How to Start a Business in Oklahoma

Say you’ve been offering business consulting services as an individual from your home work space. You’d be considered a sole proprietor by the state of Oklahoma and would not have to file any paperwork with the Secretary of State. The same goes for if you and another person start an online tutoring business, except this would be called a general partnership. While a sole proprietorship and general partnership are easy to form, they don’t protect your assets.

And asset protection is what we all want. Right?

As an Oklahoma sole proprietor or general partner, you leave yourself open to being sued and your assets put in jeopardy. And when we say you get sued, we don’t mean potential litigators just go after your business. Without liability protection, your home, car, and personal possessions are up for grabs. A sole proprietorship or general partnership do not offer liability protection. For that type of protection, you’ll need to form an LLC or corporation.

Oklahoma Limited Liability Company (LLC)

Limited liability companies (LLCs) are flexible business structures that provide a legal separation between you, the person, and you, the business owner. However, you can hire a manager or managers to run the LLC or do it yourself. LLCs also have more tax classification options than other entities. For their adaptability and strong liability protection, LLCs are a popular choice among small business owners. To start an Oklahoma LLC, you’ll need to file paperwork with the Oklahoma Secretary of State.

Oklahoma corporation

Corporations are complex business structures with less flexibility than an LLC. For example, shareholders must appoint a board of directors and hold annual meetings. One of the biggest benefits to forming an Oklahoma corporation is that the Oklahoma Income Tax is fairly low at just 4%. To form an Oklahoma corporation, you’ll need to file paperwork with the Oklahoma Secretary of State.

As business formation experts, we understand the process of naming a business isn’t always straightforward. So here’s the skinny:

When you do business as a sole proprietor or general partnership, you’ll be doing it under your name—unless you get a DBA.

For an LLC or corporation, you’ll need a business name that will meet Oklahoma’s requirements. It must:

• Use an appropriate identifier or abbreviation like “Incorporation,” “Inc.” for corporations or “limited liability company,” “limited company,” “LLC,” “LC,” “L.L.C.,” or “L.C.” for LLCs
• Be unique in the state of Oklahoma

Find out if your desired name is available in Oklahoma by searching the Oklahoma Business Entity Database.

If you’re a sole proprietor or part of a general partnership, you don’t need to file formation paperwork because you’re not creating a separate business entity.

But to start an Oklahoma LLC or corporation, you’ll need to file paperwork with the Oklahoma Secretary of State. This is the step that officially brings your business from an idea on paper into an actual business you own and operate.

• To form an Oklahoma LLC, file Oklahoma Articles of Organization ($100)
• To start an Oklahoma corporation, file Oklahoma Certificate of Incorporation (minimum $50)

To fill out these forms, you’ll need to list an Oklahoma registered agent (like us!) to handle your state and legal mail. Once you’ve completed the form, you’ll need to file it online or by mail.

Note: The information you list on this form will become part of the public record. This means that the names and addresses you provide will be posted on the Oklahoma Secretary of State website.

Now that you’ve formed your business, it’s time to draft your internal records and documents. These are the documents that allow you to outline how your business will operate and function. Your Oklahoma internal records give you control over your business in a way that’s legally binding.

Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS. Because you’ll most likely have to share these documents with third parties, you may want to have an attorney review them to make sure you are within Oklahoma state law.

Here are the major internal documents you need to organize for LLCs and corporations:

Oklahoma LLC Operating Agreement

This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint members. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.

While you can simply search the internet for an operating agreement template that’s just been thrown together, we offer an attorney-drafted Oklahoma LLC Operating Agreement template that you can use as a solid foundation. And, just in case you’re wondering, we offer our LLC operating agreement template for free.

Oklahoma Corporate Bylaws

Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Like Oklahoma’s operating agreements, corporate bylaws are not required by law in Oklahoma (18 OK Stat § 18-1013 (2021)). But, creating bylaws can help protect you and your business down the road.

As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted an Oklahoma Corporate Bylaws template you can use to get started.

Starting a nonprofit? Learn about Oklahoma nonprofit bylaws.

