma law requires you to have a registered agent before your company can start functioning.

Who Can be a Registered Agent?

A registered agent should be named in the formation document of a business entity incorporated under Oklahoma law.

You are at liberty to choose any individual or another entity to be the registered agent of your LLC. However, the person/entity you choose must satisfy the requirements laid down by the State with regard to a registered agent. The agent you select for your LLC must be:

• An individual State resident (above 18 years) or
• A business entity that has obtained authorization to conduct business in the State. 

The registered agent should be available during business hours on all working days.

Individual v. Registered Agent Service

If you satisfy the legal criteria, you can operate as a registered agent for your LLC in Oklahoma. Alternatively, you can name any manager or employee of your company, as well as any acquaintance trusted by you, as your LLC’s registered agent. However, this may not be advisable for all businesses.

You should hire a professional registered agent service as it has many advantages.
A professional registered agent service reminds you when your returns and other filings are due and help ensure you don’t miss any deadlines. Most even file your annual report and other filings with the State authorities. A registered agent service will secure the company’s paperwork by archiving copies. In the case of theft, natural catastrophe, or other unanticipated losses, a backup of all your important business and legal papers will be available.

You will be able to entirely focus on operating your business instead of worrying about missing out on communication sent by the authorities to your LLC. It’s beneficial to have them around because they assist in maintaining a healthy work-life balance and offer honest advice based on their experience.

A registered agent service allows you to focus on your business rather than fretting over deadlines or being reachable during business hours. Moreover, if you are your agent, you risk receiving sensitive documents like notice of a lawsuit in front of your employees or clients. Having a professional registered agent service helps you handle the situation discreetly.

Most registered agent services are set up in multiple States. So as and when you decide to expand your business beyond Oklahoma, you may seek the help of these professional services.

File Article of Organization with Oklahoma

The Articles of Organization is a legal document that an LLC needs to file for its formation. It is to be filed with the office of the Secretary of State. Once this is completed, your LLC is registered and recognized in the law’s eyes. 

You need to provide correct details concerning the following in the Articles of Organization: 

• Entity Name
• Entity Address
• Entity Email Address
• Registered Agent Name and Registered Office Address
• Term of Existence

Expedited Filing

As of now, the State does not have any provisions pertaining to expedient processing of your Certificate of Organization.

Publish Notice of Formation

Oklahoma does not require your LLC to publish its formation in local newspapers.

Create an Operating Agreement for Your Oklahoma LLC

An operating agreement is a legal document that outlines a Limited Liability Company’s ownership and operating processes. It lays down the rules of your LLC’s internal operation and functioning. It also provides a framework concerning the duties of members of the LLC and its managers.

An operating agreement acts as a guiding force in matters of the day-to-day functioning of the LLC. Although an operating agreement is not legally required in Oklahoma, it is recommended to have one in place as it is an integral part of any business.

Members of an LLC may enter into an operating agreement to regulate their company’s internal affairs. An operating agreement ensures that all business owners are on the same page and reduces the risk of future conflict. Without an operating agreement in existence, the affairs of your company would be regulated by Oklahoma’s legislation.

There are no prescribed templates for an operating agreement, and you may draft one according to the needs of your business. However, irrespective of the nature of your business, it shall be advisable for your operating agreement to cover the following matters:

• Organization Details 
• Ownership 
• Duties of Members and Managers
• Management and Voting 
• Capital Contributions
• Division of Profit and Losses
• Bookkeeping Procedures
• Procedure for adding new members
• Requirements concerning Meetings and Procedures thereof
• Dissolution

Oklahoma’s laws provide that, in the absence of an Operating Agreement, any contentions concerning ownership, liabilities, management, finance etc. would be handled according to Oklahoma LLC Act.

Writing the Operating Agreement Yourself v. Hiring a Professional

For most corporate entities, the merits of engaging a commercial service to draft an operating agreement outweigh the demerits. A professional is experienced and brings expertise in ensuring your operating agreement is air-tight and serves its purpose instead of causing even more confusion. Most commercial registered agents also draft operating agreements.

