LLC vs. S Corp in Oklahoma 2024: A Comprehensive Comparison

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LLC vs. S Corp in Oklahoma: Understanding the Differences

Embarking on the entrepreneurial journey in Oklahoma, also known as The Sooner State, is an exciting and transformative experience. Oklahoma LLC and S Corporation are two popular options that often top the list of considerations for entrepreneurs. This article serves as your comprehensive guide, comparing LLC vs. S Corp in Oklahoma and ultimately assisting you in determining the best fit for you.

Dive into business formation with confidence and clarity as LLCBase expert analysis simplifies the complexities of LLCs and S Corps, shedding light on their unique advantages and drawbacks. So, let’s explore the fascinating world of LLCs and S Corps and set your business on the path to success in Oklahoma.

What are an LLC and an S-Corp

A Limited Liability Company (LLC) is a popular legal business structure that offers a combination of benefits from both corporations and partnerships. It is specifically designed to provide personal asset protection to its owners, known as members. This protection ensures that the owner’s personal assets are separate from the business liabilities, such as debts and lawsuits.

In Oklahoma, forming an LLC involves several steps, including paying an initial filing fee. Additionally, LLCs in Oklahoma are required to pay an annual fee of $25 to maintain their legal status and stay compliant with the state regulations.

An LLC in Oklahoma offers an attractive option for entrepreneurs seeking a flexible business structure with added liability protection and favorable tax treatment.

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On the other hand, an S-Corporation, or S-Corp, is not a separate legal business entity like an LLC. Rather, it is a tax classification that existing corporations and LLCs can elect. A business can bypass double taxation by opting for this tax status, as the profits and losses are directly passed through to the owner’s personal tax return. Starting an S Corp in Oklahoma  allows business owners to report and pay taxes on their business income as part of their individual income tax filings, eliminating the need for separate corporate taxes.

In Oklahoma, it is crucial for business owners considering this tax classification to fully understand the implications and requirements of being an S-Corp in Oklahoma. This includes adhering to specific rules and regulations related to ownership, shareholder limits, and tax filing deadlines. If you want to start an S-Corp, LegalZoom will help you every step of the way!

LLCs and S-Corporations Comparison

Let’s explore the comparison between LLCs and S-Corporations to help you make an informed decision.

1. Taxation Differences in Oklahoma

One of the main differences between LLCs and S-Corporations in Oklahoma lies in how they are taxed. LLCs are typically subject to pass-through taxation, meaning the business profits and losses are reported on the owner’s personal tax return. In contrast, S-Corporations must adhere to specific tax requirements, including distributing salaries to shareholders and adhering to the state’s income tax rate.

  • Federal Taxes: When choosing between an LLC or S-Corporation in Oklahoma, it’s essential to consider several federal tax factors. These factors include differences in Pass-Through Taxes and Self-Employment Taxes.
  • Pass-Through Taxes: Both LLCs and S-Corporations in Oklahoma benefit from pass-through taxation at the federal level. Due to pass-through taxation, these entities do not pay federal income taxes as separate legal entities. Instead, their owners are required to pay federal income taxes on their share of the business income. This type of taxation prevents the company from being taxed twice. In contrast, C-Corporations in Oklahoma are subject to double taxation, meaning they must pay federal taxes at the entity level and their owners’ taxes.
  • Self-Employment Taxes: Many LLC owners in Oklahoma opt for S-Corporation taxation to reduce their self-employment taxes. An S-Corporation owner is not considered self-employed; they can become an employee of the company and receive regular salary benefits. Conversely, an LLC member must include their guaranteed payments and a portion of the LLC’s earnings when calculating their self-employment tax. Share distributions determine the corporate income of S-Corporation shareholders. For example, suppose you are the sole owner of an LLC in Oklahoma with an annual profit of $150,000 and a fair wage for someone in your location doing the same job as you is $100,000. Under the default LLC taxation, you must pay self-employment taxes on the $150,000 profit. However, if your company is taxed as an S-Corp in Oklahoma, you would be responsible for paying payroll taxes only on the $100,000 standard wage. Income tax would still apply to the remaining $50,000.
  • Oklahoma State Taxes: No major tax differences exist between regular LLCs and S-Corporation LLCs at the state level. For filing an annual report in Oklahoma, it costs $25, which can be paid to the OR Secretary of State. Additionally, before forming the LLC, you must pay $100.

On the other hand, if you form an S-Corporation in Oklahoma, you will also need to pay taxes. This includes the S-Corp filing fee and an annual report fee after establishing your S-Corp for one year. You must also go to the OR Secretary of State to make these payments.

