How to Convert Oklahoma Corporation to LLC | The Ultimate Guide

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Convert Oklahoma Corporation to LLC

When it comes to business structures, corporations and limited liability companies (LLCs) are two of the most popular options in Oklahoma. Each business structure has advantages and disadvantages, so business owners must choose the best fit for their needs. There may come a time when a corporation realizes that converting to an LLC would be more beneficial. This comprehensive guide will walk you through Converting Oklahoma Corporation to an LLC, discussing the reasons for conversion, the steps involved, and any potential challenges you may face.

Webinarcare Editorial Team will help you easily understand the conversion process, so you must be guided by all the factors gathered in this article.

How to Convert Oklahoma Corporation to an LLC

Understanding Corporation and LLC in Oklahoma

Understanding the differences between corporations and LLCs in Oklahoma is essential for aspiring business owners and entrepreneurs. Both business structures offer distinct advantages and disadvantages, and comprehending their characteristics is crucial in making informed decisions.

Corporation

A corporation is a legal entity separate from its owners, known as shareholders or stockholders. It provides limited liability protection to its owners, meaning shareholders’ personal assets are typically shielded from company debts or liabilities. Corporations in Oklahoma have the advantage of being able to issue stock to raise capital, making them an attractive choice for businesses seeking significant investment opportunities. However, corporations also come with additional formalities, such as regular shareholder meetings and extensive record-keeping requirements.

Limited Liability Company (LLC)

A limited liability company (LLC) is a flexible business structure that combines the advantages of both corporations and partnerships. LLCs offer limited liability protection to their owners, called members, shielding their personal assets from business debts or lawsuits. Unlike corporations, LLCs do not require as many formalities as regular meetings or extensive record-keeping. This aspect makes LLCs more suitable for small businesses or entrepreneurs who prefer a less burdensome administrative and compliance structure.

Understanding the distinctions between corporations and LLCs is crucial to determine which structure aligns best with your business goals, resources, and needs in Oklahoma. By evaluating liability protection, taxation, ownership structure, and operational flexibility, entrepreneurs can make confident decisions when establishing their business entity in Oklahoma.

It is suggested that you speak with a legal professional before you begin converting your Oklahoma corporation to an LLC. They’ll understand what’s best for you and your company. To safeguard your personal assets from business debts, you can always start an LLC in Oklahoma.

– WEBINARCARE EDITORIAL TEAM

How to Convert Oklahoma Corporation to an LLC

Converting a corporation to an LLC in Oklahoma involves several steps, which may vary depending on Oklahoma laws and regulations. Here is an outline of the steps required to convert Oklahoma corporation to an LLC:

Step 1: Research and Understand the Conversion Process

Before embarking on the conversion process, it’s crucial to research and understands the specific requirements and steps involved in converting a corporation to an LLC in Oklahoma. Familiarizing yourself with the relevant state laws, regulations, and necessary forms or filings will help ensure a smooth transition. 

The Oklahoma Secretary of State will often have valuable information about the conversion process, including required forms, fees, and filing procedures. Look for sections related to business entity conversions and corporation dissolution. In converting to an LLC, hiring an LLC Service in Oklahoma is best since it provides guidance and assistance.

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Step 2: Obtain Shareholder Approval

The second step in converting Oklahoma corporation to an LLC is obtaining approval from the corporation’s shareholders. This typically involves holding a shareholder meeting and voting on a resolution to approve the conversion. Be sure to review the corporation’s bylaws to ensure that the proper procedures are followed.

Step 3: Prepare and File a Plan of Conversion

Oklahoma requires that a Plan of Conversion be prepared and filed with the Oklahoma Secretary of State. This document outlines the terms and conditions of the conversion, including the name and structure of the new LLC, the conversion’s effective date, and any other relevant information. 

In terms of naming your Oklahoma LLC, you must adhere to the following when choosing your LLC’s name:

  • The name must include “Limited Liability Company,” “LLC,” or “L.L.C.“
  • The name cannot include words or phrases that imply the company is engaged in activities it is not authorized to conduct.
  • The name must be distinct from other registered businesses in Oklahoma.

