How to Start an S-Corporation in Oklahoma (2024 Guide)

Start an S-Corporation in Oklahoma

If you want to start an LLC in Oklahoma, there are things that you should consider. Oklahoma is the home to a thriving business community, making it an attractive location for entrepreneurs. One popular business structure is the S-Corporation, which offers several tax and operational advantages. This comprehensive guide will explore the process of starting an S-Corporation in Oklahoma, including the costs, steps, advantages, and disadvantages associated with this business structure.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your S-corp, all the steps in this article must guide you.

What is an S-Corporation?

An S-Corporation is a type of corporation that elects to be taxed under Subchapter S of the Internal Revenue Code. This tax treatment allows S-Corporations to enjoy pass-through taxation, meaning the corporation’s income, deductions, and credits flow through to the shareholders, who report this information on their individual tax returns. This structure helps to avoid the double taxation experienced by C-Corporations.

An S corporation (S corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other companies. It’s a tax classification that might result in significant financial savings for corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

Limitations and Requirements of S-Corp

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

You can apply for an S-Corp in Oklahoma if qualified for the limitations and requirements.

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How to Form an S-Corporation in Oklahoma?

To create S-Corp in Oklahoma, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Articles of Organization, creating an operating agreement, requesting an EIN, and filing a form 2553.

Step 1: Register a Business Name in Oklahoma

After you have decided on the idea to start an S-Corp in Oklahoma, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an S-Corp, there is a complete guide on Oklahoma Business Name Search for a proper business name. Here are some guidelines you must follow while naming your S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in Oklahoma.
  • Limit of restricted words that need a license in Oklahoma
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hire a Registered Agent

The next step in starting an S-corp in Oklahoma is hiring a Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence. Forming an LLC with an S-corp will be easier if you have Registered Agent in Oklahoma.

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Step 3: File For Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). Oklahoma Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. For the Articles of Organization to be filed in OR Secretary of State, you need to pay a filing fee of $100. In Oklahoma, the filing fee of forming an LLC is $100.

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Step 4: Creating an Operating Agreement

After you have filed your Articles of Organization, the next step is to create an operating agreement in Oklahoma. The operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following:

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure.

Step 5: Request for an EIN

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

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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Step 6: File Form 2553 for your S-Corp Business

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or at most 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS.

In Oklahoma, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Ogden, UT 84201 Fax: 855-214-7520 .

Costs of Forming an S-Corporation

There are several costs associated with forming an S-Corporation in Oklahoma, including:

  1. Filing Fees: When forming a corporation in Oklahoma, you must file Certificate of Incorporation with the Oklahoma Secretary of State and pay a filing fee of $25 for online, by mail filing or in person filing..
  2. Statement of Information: After forming the corporation, you must file a Statement of Information (Form SI-550) within 90 days and pay a filing fee (currently $25). This statement must be filed annually after that.
  3. Franchise Tax: S-Corporations in Oklahoma are subject to the annual franchise tax, which is the greater of a minimum tax (currently $800) or a calculated tax based on the corporation’s net income.
  4. Other Costs: Depending on the nature of your business, additional costs may include obtaining licenses and permits, registered agent services, and professional fees for legal and accounting services.

Advantages of Forming an S-Corporation

There are numerous advantages to incorporating an S-Corp, but you should be aware of certain problems. Consider the following benefits of an S corporation:

Pass-through Taxation

S-Corporations enjoy pass-through taxation, which helps to avoid the double taxation faced by C-Corporations. This can result in potential tax savings for shareholders. Pass-through taxation is a tax system where the income, deductions, and credits generated by a business entity, such as Oklahoma General Partnership, limited liability company (LLC), or S-Corporation, are passed through to individual owners or shareholders instead of being taxed at the corporate level.

In this system, business profits and losses are reported on the owners’ or shareholders’ individual tax returns, and taxes are paid at their individual income tax rates. This avoids the issue of double taxation, which occurs in C-Corporations where income is taxed at both the corporate level and again when distributed to shareholders as dividends. Pass-through taxation is generally advantageous for small businesses and their owners, as it simplifies tax filings and often results in lower overall taxes.