2. Liability Protection

LLCs and S-Corporations in Oklahoma provide liability protection for their owners. This means that the owner’s personal assets are protected from business debts and lawsuits. However, S-Corporation status does not offer the same level of protection as an LLC, as it is primarily a tax designation.

The following factors exclude certain individuals and entities from becoming shareholders in an S-Corporation in Oklahoma:

  • Insurance businesses
  • Domestic international sales corporations
  • Partnerships
  • Corporations
  • Unauthorized immigrants
  • Specific financial institutions

While understanding the ownership requirements of LLCs and S-Corporations in Oklahoma is essential, seeking legal counsel when establishing your business is still advisable. For assistance with your Oklahoma LLC or Oklahoma S-Corp, consider consulting with professionals.

3. Ownership Requirements and Restrictions

LLCs and S-Corporations in Oklahoma have specific ownership requirements and restrictions. For instance, an LLC can have unlimited members, while an S-Corporation is limited to 100 shareholders. Additionally, S-Corporations can only have one class of stock and must follow strict rules regarding shareholder eligibility.

Easier to File in Oklahoma: LLCs or S-Corporations

While filing an LLC or S-Corporation in Oklahoma requires time and preparation, proper planning can make the process manageable. Both LLCs and S-Corporations can be filed through the Oklahoma Registered Agent.

To start an LLC in Oklahoma, you must submit the Articles of Organization to the Oklahoma Secretary of State. This document should contain all the necessary information for your LLC, along with the payment of the associated filing fee.

On the other hand, if you want to elect S-Corporation status for your Oklahoma LLC, you will need to submit additional paperwork. First, file Form 8832 with the Internal Revenue Service (IRS) to indicate your preference to tax your LLC as a corporation rather than a partnership. Next, submit Form 2553 to choose S-Corporation status.

Remember, maintaining legal compliance is crucial for your LLC. This means submitting annual tax returns and reports after establishing your business entity.

With that, we’ve carefully curated a list of the best LLC services in Oklahoma to support and guide you through filing an LLC and S-Corp. Check them out!

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Filing Process for LLCs vs. S-Corporations in Oklahoma

Forming an LLC in Oklahoma involves several crucial steps. To start, you must file Articles of Organization with the Oklahoma Secretary of State and pay the associated filing fee of $100. Once your LLC is established, you must comply with annual reporting and tax requirements.

On the other hand, if you want to elect an S-Corporation status for your existing LLC or corporation, the process is slightly different. Firstly, you must file Form 8832 with the Internal Revenue Service (IRS) to classify your LLC as a corporation for tax purposes. Then, you must submit Form 2553 to the IRS to choose S-Corporation status. In Oklahoma, the S-Corporation filing fee is $25 for online, by mail filing or in person filing..

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The LLC formation and S-Corporation election processes can be completed through three methods that are online, by mail and in-person. Online incorporation is available at Create an account/Log in to the SOS site, get the online form, fill it, and submit online, while offline incorporation can be done at Send the form by mail or drop it off in person at Oklahoma Secretary of State, 421 N.W. 13th Suite 210, Oklahoma City, OK 73103. It is essential to stay up-to-date with any ongoing reporting and tax requirements for your chosen business structure.

The filing process for LLCs and S-Corporations in Oklahoma varies slightly, with each requiring specific forms and fees. It’s essential to consider the unique requirements of each business structure before making a decision. Consulting with a legal or financial advisor can provide valuable guidance on which structure best suits your business in Oklahoma.