In Oklahoma, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 60 days. You must file a name reservation application with the Oklahoma Secretary of State to keep the name. 

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Oklahoma DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in two methods, by mail and in person.

However, before filing a DBA, you should know that you need to renew your DBA every Indefinite, which costs $25.

Be sure to review Oklahoma’s specific requirements for a Plan of Conversion, Or you can hire the Best Oklahoma Registered Agent Services for easier processing. 

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Step 4: File Articles of Organization for the New Oklahoma LLC

Along with the Plan of Conversion, you must file the Articles of Organization in Oklahoma for your new LLC. This document establishes the new LLC that includes information such as the LLC’s name, Registered Agent, and management structure. 

For your LLC name, you must check the availability of your desired LLC name by searching the Oklahoma Secretary of State Business Entity Search ‘s website.

Regarding your Registered Agent, he must receive and forward legal and tax documents on behalf of your LLC, such as service of process, state tax notification, and filing Annual Report. Your Registered Agent must have a physical address in Oklahoma and be available during regular business hours. The cost of Registered Agent in Oklahoma ranges from $50 – $150.

With all of the information included in the Articles of Organization, you must pay the filing fee of $100, which you can pay with the Oklahoma Secretary of State.

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Step 5: Prepare the Operating Agreement

While not always required by state law, it’s a good idea to draft an operating agreement for the new Oklahoma LLC. This document outlines the LLC members’ roles, responsibilities, ownership percentages, and other important operational details.

The operating agreement should include the following:

  • The roles and responsibilities of members and managers
  • The process for admitting or removing members
  • The allocation of profits and losses among members
  • The procedure for making major decisions
  • The process for dissolving the LLC

Step 6: Notify Creditors and Other Interested Parties

Inform creditors, vendors, and other interested parties of the Oklahoma corporation’s conversion to an LLC. This can help ensure a smooth transition and maintain good relationships with those involved in your business.

Step 7: Update Tax Information

After converting to an LLC, you must update your tax information with the Internal Revenue Service (IRS) and the Oklahoma Tax Commission. This includes obtaining a new Employer Identification Number (EIN) for the LLC and updating any tax accounts or registrations.

To obtain an EIN for your Oklahoma LLC, you can apply online on the IRS website, by mail, or by fax. The online application process is the fastest and most convenient method, as you will receive your EIN immediately upon completing the application. There is no fee to obtain an EIN.

The application of an EIN in Oklahoma can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

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As an LLC in Oklahoma, your business may be subject to various state taxes and licenses, depending on the nature of your operations. Common taxes and licenses include:

  • Sales Tax: If your LLC sells taxable goods or services, register for Oklahoma sales tax permit and collect sales tax from your customers.
  • Employer Taxes: If your LLC has employees, you may be required to register for Oklahoma unemployment insurance and workers’ compensation coverage.

To ensure you comply with all applicable Oklahoma tax and licensing requirements, you can check out the Oklahoma Tax Commission and Oklahoma Small Business Taxes for more information.

Step 8: Update Licenses and Permits

Depending on the nature of your Oklahoma business, you may need to update or obtain new licenses and permits for your LLC. Check with the appropriate local, state, and federal agencies to ensure your LLC complies with all necessary regulations.

Reasons for Converting Oklahoma Corporation to an LLC

When considering the conversion of a corporation to a limited liability company (LLC) in Oklahoma, it is essential to understand the potential advantages that this change in business structure may provide. Here are some common reasons for converting Oklahoma corporation to an LLC:

