Limited Liability Company formation is a complicated process, but it can be rewarding. An LLC provides personal asset protection, and is typically less regulated than a corporation. In this article, we’ll provide you with all the information you need to learn how to form an LLC, help you learn about the business environment and economy of Oklahoma, and give you a detailed explanation of formation times in the state of Oklahoma.
Discovering Oklahoma
Oklahoma is referred to as “the Sooner State” because in 1889, settlers who were called “sooners” were allowed to claim land in the state for themselves. It’s bordered by Colorado, Kansas, Missouri, Arkansas, Texas and New Mexico.
It’s home to the Ozark Plateau and park of the Ozark mountain range, as well as the Ouachita Mountains and national forest, the Arbuckle Mountains, and the Wichita Mountains National Wildlife Refuge. But that doesn’t mean it’s all mountains. It’s also home to the Red River, which forms the border between Oklahoma and Texas, hills made of red sandstone, shale and in Gypsum Hills there are big 20 foot tall hills made of gypsum. The Prairie Plains section of the state has fertile lands that are used to farm and raise animals.
In addition to gypsum, which is a type of soft mineral, Oklahoma is one of the nation’s biggest crude oil, natural gas and petroleum producers.
Economic Overview of Oklahoma
The state of Oklahoma has a GSP or Gross State Product of $195.2 billion, and has a growth rate of 18.0k% between 2018-2023.
The biggest industries by revenue in Oklahoma are Oil Drilling & Gas Extraction, Gasoline & Petroleum Wholesaling, Hospitals, Lotteries & Native American Casinos and New Car Dealers. The largest companies by employment in the state are Walmart Inc., Amazon.Com, Integris Health, Inc., Hobby Lobby Stores, Inc. and Oklahoma State University. And the sectors that contribute the most to the state’s overall Gross Domestic Product are Mining, Real Estate & Rental & Leasing, Manufacturing, Healthcare & Social Assistance and Retail Trade.
Business Environment in Oklahoma
The business environment in Oklahoma was ranked #34 by usnews.com. It ranked #41 in growth, #33 in long-term stability, #7 in affordability and #43 in economic opportunity.
The state’s cost of living index is 90.3 (100.0 nationally), the median household income for the state is $55,826 (the national average is $69,717) and the poverty rate is 15.6%, which is a bit up from the national average of 12.8%. The unemployment rate in the state is 3.5%, a little under the national statistic of 3.9%.
State-Specific Regulations and Incentives for Forming an LLC in Oklahoma
There are a number of incentives to help Oklahoma business owners.
- Oklahoma Quality Jobs Program: This program provides grants up to 5% of the new employee gross taxable payroll for businesses creating new jobs meeting or exceeding the county’s average wage, or the State Index wage threshold, depending on which is lower. Companies must have a new annual payroll minimum of $2.5 million within 3 years. The threshold is lowered to $1.5 million for research and development projects, certain food processing projects, as well as businesses near former military bases. Qualifying businesses must also provide health insurance for their employees if they want to receive these tax credits. And they could receive the grants for up to 10 years.
- The 21st Century Oklahoma Quality Jobs Program: This program is designed to draw in high-paying jobs and increase the number of advanced industry companies in the state. It provides cash grants of 10% of the taxable payroll, or two times the net benefit rate of the quality jobs program. Businesses must create a minimum of 10 full-time jobs which have have a minimum annual wage of $120,071 or 300% of the county’s average wage in the county it’s located. The grants can be issued for up to 10 years.
- Workforce Tax Credits: Businesses in aerospace, automotive, or cybersecurity/software industries can qualify for a tax credit that’s based on the number of jobs or a payroll credit for qualifying occupations. Employees in certain occupations can qualify for tax credits for $5,000 to use against individual income taxes.
- Investment/ New Jobs Income Tax Credit: If manufacturers create jobs or invest in new capital improvements, they can qualify for a 5-year tax credit for more than 1% per year of their investment. The property must be qualified as a new depreciable property. They could alternatively receive a credit for $500 for every new job they create. This credit goes up to 2% of investments and $1000 for each new job when the business is located in an Enterprise Zone, or if an investment is over $40 million.
- Insurance Premium Tax Credit: This is an annual tax credit provided to insurance companies locating or expanding into Oklahoma. They must maintain more than 200 employees, and it’s 15%-50% of the number of full-time employees.
- Sales Tax Exemption Program: Equipment and machinery used for the manufacturing process, as well as tangible personal property that results from the manufacturing process is exempt from sales tax.
- Ad Valorem Tax Exemption: Ad valorem tax exemptions for up to 5 years are available to eligible businesses such as new or expanding manufacturers, computer services and data processing companies that have substantial out-of-state sales, research and development companies, wind power generators and oil refineries.
- Oklahoma Quick Action Closing Fund: In Oklahoma, the governor is granted discretionary authority to provide grants to help out economic development projects.