FAQs

What is an LLC?
An LLC (Limited Liability Company) is a type of business entity formed by filing Articles of Organization with the Oklahoma Secretary of State.
What is an S Corporation?
An S Corporation is a type of corporation that elects to be treated as a pass-through entity for tax purposes.
What are the advantages of forming an LLC?
The advantages of forming an LLC include limited liability protection for its owners, pass-through taxation, and flexibility in its management structure.
What are the advantages of forming an S Corporation?
The advantages of forming an S Corporation include limited liability protection for its owners, pass-through taxation, and the potential for tax savings if an owner is also an employee.
How is an LLC taxed in Oklahoma?
In Oklahoma, LLCs are usually treated as S Corporations for tax purposes if they meet certain requirements.
How is an S Corporation taxed in Oklahoma?
In Oklahoma, S Corporations are taxed as pass-through entities, meaning the income passes through to the shareholders and is taxed as individual income.
Can an LLC elect to be taxed as an S Corporation in Oklahoma?
Yes, in Oklahoma an LLC can elect to be taxed as an S Corporation by filing Form 2553 with the IRS and registering with the Oklahoma Tax Commission.
Can an S Corporation elect to be taxed as an LLC in Oklahoma?
No, an S Corporation cannot elect to be taxed as an LLC in Oklahoma.
What are the requirements for forming an LLC in Oklahoma?
To form an LLC in Oklahoma, you must file Articles of Organization with the Oklahoma Secretary of State, pay a filing fee, and appoint a registered agent.
What are the requirements for forming an S Corporation in Oklahoma?
To form an S Corporation in Oklahoma, you must file Form 2553 with the IRS, file Articles of Incorporation with the Oklahoma Secretary of State, pay a filing fee, and appoint a registered agent.
What is the process for forming an LLC in Oklahoma?
The process for forming an LLC in Oklahoma involves filing Articles of Organization with the Oklahoma Secretary of State, paying the filing fee, and appointing a registered agent.
What is the process for forming an S Corporation in Oklahoma?
The process for forming an S Corporation in Oklahoma involves filing Form 2553 with the IRS, filing Articles of Incorporation with the Oklahoma Secretary of State, paying the filing fee, and appointing a registered agent.
Are there any annual requirements for LLCs in Oklahoma?
Yes, LLCs in Oklahoma must file an Annual Certificate with the Oklahoma Secretary of State each year and pay an annual fee.
Are there any annual requirements for S Corporations in Oklahoma?
Yes, S Corporations in Oklahoma must file an Annual Report with the Oklahoma Secretary of State each year and pay an annual fee.
What is the liability protection for LLC owners in Oklahoma?
LLC owners in Oklahoma have limited liability protection, meaning their personal assets are not at risk if the business is sued or faced with debt.
What is the liability protection for S Corporation shareholders in Oklahoma?
S Corporation shareholders in Oklahoma have limited liability protection, meaning their personal assets are not at risk if the business is sued or faced with debt.
Can foreign entities form LLCs or S Corporations in Oklahoma?
Yes, foreign entities can form LLCs or S Corporations in Oklahoma, but they must appoint a registered agent who is authorized to do business in the state.
Can LLCs or S Corporations in Oklahoma change their business entity type?
Yes, LLCs or S Corporations in Oklahoma can change their business entity type by filing the appropriate paperwork with the Oklahoma Secretary of State.
What is the minimum number of owners for an S Corporation in Oklahoma?
The minimum number of owners for an S Corporation in Oklahoma is one.
What is the minimum and maximum number of owners for an LLC in Oklahoma?
There is no minimum or maximum number of owners for an LLC in Oklahoma.
Can corporations or partnerships own an LLC in Oklahoma?
Yes, corporations or partnerships can own an LLC in Oklahoma.
Can individuals from different states be owners of an LLC or S Corporation in Oklahoma?
Yes, individuals from different states can be owners of an LLC or S Corporation in Oklahoma.
Can an LLC or S Corporation in Oklahoma be dissolved voluntarily?
Yes, an LLC or S Corporation in Oklahoma can be dissolved voluntarily by filing the appropriate paperwork with the Oklahoma Secretary of State.
What happens to an LLC or S Corporation in Oklahoma if an owner or shareholder dies?
When an owner or shareholder dies, their interest in the LLC or S Corporation is transferred to their heirs or beneficiaries, unless otherwise specified in the business’s Operating Agreement or Bylaws.
How do you choose between forming an LLC or S Corporation in Oklahoma?
Your choice between forming an LLC or S Corporation in Oklahoma will depend on factors such as the number of owners, taxation, liability protection, and management structure.
What is the cost difference between LLC and S Corporation formation in Oklahoma?
The cost difference between LLC and S Corporation formation in Oklahoma is minimal, as both require filing fees and other associated costs.
Can an LLC or S Corporation in Oklahoma sell its business assets?
Yes, an LLC or S Corporation in Oklahoma can sell its business assets.
Can LLCs or S Corporations in Oklahoma engage in any business activity?
LLCs or S Corporations in Oklahoma can engage in any lawful business activity, unless otherwise restricted by law or their Operating Agreement/Bylaws.
What is a Limited Liability Company (LLC) in Oklahoma?