  • Tax Flexibility: One of the primary reasons Oklahoma business owners opt to convert their corporation to an LLC is the tax benefits. While corporations are subject to double taxation, where the company’s income and the shareholder’s dividends are taxed, LLCs are considered pass-through entities. This means the business’s income passes through to the owners’ personal tax returns, avoiding double taxation.
  • Simplified Management Structure: Another advantage of an LLC over a corporation is its simplified management structure. Oklahoma Corporations have a more complex structure with shareholders, One directors, and officers, while an LLC is managed by its members or designated managers. This can make decision-making and operations more straightforward for small businesses.
  • Reduced Administrative Requirements: Oklahoma LLCs generally have fewer administrative requirements than corporations, such as lower Annual Report fees and less stringent record-keeping rules. This can save Oklahoma business owners time and money, allowing them to focus more on growing their businesses.
  • Personal Asset Protection: Both corporations and LLCs offer limited liability protection, meaning the business’s debts and liabilities are separate from the owner’s personal assets. However, some business owners may prefer an LLC’s specific liability protections over a corporation.

Challenges and Considerations

When converting a corporation to an LLC in Oklahoma, it is essential to consider the potential challenges and implications of the conversion process. Here are some challenges and considerations to keep in mind:

  • Tax Implications: Although converting Oklahoma corporation to an LLC can offer tax benefits, it’s essential to consider the potential tax implications of the conversion. In some cases, the IRS may treat the conversion as a taxable event, which could result in additional taxes being owed. Consult with a tax professional to understand the tax implications of converting your corporation to an LLC in Oklahoma.
  • Legal and Financial Advice: Converting Oklahoma corporation to an LLC can be a complex process, and it’s essential to seek legal and financial advice to ensure that the conversion is done correctly in the business’s best interests.
  • Timing: Converting Oklahoma corporation to an LLC can take time, particularly if there are regulatory approvals or other requirements to be met. Be prepared for the conversion process to take several weeks or even months to complete.

Benefits of Converting Oklahoma Corporation to an LLC

Converting a corporation to a limited liability company (LLC) can benefit business owners. These advantages can include:

  • Tax Flexibility: One of the primary benefits of converting Oklahoma corporation to an LLC is the potential tax advantages. While corporations are subject to double taxation (the company’s income and the shareholder’s dividends are taxed), LLCs are generally considered pass-through entities for tax purposes. This means the business income passes through to the owners’ personal tax returns, avoiding double taxation.
  • Personal Asset Protection: Both corporations and LLCs offer limited liability protection, meaning the business’s debts and liabilities are separate from the owner’s personal assets. However, some business owners may prefer the specific liability protections provided by an LLC over a corporation, depending on the nature of their business and the potential risks involved.
  • Increased Flexibility in Profit Distribution: Unlike Oklahoma corporations, which typically distribute profits according to the percentage of shares owned, LLCs can offer more flexibility in profit distribution among members. This can be particularly advantageous for businesses with multiple owners who contribute differently to the company’s success.
  • Potential for Easier Transfer of Ownership: Depending on the specific rules and regulations in Oklahoma, transferring ownership of an LLC may be easier than transferring ownership of a corporation. This is an important consideration for business owners who plan to sell or transfer their business.

While the benefits of converting Oklahoma corporation to an LLC can be significant, it’s essential to carefully consider the potential challenges and implications of the conversion process.

