How to Start a Business in Oklahoma
How do you start a business in Oklahoma? All you have to do is sell something. But of course, there’s much more at the heart of successfully forming and maintaining a business in the Sooner State. What happens if your business faces legal action? How do you protect your money, and more importantly, your house? Does Oklahoma’s low state sales tax of 4.5% really make much difference to a small business? In this guide, we’ll get into the nitty-gritty of starting a business in Oklahoma.
Ready To Start A Business In Oklahoma?Lets Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get OK Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
File an Oklahoma Annual Certificate
Build Your Business Website
Apply for Trademarks
1. Pick a Business Structure
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.
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.
Can an LLC be just one person?
Of course! A one-person LLC is called a single-member LLC, sometimes referred to as an SMLLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are very similar to multi-member LLCs, however, there are a few notable differences. For example, SMLLCs are taxed as a sole proprietor and multi-member LLCs are taxed as partnerships.
Read all about Single-Member LLCs.
What about an Oklahoma nonprofit?
Are you thinking about starting a nonprofit in Oklahoma? You can start an Oklahoma nonprofit if you have three incorporators who agree to start a nonprofit for the mutual benefit and interests of the public or a group. To start an Oklahoma nonprofit, you’ll have to file a Certificate of Incorporation Oklahoma Not for Profit Corporation ($25) with the Oklahoma Secretary of State.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
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.
Can I reserve a business name in Oklahoma?
Yes! Oklahoma allows you to file an Application for Reservation of Name ($10) to reserve your business’s name while you wait to form your LLC or corporation.
What's a DBA?
DBA stands “for doing business as” and is a simple way of allowing you to have two names for your business. Many business owners decide to use a DBA because LLCs and corporations have name requirements that aren’t always catchy. It’s why we call Google, Google and not Alphabet Inc. —it’s legal name.
Your business’s legal name is the one you list on your formation documents. If you’re a sole proprietor, your business name is your human name.
Imagine, you have this great business name, but Oklahoma wants you to tack extra letters (LLC, Inc., etc.) onto the end. Bummer. With a DBA, you can use your legal name for state and government paperwork, while saving your witty and awesome DBA for the public. Since Oklahoma refers to DBAs as trade names, you’ll file a Trade Name Report form ($25) with the Oklahoma Secretary of State to register your DBA.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that you could be sued for infringement.
3. File Formation Paperwork
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.
What is a registered agent?
A registered agent is the person or entity who is responsible for receiving state and legal mail on behalf of your business. By law, your registered agent is required to have a physical address in Oklahoma where they’re present during business hours to accept service of process. Since we’re a registered agent service, we meet all those requirements.
How can I keep my information off the public record?
The best way to keep your information off the public record is to hire a registered agent that will allow you to list their name and address instead of yours—like us! Luckily, Oklahoma doesn’t require business owners to list their name on business formation documents. However, if you choose to act as your own registered agent, you will need to list your name and physical address. So, if you want to take advantage of Oklahoma’s privacy benefits, you’ll need to hire a registered agent.
4. Draft Internal Records
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.
5. Get Oklahoma Business Licenses
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.
How do I get an Oklahoma business license?
To get a business license in Oklahoma, you’ll need to contact the local board in charge of your profession’s licensing. Like with filing your original business’s formation documents, getting an Oklahoma business license requires you to file more documents. However, you won’t be filing your documents with the Secretary of State, but with local agencies within your industry.
How much does it cost to get an Oklahoma state business license?
It depends. The cost can range from $35 and up. Since Oklahoma doesn’t require every business to get a license the fees vary by location and profession. To check for exact fees, contact your local industry licensing board.
How do I get a professional license in Oklahoma?
The process for getting a professional license will vary depending on your profession and specific service your business provides. Professional licenses are issued by the board that regulates your industry in Oklahoma. For example, retailers that sell meat, eggs, or dairy products must apply for a license from the Oklahoma Department of Agriculture, Food and Forestry, while consumer creditors must apply with the Oklahoma Department of Consumer Credit.
How do I get a local business license?
Every city, town, and county is different. In Oklahoma City, for example, pawnbrokers must file a General Application, Immigration Affidavit, and Pawnbroker Occupation Bond. In addition, you’ll need to apply for a sales tax permit, pawnbroker license, and a used merchandise license. All of those forms go to different departments, too—the Oklahoma Tax Commission, Oklahoma City Licensing, and Oklahoma Department of Consumer Credit. So you’ll need to research your county and industry to determine which licenses you need and where to send them.
6. Organize Your Money
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.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
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
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed and not an insured member of your employee base. Independent contractors are held to a contract for a specific type of work or project, usually with a specified end date or target budget. An employee is hired by your business as a regular full- or part-time employee insured through your business and required to follow your internal documents, handbooks, and operating practices.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
How do I get an Oklahoma Employer Account Number?
To get your Oklahoma Employer Account Number, register online with the Oklahoma Employer Security Commission. Then, you’ll be able to get your account number and tax rate.
7. Get Business Insurance
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 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.
Do business owners need workers compensation insurance in Oklahoma?
Yes. The only exceptions to the rule can be found in the Oklahoma Workers’ Compensation Commission Guide for Employers. Sole proprietors, small family businesses, and agricultural employees are just some of the types of businesses that do not require workers compensation insurance in Oklahoma.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
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!
- 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.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Oklahoma, the corporate tax rate ranges from 2 to 9.4%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Local Oklahoma Business Taxes
Here’s another bonus perk to forming your business in Oklahoma. Oklahoma has no local or municipal business taxes!
9. File an Oklahoma Annual Certificate
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.
What if I don't file an annual report in Oklahoma?
If you don’t file an Oklahoma Franchise Tax, your corporation will be assessed 10% of your total tax due. In addition, 1.25% interest will continue to accrue each month a return isn’t filed. LLCs and LPs won’t be charged late fees; however, they will lose their good standing with the state.
10. Build Your Business Website
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.
11. Apply for Trademarks
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.
How do I register a trademark in Oklahoma?
To register a trademark in Oklahoma, you’ll need to file a Trademark Registration form ($50) with the Oklahoma Secretary of State. You can file by mail, in person, or online.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.