Limitations of an Operating Agreement

There is no fixed format for this agreement. You have all the freedom to include the terms of the agreement you feel are necessary for your LLC.

However, an operating agreement cannot exempt its owners, members, or employees from Oklahoma’s laws. You cannot include something prohibited by the laws of Oklahoma.

Obtaining an EIN for your Oklahoma LLC

EIN stands for Employer Identification Number. Businesses are given an EIN by the Internal Revenue Service (IRS) to identify an operating business entity for taxation purposes. It acts as a social security number for businesses. Hiring employees for any small business or starting a business bank account is also required.

An EIN is also known as a Federal Employer Identification Number (FEIN) or a Federal Tax Identification Number (FTIN). The IRS issues an EIN, and you can apply for it online or through the mail.

File Annual Reports in Oklahoma

An annual report is a document used by the authorities to get the latest and updated information about all the business entities operating in the State. In Oklahoma, an annual report is called an “Annual Certificate.”

You need to file the annual certificate of your LLC every year. It is due at the end of the month your LLC was formed. For example, if your LLC was formed on October 11th, 2020, your annual certificate is due by the end of October every year, starting from 2021.

You may file your annual certificate online using the Secretary of State’s website. Or you can also download the form and have a dully filled copy mailed to the Oklahoma Secretary of State, 421 N.W. 13th Suite 210, Oklahoma City, OK 73103. The filing fee is $25.

If you miss the deadline and fail to file the certificate 60 days after the due date, the State will revoke your “good standing” status. Also, if you do not file the document for three years, you risk getting shut down by the State.

Tax Liability for your Oklahoma LLC

The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:

• Sole proprietorship: a business owned by a single person
• Partnership: a business owned by multiple people
• C – Corporation: income is split or segregated for taxation
• S – Corporation: tax liability is split between the business and its owners

Federal Tax Liability

LLCs are not considered independent tax entities for federal tax purposes. As a result, rather than paying corporate taxes, LLCs shift their tax burden onto their members. The income and losses of an LLC must be reported on the owners’ personal tax returns. You must pay self-employment tax and federal income tax as the owner of an LLC, which is taxed as “pass-through” income.

Because federal taxes are complicated, check with your accountant or a professional tax preparer to ensure your Oklahoma LLC pays the correct amount. Furthermore, any guaranteed earned income payments that management members get for their business participation may be subject to self-employment tax.

All members or managers who take profits out of the LLC must pay the self-employment tax. The Federal Insurance Contributions Act (FICA), which covers Social Security, Medicare, and other benefits, is in charge of collecting this levy. It applies to all of the money you take out of your firm. The self-employment tax rate is now 15.3%.

The Internal Revenue Service allows LLCs to be regarded as S Corporations or C Corporations for tax purposes if they meet specific criteria. This allows you to claim some of your income as salary and other income as distributions or withdrawals, which can help you lower the self-employment tax your LLC owes. If you would like your LLC to be taxed like a C-Corp or S-Corp, you can do so by filing Form 8832 and Form 2553, respectively.

You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions like business expenses. You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc. However, federal corporate taxes must be paid if you treat your LLC as a corporation for tax purposes.

If you’re a single-member LLC, your default taxation type will be that of a sole proprietor. The LLC has to report its activities under Schedule C, Schedule E and/or Schedule F of Form 1040. 

If your LLC has more than one member, it will be taxed as a ‘partnership’ by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in the K-1 of each partner. 

State Tax Liability

Oklahoma’s LLC tax rate is variable, depending on taxable net income in the State.

Any money you pay to yourself as a business owner will be subject to Oklahoma income tax. These earnings are reflected on your individual tax return. You’ll be taxed at Oklahoma’s ordinary rates, and you’ll be able to take advantage of usual allowances and deductions.