FAQs

What is the process of converting an Oklahoma corporation to a limited liability company?
The process involves filing a Certificate of Conversion with the Oklahoma Secretary of State.
Is there a fee for converting an Oklahoma corporation to a limited liability company?
Yes, there is a fee that must be paid to the Oklahoma Secretary of State.
How long does it take to convert an Oklahoma corporation to an LLC?
The process typically takes a few weeks, depending on how long it takes for the state to process the paperwork and issue the necessary approvals.
Do I need to file a new business registration in Oklahoma if I convert my corporation to an LLC?
Yes, you will need to re-register your business with the state as an LLC.
What are the benefits of converting an Oklahoma corporation to an LLC?
Benefits include increased flexibility in management and ownership, pass-through tax treatment, and limited liability protection for members
Who can be a member of an Oklahoma LLC?
Any person or entity can be a member of an Oklahoma LLC, including individuals, corporations, and other LLCs.
How is an Oklahoma LLC taxed?
Oklahoma LLCs are treated as pass-through entities for tax purposes, and are not subject to state-level income tax.
Do Oklahoma LLCs need to have an operating agreement?
While an operating agreement is not legally required in Oklahoma, it is highly recommended to have one to establish the internal management structure for the company and protect the interests of all members.
Can an Oklahoma LLC be taxed as an S corporation?
Yes, an Oklahoma LLC can elect to be taxed as an S corporation under federal tax law.
What is the liability protection for members of an Oklahoma LLC?
Members of an Oklahoma LLC have limited liability protection, which means that their personal assets are generally shielded from the company’s debts and other legal obligations.
Do single member LLCs in Oklahoma have limited liability protection?
Yes, even a single member of an Oklahoma LLC is generally not personally liable for the company’s debts and other obligations.
Is it difficult to convert an Oklahoma corporation to an LLC?
The process is fairly straightforward, as long as the necessary documentation and fees are submitted to the Oklahoma Secretary of State.
Can an Oklahoma LLC have multiple classes of members?
Yes, an Oklahoma LLC can have different classes of members with different rights and obligations.
Does an Oklahoma LLC need to have a registered agent?
Yes, all LLCs in Oklahoma must have a registered agent to receive legal notices and other important information on behalf of the company.
What is a registered agent for an Oklahoma LLC?
A registered agent is a person or business authorized to receive legal paperwork and other important notices on behalf of an Oklahoma LLC.
Can an Oklahoma LLC be managed by its members?
Yes, an Oklahoma LLC can be member-managed or manager-managed, depending on the structure established in the LLC’s operating agreement.
Is an Oklahoma LLC required to file an annual report with the state?
Yes, Oklahoma LLCs are required to file an annual report with the Secretary of State, along with a filing fee.
Can an Oklahoma LLC have foreign members?
Yes, an Oklahoma LLC can have members who are residents of other states or countries.
Can an Oklahoma LLC be converted back to a corporation?
Yes, it is possible to convert an Oklahoma LLC back to a corporation, although the process typically involves filing paperwork with the state and potentially dissolving and re-forming the company.
Are there any restrictions on the name of an Oklahoma LLC?
Oklahoma LLCs must have a unique name that is distinguishable from other businesses in the state, and may not include restricted words or phrases such as “bank,” “university,” or “insurance.”
Can an Oklahoma LLC be dissolved?
Yes, an Oklahoma LLC can be dissolved voluntarily by a vote of the members, or involuntarily by court order.
Are LLC members required to make capital contributions?
While capital contributions are not legally required for Oklahoma LLCs, operating agreements may include provisions requiring members to contribute funds or assets.
Does an Oklahoma LLC need to hold regular meetings?
While not legally required, it is generally a good practice for Oklahoma LLCs to hold periodic meetings to update members on the company’s operations and make important decisions.
What happens to the debts of an Oklahoma LLC if it is dissolved?
Generally, any existing debts or obligations of an Oklahoma LLC are paid off through the company’s remaining assets before being dissolved.
Can an Oklahoma LLC issue stock?
No, an Oklahoma LLC cannot issue stock like a corporation. Instead, ownership interests in the LLC are represented by membership units.
Can members of an Oklahoma LLC have different voting rights?
Yes, the operating agreement of an Oklahoma LLC can establish different voting rights for members based on the amount of ownership or other factors.
Can an Oklahoma LLC change its business structure in the future?
Yes, an Oklahoma LLC may choose to change its business structure at a later date by filing the necessary paperwork and following state regulations.
Are unsigned operating agreements legally binding in Oklahoma?
No, allowing an LLC’s operating agreement to go unsigned may jeopardize the legal standing of the agreement in Oklahoma.