Limited Liability Protection

Shareholders of an S-Corporation have limited liability protection, meaning their personal assets are protected from the corporation’s debts and obligations. Limited liability protection in an S-Corporation refers to the legal separation between the personal assets of the shareholders (owners) and the business assets, which protects shareholders from being personally responsible for the company’s debts and legal obligations.

In an S-Corporation, shareholders’ personal assets, such as their homes, cars, and personal savings, are not at risk if the business faces financial difficulties or lawsuits. The shareholders’ liability is limited to the amount they have invested in the company. This limited liability is a significant advantage of incorporating a business as an S-Corporation, as it provides a safeguard for the personal financial well-being of the business owners.

It is important to note that limited liability protection can only be supported if the shareholders maintain proper corporate formalities, such as keeping separate business and personal finances, holding regular shareholder meetings, and maintaining accurate business records. In such cases, courts may “pierce the corporate veil” and hold shareholders personally liable for the company’s debts and obligations.

Transferability of Shares

Shares in an S-Corporation are more easily transferable than those in an LLC, allowing for greater flexibility in ownership changes. Transferability of shares in an S-Corporation refers to the ability of shareholders to sell, gift, or otherwise transfer their ownership interest in the company to another person or entity. This is an important aspect of an S-Corporation’s structure, as it allows for flexibility in ownership and the potential for raising capital through the sale of shares.

However, there are certain restrictions on the transferability of shares in an S-Corporation, which are imposed by the Internal Revenue Service (IRS) to maintain the company’s eligibility for S-Corp status:

  • Shareholders: The number of shareholders in an S-Corporation is limited to a maximum of 100. Only individuals, certain trusts, and estates can be shareholders; other corporations and partnerships are generally not allowed.
  • Eligible Shareholders: Only U.S. citizens and resident aliens can be shareholders in an S-Corporation. Non-resident aliens are not allowed to hold shares.
  • One Class of Stock: S-Corporations can only have one class of stock. All shares must have the same rights and privileges, such as voting rights and distribution preferences. However, differences in voting rights are allowed if they are not tied to economic rights (e.g., distribution preferences).
  • Perpetual Existence: Perpetual existence refers to the concept that a business entity, such as an S-Corporation, can continue to exist indefinitely, regardless of changes in ownership or management. This means the corporation can outlive its original founders and shareholders and continue to operate even if individual shareholders pass away or decide to sell their shares.

This characteristic of an S-Corporation provides stability and continuity for the business, as it ensures that the corporation’s operations, contracts, and legal obligations remain unaffected by changes in ownership. It also makes it easier for the company to attract investors and raise capital. Potential investors can be confident that the business will continue to exist even if the original owners are no longer involved.

Disadvantages of Forming an S-Corporation

Despite these advantages, moving to an S corporation only sometimes makes sense – or at the very least, necessitates a thorough review of certain situations. The following issues may arise in particular:

Restrictions on Shareholders

S-Corporations are subject to specific restrictions, such as a maximum of 100 shareholders and limitations on the types of eligible shareholders (e.g., only individuals, certain trusts, and estates).

Single Class of Stock

S-Corporations are limited to issuing only one class of stock, which can limit flexibility in raising capital or creating different ownership structures. A single class of stock in an S-Corporation refers to the requirement that the corporation only issues one type of stock with equal rights and characteristics for all shareholders. This means that all shares of stock must have the same economic rights, such as dividend distribution preferences and liquidation rights, as well as voting rights. The single class of stock requirement is one of the key criteria the Internal Revenue Service (IRS) sets for a corporation to qualify for S-Corp status.

Increased Complexity

Forming and maintaining an S-Corporation requires more paperwork, record-keeping, and compliance with state and federal regulations than simpler structures like LLCs.

Franchise Tax

S-Corporations in Oklahoma are subject to the annual franchise tax, which can financially burden some businesses.