- Oklahoma Small Employer Quality Jobs Program: This program provides incentives to businesses in the amount of 5% of their newly created payrolls for as long as 7 years. Eligible companies must not have more than 500 employees when they apply. The minimum requirement for newly created jobs is dependent on the population of the community where the business is located. The business is required to have an average wage of more than 110% of the county’s population.
- Training for Industry Program (TIP): This is a way for businesses creating jobs in the state to develop a skilled workforce at no or low cost. Funding for job training is based on the project.
Pros and Cons of Establishing an LLC in Oklahoma
There are both perks and drawbacks to owning a business in Oklahoma, so let’s discuss them.
Oklahoma supplies lots of tax advantages.There are several different incentives for businesses in the state, such as the Quality Jobs Program that offers tax credits to businesses which create jobs in Oklahoma. It also has a corporate income tax rate of 4%, individual tax rates between 0.25-4.75%, and a state sales tax rate of 4.50%.
There are many resources in the state that are designed to help businesses, like the Oklahoma Department of Commerce, which can help with the financing, planning and marketing of businesses.
Oklahoma also provides access to capital. There are programs that set out to help businesses get the capital they need, like the Small Business Administration, and the Oklahoma Capital Investment Board.
It’s located near many big markets, which means you have the opportunity to do business in highly populated areas and put your products in beneficial markets. Texas, Colorado and New Mexico, for instance, all have lots of buying power. So if you can expand over into those markets, or attract customers from those states, then you can drastically increase your customer base.
Now for the drawbacks.
There’s a high cost of business in the state. Sure, there’s a low cost of living, but the high business expenses in the state can present struggles like attracting and retaining employees, and making enough money to pay for overhead costs.
Oklahoma is well-known for a variety of extreme weather conditions, like tornadoes and other storms, and floods. This can cause massive property damage, as well as disrupt business operations.
Businesses in Oklahoma are moderately regulated. Some of these include labor laws and environmental regulations. Not only do these mean extra costs for businesses, it increases the amount of hassles that businesses have to deal with.
Procedure of Establishing an LLC in Oklahoma
This section will provide you with detailed instructions and a step by step guide for how to start an LLC in Oklahoma.
Necessary Documentation for Filing an LLC in Oklahoma
Unfortunately, you can’t just submit one blanket application to get an LLC. There’s a whole range of documents and paperwork that’s necessary. Here are a few of the documents you’ll need when filing for a Limited Liability Company in Oklahoma.
- Articles of Organization: To start an LLC, you must first submit an Articles of Organization form to the Secretary of State. It’s important that you send two copies because they’ll keep one and send one back to you for your records once your LLC is approved. It will ask for detailed information about your company, such as your chosen business name, its duration, purpose, address, registered agent, the contact information of each LLC member, and you may be required to choose whether your LLC is member-managed or manager managed.
- Operating Agreement: Typically speaking, Operating Agreements aren’t legal requirements for LLCs, but they are important internal business documents because they set the ground rules for LLC members and how your company will run. Some of the information provided in the document includes what to do if an LLC member dies, how to add and remove members, the roles and contributions of each LLC member, details about the distribution of profits and losses among members, and rules for managers, such as voting rights and meeting schedules that they’ll adhere to.
- Employer Identification Number (EIN): You’ll need to apply for an Employer Identification Number or EIN if you haven’t already. This number identifies your business to government agencies, and means you won’t be required to use your Social Security Number on paperwork anymore. It’s also necessary when hiring employees or opening a business bank account. You can apply for your EIN for free and be granted one immediately from the IRS website.
- Name Reservation Application: Before you file your LLC documents, you’ll need to find a business name that meets all of the legal requirements, then file an “Application for Reservation of Name”, which you can submit to the Oklahoma Secretary of State, and reserve the name for 60 days.
- Annual Certificate: Rather than filing an annual report in Oklahoma, LLCs file an annual certificate. It functions much the same as an annual report. It’s due on the anniversary of your LLC’s formation, and your first one is filed with your Articles of Organization. Each subsequent annual certificate can be filed through the Secretary of State Entity Filing website.
- Tax Registrations: If your company will collect sales tax, sell goods or hire employees, then you need to get it registered with the Oklahoma Tax Commission. Even if you don’t plan on collecting sales taxes, you’re required to register with the tax commission for tax purposes.
- Business Licenses and Permits: The state of Oklahoma doesn’t require LLCs to obtain a business license from the state government. However, that doesn’t mean you won’t need licenses and permits from county and local governments. Head to the Oklahoma Department of Commerce website to find out about licensing requirements your company may need to meet, and check in with county and local clerks, as well.
Legal Requirements for Starting an LLC in Oklahoma
Here’s the legal process to start a Limited Liability Company in Oklahoma.
- Get an Articles of Organization Form: The first step is to pick up your Articles of Organization, which is essentially an application to form an LLC. They’re available from the Oklahoma Secretary of State.