A Limited Liability Company (LLC) in Oklahoma is a business structure that offers the legal protection of a corporation while allowing owners to report business gains and losses on their individual tax returns.
Can an LLC formation in Oklahoma be done online?
Yes, an LLC formation in Oklahoma can be done online by filing articles of organization with the Oklahoma Secretary of State.
What are the filing fees for an LLC in Oklahoma?
The filing fees for an LLC in Oklahoma is currently $100 (as of 2021).
What is an S Corporation in Oklahoma?
An S Corporation in Oklahoma is a business entity that combines the legal protection of a corporation with the pass-through taxation of a partnership or sole proprietorship.
Is the formation of an S Corporation in Oklahoma a good idea?
The decision to form an S Corporation in Oklahoma would depend on each business’s individual circumstances.
How is ownership of an LLC in Oklahoma structured?
Ownership of an LLC in Oklahoma is structured through member interests.
How do owners of an LLC in Oklahoma report income on their tax returns?
Owners of an LLC in Oklahoma can report business gains and losses on their individual tax returns using Schedule C or Form 1065.
Is there a limit on the number of members an LLC in Oklahoma can have?
No, there is no limit on the number of members an LLC in Oklahoma can have.
How is ownership of an S Corporation in Oklahoma structured?
Ownership of an S Corporation in Oklahoma is through shareholders.
Can nonresidents of Oklahoma own an LLC or S Corporation in Oklahoma?
Yes, nonresidents of Oklahoma can own an LLC or S Corporation in Oklahoma.
Are there any annual reports required for an LLC in Oklahoma?
Yes, an annual certificate must be filed with the Oklahoma Secretary of State each year by an LLC in Oklahoma.
Are there any annual reports required for an S Corporation in Oklahoma?
Yes, an annual report must be filed with the Oklahoma Secretary of State each year by an S Corporation in Oklahoma.
What is the initial cost of setting up an LLC in Oklahoma?
The initial cost of setting up an LLC in Oklahoma is the state filing fee of $100.
What is the initial cost of setting up an S Corporation in Oklahoma?
The cost of setting up an S Corporation in Oklahoma is similar to that of an LLC cost.
Can an LLC or S Corporation do business nationwide?
Yes, both LLCs and S Corporations in Oklahoma can do business nationwide.
Is a Registered Agent required for an LLC or S Corporation in Oklahoma?
Yes, a registered agent is required for both LLCs and S Corporations in Oklahoma.
Is there a salary limit for S Corporation shareholders in Oklahoma?
Shareholders in Oklahoma are required to take a “reasonable compensation” of salary, but there is no specific salary limit.
Can a foreign LLC or S Corporation do business in Oklahoma?
Yes, a foreign LLC or S Corporation can register as a foreign entity and do business in Oklahoma.
Do LLCs or S Corporations in Oklahoma have to withhold taxes from employee paychecks?
Yes, both LLCs and S Corporations in Oklahoma have to withhold federal income taxes, Social Security taxes, and Medicare taxes from employee paychecks.
Does Oklahoma tax out-of-state S Corporations?
Oklahoma taxes out-of-state S Corporations based on their Oklahoma source income.
Do local LLCs or S Corporations in Oklahoma have to pay use taxes?
Yes, local LLCs or S Corporations in Oklahoma have to pay sales and use taxes on goods and services used within the state.
What is the liability protection for an S Corporation?
An S Corporation in Oklahoma has the legal protection of broader liability benefits without having to be subject to the double taxation imposed on larger companies.
What is the personal liability protection for LLCs in Oklahoma?
LLCs in Oklahoma provide personal liability protection where sole proprietorship​ and partnership do not.
What categories of taxes are used for LLCs or S Corporations in Oklahoma?
LLCs or S Corporations in Oklahoma are subject to the same federal income and employment taxes levied on sole proprietorship or partnership.
What documents need to be filed for registering a business name in Oklahoma?
A business name is registered by filing an Application for assumed name with the secretary of state.
Where are the bylaws for LLCs or S Corporations in Oklahoma available?
If you form an LLC or S corporation in Oklahoma, the state typically does not require creation of bylaws or operating agreement documents.
Can an LLC or S Corporation in Oklahoma later convert its structure to another type of business entity?
Yes, conversion is possible but always consult the state requirements.

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Conclusion

Navigating the world of business structures and filings may seem daunting, but with the right information and guidance, you can confidently make the best decision for your unique entrepreneurial journey. Remember, the path to success is paved with well-informed choices and a clear understanding of your business goals. So, take the time to research, consult with professionals, and weigh the pros and cons of LLCs and S-Corporations in Oklahoma.

As you embark on this exciting adventure, remember that a strong foundation built on sound legal and financial principles will be the backbone of your thriving enterprise. Embrace the challenge, stay curious, and always remember your passion and vision. Visit LLCBase today to access valuable resources, expert guidance, and personalized support tailored to your needs. Don’t wait any longer – let us help you realize your entrepreneurial dreams. 

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