You’ll also have to pay certain other State level taxes if you have employees. You should register your business with the Oklahoma Taxpayer Access Point (Form WTH 10006) on paper or online at Oklahoma Taxpayer Access Point (TAP). After you’ve enrolled, you’ll need to file withholding taxes using Form WTH-10001 regularly (for example, monthly or quarterly). Regularly, you’ll need to complete reconciliation paperwork for your LLC’s tax withholding.

Oklahoma, like nearly every other State, levies a corporate income tax. The corporate tax in Oklahoma is a flat 6% of taxable revenue in the State. This tax must be paid if your LLC is taxed as a corporation. The Oklahoma Tax Commission receives the State’s corporate income tax return (Form 512).

Additionally, if you sell certain tangible goods or specific services, you will be required to collect sales tax at the point of sale and remit it to the Oklahoma Tax Commission. The sales tax rate in Oklahoma varies by region, county, and city where the purchase is made.

Miscellaneous Tax Liability

Depending on their industry, the LLCs can pay additional taxes and fees. For instance, if the LLC sells gasoline, it must pay a tax on any fuel it sells. Similarly, you may be required to pay some duties if you import or export items.

Permits & Licenses

An LLC operating in Oklahoma must comply with State and Federal regulations. Accordingly, your business will be subject to three licensing jurisdictions: Federal, State and Local.

A business license can be obtained by submitting an application to the appropriate licensing and regulatory agency for your industry. The type of license you’ll need depends on your business’s activity and location. When an LLC engages in activities regulated by the federal government, obtaining the necessary business license and the permit is the precondition that needs to be fulfilled. These activities are:

• Agriculture
•  Alcoholic beverages
• Aviation
• Firearms, ammunition, and explosives
• Fish and wildlife
• Commercial fisheries
• Maritime transportation
• Mining and drilling
• Nuclear energy
• Radio and television broadcasting
• Transportation and logistics

At the State level, a sales tax permit is required for any business that sells or leases taxable goods or services which are subject to sales tax. An application for an Oklahoma sales tax permit can be made either online or by mail through the Oklahoma Taxpayer Access Point.

The registration cost of an Oklahoma sales tax permit is $20. An additional $10 is required to be paid for each additional location of the business. Oklahoma Sales Tax Permit has to be renewed every three years after the date of issue.

Depending on where you operate your business, you may also be required to get the local government’s license and permit. In Oklahoma City, a certain specified list of professions is required to have a specific city license. To know more about local licensing requirements, get in touch with the office of your county government.

For more information regarding;

• Federal Permits and License
• Oklahoma’s Development Services page
• Oklahoma Department of Commerce

Business Bank Account & Phone Number

An LLC is a separate legal entity, and it is required to have its own business account as owners must be protected from using personal assets to discharge business debts. A separate business account ensures personal assets are segregated from the LLC’s assets.

A separate business account can be opened by going to the bank or remotely. You can open a business account remotely if you already have a personal account in the United States. Moreover, services like PayPal can also be used depending upon the industry.

A separate business phone number is essential as business communication needs to be separated from personal communication. You can opt for a DID number (direct inward dialing number), also known as DDI or direct dial-in number. Incoming phone calls from the United States are forwarded to your existing business line through these virtual US phone lines.

Due to a city-specific dial code, your firm will have a localized presence in the United States if you use the USA DID numbers. If the LLC is based in Oklahoma, a local area code assures your customers that they are dealing with a trusted local company.

If the LLC does business in various States, having an Oklahoma phone number gives a sense of being closer to the customers. Before getting a US phone number for your company, it is imperative to know what services are included.

Final Thoughts

Oklahoma is often chosen for setting up a business due to the convenience with which you may organize and administer your company. Oklahoma provides an excellent regulatory set-up and has minimal filing fee requirements and procedural formalities for starting a business.

With schemes such as the Paycheck Protection Program, businesses could keep their workforce employed even during the Covid-19 pandemic. Oklahoma provides business assistance, financial or otherwise, to small entrepreneurs and start-ups. The information regarding this can be found on the Oklahoma Small Business Development Centers website.

On completing the above steps, your LLC is legally incorporated and ready to do business. We wish you and your new business the very best!