What is the process for converting an Oklahoma corporation to a limited liability company?
The process involves filing articles of organization with the Oklahoma Secretary of State after obtaining approval from the corporation’s board of directors and shareholders.
Are there any fees associated with converting to an Oklahoma LLC?
Yes, there is a filing fee of $100 to submit the articles of organization.
Can I convert my corporation to an Oklahoma LLC online?
Yes, the Oklahoma Secretary of State provides an online filing option for the articles of organization.
How long does the conversion process take?
Typically, it takes 3-5 business days for the Oklahoma Secretary of State to process the articles of organization.
Do I need to change my business name when converting to an Oklahoma LLC?
No, you can keep your existing business name.
What paperwork do I need to file when converting to an Oklahoma LLC?
You will need to file articles of organization with the Oklahoma Secretary of State.
Will I need to get new tax IDs and permits when converting to an Oklahoma LLC?
Yes, you will need to apply for new tax identification numbers and any necessary permits.
Do I need to notify my creditors of the conversion?
It is generally a good idea to notify your creditors and customers of the conversion.
Are there any specific requirements for operating an Oklahoma LLC?
Yes, some requirements include maintaining a registered agent, keeping accurate financial records, and submitting annual reports.
Can an out-of-state corporation convert to an Oklahoma LLC?
Yes, an out-of-state corporation can convert to an Oklahoma LLC by following the same process.
Are there any tax implications when converting to an Oklahoma LLC?
It is recommended to consult with a tax professional to determine the tax implications specific to your business.
Will I need to dissolve my corporation before converting to an Oklahoma LLC?
No, you do not need to dissolve your corporation before converting to an Oklahoma LLC.
What happens to the assets and liabilities of my corporation when I convert to an Oklahoma LLC?
The assets and liabilities will transfer over to the new LLC.
Can employees keep their jobs during the conversion process?
Yes, employees can keep their jobs during the conversion process.
Can shareholders continue to own a portion of the business when it is an Oklahoma LLC?
Yes, shareholders can continue to own a portion of the business as members of the new LLC.
Will I need to create a new operating agreement for the Oklahoma LLC?
Yes, you will need to create a new operating agreement for the LLC.
Do I need to obtain new business licenses when converting to an Oklahoma LLC?
It is recommended to consult with a licensing professional to determine if new business licenses are required.
Can I convert a non-profit corporation to an Oklahoma LLC?
No, non-profit corporations cannot convert to LLCs in Oklahoma.
What happens if my corporation has outstanding legal issues when I try to convert it to an Oklahoma LLC?
It is important to resolve any legal issues before attempting to convert the corporation to an LLC.
Can a foreign corporation doing business in Oklahoma convert to an Oklahoma LLC?
Yes, a foreign corporation can convert to an Oklahoma LLC by following the same process.
Do I need to publish a notice of the conversion in Oklahoma?
No, there is no requirement to publish a notice in Oklahoma.
Will my Oklahoma LLC be treated as a partnership or a corporation for tax purposes?
It will depend on the specific tax election made by the LLC.
Can I convert an Oklahoma LLC back to a corporation if needed?
Yes, it is possible to convert an Oklahoma LLC back to a corporation if needed.
Do I need to file anything with the IRS when converting to an Oklahoma LLC?
It is recommended to file IRS Form 8832 to notify the IRS of the entity classification change.
Can I convert my corporation to another type of entity besides an Oklahoma LLC?
Yes, you could convert your corporation to a different entity type such as a sole proprietorship, partnership, or cooperative.
Can I convert my Oklahoma LLC to a corporation again later on?
Yes, it is possible to convert an Oklahoma LLC back to a corporation later on.
What happens to any of my pending legal disputes during the Oklahoma LLC conversion process?
Pending legal issues will generally be handled by the new LLC once the conversion is complete.
Are there any limitations on the types of businesses that can convert to an Oklahoma LLC?
No, any business entity can generally convert to an Oklahoma LLC as long as it meets the state requirements.
What are the benefits of converting to an Oklahoma LLC from a corporation?
Some benefits include reduced liability for owners, increased protection for personal assets, and more flexibility in management and taxation.

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Conclusion

Converting Oklahoma corporation to an LLC can offer significant benefits for your business, including tax flexibility, simplified management, and reduced administrative requirements. However, it’s essential to carefully consider the potential challenges and implications of the conversion process. Following the steps outlined in this guide and seeking professional advice, you can successfully convert your corporation to an LLC and position your business for continued success.

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