In an Oklahoma S-Corporation context, the franchise tax is usually based on the company’s income, net worth, or a combination of both. Since S-Corporations are pass-through entities for federal income tax purposes, meaning that their income is not taxed at the corporate level but rather passed through to individual shareholders, they may be exempt from or subject to lower franchise tax rates in some states than traditional C-Corporations.

However, S-Corporations must still comply with Oklahoma franchise tax requirements, which may include annual filings and tax payments. It is crucial for S-Corporation owners to understand the specific rules and regulations in their state of operation and to consult with a tax professional to ensure compliance and minimize their tax.

FAQs

How do I start an S-corporation in Oklahoma?
To start an S-corporation in Oklahoma, you need to file Articles of Incorporation with Oklahoma Secretary of State.
What are the advantages of starting an S-corporation in Oklahoma?
Some advantages of starting an S-corporation in Oklahoma are there are higher profitability opportunities and limited personal liabilities.
Are there any disadvantages to starting an S-corporation in Oklahoma?
One of the disadvantages of starting an S-corporation in Oklahoma is that the process of starting up can be expensive.
What is the cost of starting an S-corporation in Oklahoma?
The cost of starting an S-corporation in Oklahoma is $100.
Do I need a lawyer to start an S-corporation in Oklahoma?
No, you are not required by law to have a lawyer to start an S-corporation in Oklahoma.
What is an SSL number, and do I need one to start an S-corporation in Oklahoma?
An SSL (Social Security Number) is a requirement in order to apply for an EIN (Employee Identification Number), which is a requirement for tax purposes.
Do I need a registered agent for my S-corporation in Oklahoma?
Yes, you are required to have a registered agent for your S-corporation in Oklahoma.
What is a registered agent in Oklahoma?
A registered agent in Oklahoma is a person who accepts legal and administrative paper work on behalf of a company.
Can an Oklahoma LLC elect to be taxed as an S corporation?
Yes, an Oklahoma LLC can elect to be taxed as an S corporation by submitting an IRS Form 1120S.
How do I add members to my Oklahoma S-corporation?
To add a new member to an existing S-corporation in Oklahoma, the company may decide to execute a resolution.
Can out-of-state owners be shareholders of an Oklahoma S corporation?
Yes, out-of-state owners can be shareholders of an Oklahoma S-corporation.
Are there any limitations on the number of shareholders for an S-corporation in Oklahoma?
Yes, the number of shareholders for an S-corporation in Oklahoma is limited to 100 shareholders.
Can my S-corporation Registered Agent be the same person as the Company’s lawyer in Oklahoma?
Yes, your company’s lawyer can also be your registered agent in Oklahoma.
What is an Oklahoma S-corporation election?
An Oklahoma S-corporation election is a filing you make with the Internal Revenue Service as Congress statute which allows small business owners to elect current corporate structure, typically a C corporation, to be taxed legally as S corporation.
When do I have to file my S-corporation taxes in Oklahoma?
As a small business owner, the due date for filing your S corporation tax returns in Oklahoma is typically the 15th day of the fourth month.
What is “double taxation” for Oklahoma S Corporations?
Double taxation for Oklahoma S-corporations is when the company pays taxes on their earnings and the shareholders pay taxes on dividends that they distribute.
Can employees of an S-corporation also be shareholders?
Yes, employees of an S-corporation can also be shareholders.
Is personal liability protection granted to owners in an Oklahoma S corporation?
Yes, owners of an S-corporation in Oklahoma have personal liability protection.
What is the difference between an Oklahoma LLC and an Oklahoma S-corporation?
Some differences between an Oklahoma LLC and an S-corporation include LLCs don’t have stockholders and are known for profits and expenses whereas stock price of a corporation define the value of its holdings in corporations.
Can I change my Oklahoma LLC to an Oklahoma S-corporation?
Yes, companies operating in Oklahoma can change their business form from an LLC to an S-Corporation by filing an Internal Revenue Service Form 2553.
Is converting an LLC to an S-corp in Oklahoma taxable?
Yes, converting an LLC to an S-corporation in Oklahoma is taxable due to the conversion of LLC’s un-taxed retained earnings.
Do Oklahoma S-corporations file annual reports with state?
Yes, Oklahoma S-corporations file Annual reports with the Secretary of State’s office.
What are the stock issuance requirements for an Oklahoma S-corporation?
Requirements for stock issuance for Oklahoma S-corporation are virtually no different than other S-corporation because issue of stock is issuance of ownership or right of ownership.
Do Oklahoma S-corporations need to hold meetings for shareholders?
Yes, at least one shareholders meeting is required annually for Oklahoma S-corporations.
Can businesses operating in different states register for S-corporation in Oklahoma?
Yes, Non-Oklahoma Business can still file for an S Corporation in Oklahoma if it satisfies the IRS S-Corporation conditions with premise of starting the intra-state trade opportunities.
How does an Oklahoma S-Corporation differ from a regular corporation?
