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  • Writer's pictureJonathan Udoka

Starting a Business in Oklahoma Part 2: Which legal structure is best for you and your business?

After you’ve finalized a name for your new business, it’s time to tackle the task of how to structure the business. The Oklahoma Secretary of State website ( provides resources to better understand the different structures and how to file each, but let’s break them down so you’re better prepared for what you will see.

Oklahoma lets you structure your business in one of six different ways. Foremost, there is the sole proprietorship. Sole proprietorships make up the majority of businesses in the country because they are the simplest to form and easiest to operate. A sole proprietorship has only one owner, and that owner has complete managerial control as well as complete personal liability for the business. That means that if the business does well, a sole proprietor reaps all the benefits. If the business suffers, the owner’s personal property can be used to cover any debts. Sole proprietorships do not need to be registered with the state.

Next, a business can be organized as one of three different kinds of partnerships: a general partnership, a limited partnership, or a limited liability partnership. Limited liability partnerships are more like LLCs then the other partnerships, so they will be discussed later in this post with LLCs. All partnerships require two or more co-owners. The co-owners do not need to be individuals but can be another legal entity. If a business has two co-owners and has not submitted the paperwork to become a corporation or an LLC, then by default it will become a partnership. Partners share the profits of the business and share control over the business’s affairs based on what kind of partnership it is.

Like a sole proprietorship, a general partnership does not need to be registered with the state. The partners share profits, losses, and the management of the business. Each partner is personally and equally liable for any debts the partnership may accrue. While not necessary, a general partnership may draft the terms of business into a binding written partnership agreement.

A limited partnership must be registered with the Secretary of State to exist as such. Limited partnerships have two levels of partnership. General partners manage the day-to-day operations of the business and share in all of its profits and all of its losses. Limited partners share in the profits, but their losses are limited to the amount that they have invested in the business. Limited partners usually do not participate in the daily operations.

Finally, we come to the last and most complex of the business structures: corporations, limited liability companies, and limited liability partnerships. These structures must be registered with the Secretary of State or the business will default to a partnership.

A corporation is a legal entity separate and distinct from those who own it and those who work for it. Corporation own property, pay taxes, can sue and be sued, and issue shares of stock (unites of ownership). In some corporations, the shareholders will elect a director or a board of directors to run the business. Corporations are attractive business structures because owners are generally not personally liable for the business’s debt and the corporation may yield other tax or financial benefits. However, these benefits may be outweighed by licensing fees, lack of personal control, or other management requirements. It is important to determine what the balance would be for your specific business before making any final decisions to incorporate. Corporations may either be formed as for profit or nonprofit purposes.

Limited liability companies (LLCs) and limited liability partnerships (LLPs) are the newest of the business structures in Oklahoma. LLPs operate like a general partnership, except that partners are protected from personal liability if another partner acts negligently. They are most commonly used for professional practices, like lawyers or accountants, but otherwise carry the same protections as LLCs. LLCs and LLPs are formed by a written agreement of individuals or entities. The agreement discloses the details of the organization of the business, its management, how the profits and losses will be distributed, and how interests will be assigned. Other than insurance or banking, any lawful or for-profit business can structure as an LLC or LLP.

Next week, we’ll talk about the registration process for limited partnerships, corporations, LLCs, and LLPs. Stay tuned!

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