- Choose a Business Name: There are a lot of important requirements that must be met regarding business names. For starters, no business name in the state of Oklahoma can be too similar to another business name already in use by other businesses in the state. To learn whether the business name you’ve selected is usable, run a search on the business name database on the Oklahoma Secretary of State’s website.
- Name a Registered Agent: One legal requirement your LLC must meet is having a registered agent. A registered agent is the point of contact for an LLC, and both receives and forwards government mail and service of process to the company. There are some legal requirements for registered agents, like having a physical address in the state, and being at least 18 years old, but as long as all of the requirements are met, you can designate anyone you want, including family members, friends, employees, or trusted professionals like lawyers. But since registered agents play such a major role in the life of LLCs, many business owners choose to hire a professional registered agent service just so they don’t have to worry about whether the job is done properly.
- Choose Your Business Address: Your business address is another important business decision. A company’s business address is included on the public record, which means everyone has access to it. For this reason, it’s probably not the best idea to use your home address as your business address. Instead, you could ask your registered agent if you could use their address, or you could research virtual addresses in your area.
- Sign and File Your Articles of Organization: Once you’ve gathered all of the necessary documents and applications, and ensure that all of the information of your Articles of Organization is filled out and accurate, you can sign and file them with the Secretary of State. Or, you could hire an LLC formation service for extra privacy, and to lessen your workload.
Time Frame for Establishing an LLC in Oklahoma
After you’ve sent your paperwork off, you must wait for approval from the Oklahoma Secretary of State. These are the time frames you can expect.
How Long Does the Initial Paperwork Take in the State of Oklahoma?
Approval times to file by mail are 2-4 weeks, or 2-3 business days if you file online. Approval time is the complete turnaround time for your LLC to be approved- start to finish- and it includes both transit and processing time.
Processing Times in the State of Oklahoma
Processing time is the amount of time it takes the Secretary of State to review all of your formation paperwork and enter the data into their system. Processing time for online filing is 2-3 business days, or 5-7 business days for mail filing.
Common Delays in the LLC Formation Process in Oklahoma
There are an assortment of circumstances that could delay the formation of a Limited Liability Company, such as the following:
- Peak Filing Seasons and High Application Volumes: The beginning and the end of the year are the most popular times for businesses to submit LLC filings. You can expect delays if you choose to file during those time periods, as well. And since every LLC filing requires clerks to manually review the documents, high volumes of applications creates a work overload for them and slows the process down as they work to get through it all.
- Weekends and Holidays: The Secretary of State’s office processes LLC filings on business days, and weekends and holidays fall outside of business days. To avoid delays, don’t file on or before a government holiday or weekend day because no one will be in the office to process your filing.
- Errors with Documents: Your documents must not contain incomplete sections or inaccurate information. It’s also important that you include the correct number of copies. If any of this goes awry, then the state can reject your documents. You’ll have to correct these mistakes, which means filling the paperwork out again, and it will take longer.
Expedited Processing for LLC Formation in Oklahoma
Expedited processing is the best choice for many impatient business owners who simply want their LLCs in a hurry. But is it an option in Oklahoma?
What Are the Expedited Options Available?
There aren’t expedited processing options in Oklahoma.
Additional Costs for Expedited Services in Oklahoma
Ordinarily, expedited services require you to pay a fee in addition to filing fees. Translation: expedited services cost extra. But since Oklahoma doesn’t offer expedited services, that’s not an expense you need to worry about.
Comparing LLC Formation Time Frame in Oklahoma with Other States
Let’s take a moment to look at the formation times in other states. This can help you determine just how fast or slow Oklahoma’s times are, and may affect your choice between a domestic or foreign LLC.
Brief Comparison with Key States
Oklahoma’s processing times are 5-7 business days for mail filing, and 2-3 business days for online filing. There isn’t an expedited processing option.
Oklahoma isn’t the only state that doesn’t offer expedited processing, and some states are slow even with expedited options. In Arizona, expedited processing takes 5 days, and it takes a whole week in Maryland. Slower online times include Arizona with 14-16 days, Maryland with 2 weeks, and Texas with 13-15 days. And slower mail times include Mayland with 5-8 weeks, Washington with 5-6 weeks, Pennsylvania with 6 weeks, and New York with 8 months.
There are states with faster times, too. In Delaware, Michigan, Montana, Nevada and West Virginia, expedited services include a 1-hour option. Alabama, Alaska, Colorado, Kansas, Kentucky, Minnesota, Missouri, New York, South Dakota, Tennessee, Wisconsin, and Wyoming all offer immediate processing on online filings. And both Ohio and Kentucky process mail filings in just one day.
Why is Oklahoma a Favorable Place for Forming an LLC?
Oklahoma is a beneficial place to form a Limited Liability Company because it provides lots of incentives to help new businesses, lots of tax benefits, and access to capital. It’s also centrally located near several large markets, such as Texas, Colorado and New Mexico. With a bit of savvy marketing and business moves, you have the opportunity to break into these markets and increase your customer base.