Regular corporations have had more rules to follow when it comes to distribution of ownership versus shareholders.
How long does it take to start up an S-corporation in Oklahoma?
It would take less than a week usually from making the decision and also depends on how quick NAICS( North American Industry Classification System search)identification number can be obtained.
What is an S-Corporation?
An S-Corporation is a type of corporation that passes corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.
How does combining corporations work in Oklahoma?
In Oklahoma, an S-Corporation can merge with and acquire another S-Corporation or C-Corporation.
Will I need a state license to have an S-Corporation in Oklahoma?
Yes, before starting an S-Corporation in Oklahoma, you’ll need to obtain an Oklahoma Business license.
Can an S-Corporation offer health insurance benefits to employees in Oklahoma?
Yes, S-Corporations in Oklahoma can provide health insurance benefits to their employees.
What is the minimum number of shareholders required to form an S-Corporation in Oklahoma?
You need to have only one shareholder to form an S-Corporation in Oklahoma.
Is Oklahoma a good state to start an S-Corporation?
Yes, Oklahoma is a good state to start an S-Corporation owing to its favorable tax provisions and investment-friendly climate.
Is it mandatory to have a registered agent for an S-Corporation in Oklahoma?
Yes, it is mandatory to have a registered agent for an S-Corporation in Oklahoma.
What are the incorporation fees in Oklahoma for starting an S-Corporation?
The incorporation fees in Oklahoma differ according to the type of incorporation. As for S-Corporation, it demands a $100 filing fee.
Will I require an operating agreement when forming an S-Corporation in Oklahoma?
It isn’t mandatory; however, the presence of an operating agreement will provide organizational detail and may be demanded by some banks and investors.
Does forming an S-Corporation affect my tax liability in Oklahoma?
It would help if you spoke to a tax consultant while making your financial decisions, though an S-Corporation that owns property in Oklahoma may need to file taxes as Oklahoma income.
What is the turn around time to start an S-Corporation in Oklahoma?
In Oklahoma, the expected turnaround time is three to five business days.
Can a non-profit entity be formed as an S-Corporation in Oklahoma?
No, non-profit organizations cannot incorporate in Oklahoma as S-Corporations.
Will I need to conduct any IRS setup while forming an S-Corporation in Oklahoma?
Yes, the corporation will need a registered agent, articles of incorporation, and an S-Corp election form filed with the IRS, among many things.
Is there an age limit to begin an S-Corporation in Oklahoma?
There is no age limit to start an S-Corporation in Oklahoma.
Will my company be subject to Arkansas franchise tax?
No, S-Corporations in Oklahoma are not subject to Arkansas franchise tax.
What is the minimum share capital requirement to form an S-Corporation in Oklahoma?
There is no specific requirement laid out by Oklahoma, but each shareholder must have contributed to the S-Corp’s startup.
Can an LLC become an S-Corporation in Oklahoma?
Yes, an LLC can submit an active election satisfying the criteria established by the state.
Can a foreign entity file for an S-Corporation in Oklahoma?
Yes, out-of-state individuals may organize an S-Corporation in Oklahoma.
Can an S-Corporation’s profits be scattered among its shareholders?
Yes, an S-Corporation’s profits are allocated among shareholders.
Can an S-Corporation dissolve in Oklahoma?
Yes, S-Corporations in Oklahoma can dissolve through numerous procedures adapted in every state just to ensure that certain criteria are fulfilled.
Will the shareholders of an S-Corporation be answerable for its debts?
Under corporate regulations, shareholders will typically not be personally answerable except in specific situations specified by Oklahoma law.
What documents do I require to form my S-Corporation in Oklahoma?
Articles of incorporation, bylaws, and several additional documents must be drafted, collectively permitting the corporation’s establishment.
Can I register an S-Corporation electronically on my own?
Yes, you can complete some of the filing processes online within Oklahoma’s Secretary of State’s website.
Can I move my S-Corporation to another address in Oklahoma?
Yes, your registered office address can change, but a formal notification to the Secretary of State is required for the filing to be effective.
As an S-Corporation, can I forfeit purchases tax in Oklahoma?
Given the structure, S-Corporations seem to not have such clauses o offer sales tax in credits but can seek certain tax breaks through deductibles.
Is an apostille demanded to form an S-Corporation in Oklahoma?
An apostille ensures that any further authorized notary status can be used throughout Europe; so Oklahoma will need any public document binding under the affirmation of the Oklahoma Secretary of State with an apostille.
How long can maintenance on my Oklahoma S-corporation stay pending when I have voided its existence?
If dissolved in Oklahoma, upkeep periods to initiate re-emprinting of the same S-corporation allows up to two years duration ahead of declaring its maturity based on the demand it exhibits.
Do agricultural ventures in Oklahoma meet the statutory standards for Oklahoma S corporations for tax purposes?
The satisfaction of the relevant demands is an assessment that should be made only after the needs state has been consulted with relevant farming programs and tax advisors.