Depending on what industry and services you will provide through your business, you may need to get a business license to legally operate in Oklahoma. You can check Oklahoma’s Business Registration and Licensing System to see if your business will require a license, but let’s go over some of the most common licenses you may need:

Oklahoma State Business License

Aside from some exceptions, general businesses in Oklahoma do not need a state business license. Those that do—building and general contractors, retail store owners, anyone selling alcohol, and anyone offering consumer credit services—need licensing from the department regulating their industry. And, if you register any DBAs for your business, you’ll need to get an additional business license for each.

Professional Business Licenses

Professional services are ones that require specialized training or education to perform safely. Think architecture, midwifery, counseling, construction, or dentistry, just to name a few. To get a professional license, you have to apply with the board that regulates your industry in Oklahoma. Each board has its own licensing process.

Local Business Licenses

While the state of Oklahoma doesn’t require you to have a business license, the city, town, or county you live in probably will. For example, Oklahoma City has a long list of businesses that require licensing from the city, like for businesses in the advertising, daycare, or coin-operated industries. Edmond, Oklahoma requires food trucks, garage sales, and any type of outdoor seller to get a license, among other businesses and professionals.

Learn more about How to Get a Business License.

The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too. Below, we get into what you need to know to organize your Oklahoma business’s money in a way that works for you.

Open a Business Bank Account

To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.

Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.

Set up Payroll

As a business owner, you are faced with many choices. One of the biggest decisions you’ll have to make is whether or not to hire employees. If you choose to go that route now or in the future, we’re here to help! Let’s get into some basics of what you’ll need:

• get an EIN
• register with the Oklahoma Tax Commission and file the Wage Withholding Tax Application
• get a unique Oklahoma Unemployment Insurance Tax Account Number
• determine whether you’re hiring employees or independent contractors
• prepare the forms your employees will fill out
• choose a payroll service or software
• decide on a payroll schedule

While you’re able to set up employer accounts through Oklahoma’s tax and employment departments, you’ll still need a reliable and secure payroll service, system, or software. A good one will automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees either by check or direct deposit

Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.

But do you really need Oklahoma business insurance? If you have employees, yes. Oklahoma requires all employers to carry workers’ compensation insurance. However, it’s sometimes not that simple, so let’s dive into it more below.

Workers’ Compensation Insurance

Workers’ compensation insurance gives medical and indemnity benefits to your employees when they suffer work-related injuries or illnesses. In Oklahoma, workers’ compensation is a no-fault system. So the employee’s fault has no bearing on eligibility for benefits. It’s important to note that Oklahoma does not view independent contractors as employees covered. Failure to carry workers’ compensation insurance will cost you dearly. A fine of up to $1,000 per day. Many insurance companies offer workers’ compensation insurance policies along with business insurance.

Liability Insurance

Liability insurance covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.

Unfortunately, operating a business also means you gotta pay taxes. Oklahoma assess a state sales tax at a flat rate of 4.5%. In addition, you’ll also be required to pay a local sales tax that maxes out at 7%—which could hike your rate all the way to 11.5%! But your tax burden isn’t determined by the state alone. You’ll also have federal, state, and local taxes to consider. We get into all the dirty details below!

Federal Taxes

• LLCs. Single-member LLC? By default, you’re taxed similarly to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. Good news: because there’s no state income tax in Oklahoma, you’ll only have to pay the 15.3% federal self-employment tax rate. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
• Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Oklahoma corporate tax rate.

To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.

Local Oklahoma Business Taxes

Here’s another bonus perk to forming your business in Oklahoma. Oklahoma has no local or municipal business taxes!

All Oklahoma LLCs must file an Oklahoma Annual Certificate with the Secretary of State. LLCs must file by their anniversary date. So, if you formed an LLC on April 25th, 2022,  then your report would be due by April 25th 2023.

Corporations don’t file an annual certificate. Instead, they must file an Annual Franchise Tax Return, which is based on your total revenue. The Franchise Tax Return is due by July 1st.

Read more about How to File an Oklahoma Annual Report.

If you want people in Oklahoma to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:

• Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
• Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
• SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
• Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.

A trademark is a design, symbol, word, phrase, or any combination thereof that represents a brand’s goods or services exclusively. Only some businesses register trademarks.

You can apply to register your trademark with the state of Oklahoma or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Oklahoma is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Oklahoma.

You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.

Our attorneys can review your application, offer advice, and prepare and submit the application for you. Check out our Trademark Service.