Also Read

Why You Should Start Oklahoma S Corp

One of the main reasons why starting an S Corp in Oklahoma is a smart choice is the tax benefits it offers. S Corporations are known for their pass-through taxation, which means that the company itself does not pay taxes on its profits. Instead, the profits are passed through to the individual shareholders who then report the income on their personal tax returns. This can result in significant tax savings for business owners, especially when compared to other business entities, such as C Corporations.

In addition to tax benefits, S Corporations in Oklahoma also offer limited liability protection for their shareholders. This means that the personal assets of the shareholders are typically protected from any business debts or liabilities. In the event that the company is sued or faces financial trouble, the shareholders are not personally responsible for the debts of the business. This can provide peace of mind for business owners who want to protect their personal assets.

Furthermore, starting an S Corp in Oklahoma can offer more credibility and professionalism for your business. By establishing your company as a legal entity, you can show customers, partners, and investors that you are serious about your business and are committed to following proper legal procedures. This can help build trust and legitimacy for your company, which can be crucial for attracting clients and growing your business.

Moreover, S Corporations in Oklahoma also have greater flexibility when it comes to ownership and structure. Unlike other business entities, S Corporations can have up to 100 shareholders, which can make it easier to attract investors and raise capital for your business. Additionally, S Corporations can issue different classes of stock, allowing for more flexibility in managing ownership and voting rights within the company.

Overall, starting an S Corp in Oklahoma can be a wise decision for small business owners looking to take their company to the next level. With tax benefits, limited liability protection, credibility, and flexibility, S Corporations offer a range of advantages that can help small businesses thrive and grow. If you are considering starting a business in Oklahoma, be sure to explore the benefits of forming an S Corporation and see how it can help you achieve your business goals.

Conclusion

Forming an S-Corporation in Oklahoma can be a beneficial decision for small business owners seeking liability protection, pass-through taxation, and easier transfer of ownership. By meeting the requirements set by the IRS and following the necessary steps, business owners can take advantage of an S-Corp’s unique structure and benefits. However, it is essential to consider the potential drawbacks, such as increased paperwork and limitations on ownership, before making a final decision. Consulting with a legal or financial professional can help business owners determine if an S-Corporation is right for their needs and goals.

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