Do you want to form a limited partnership (LP) in Oklahoma, but you’re not familiar with the formation process?
A limited partnership can be a great alternative to a general partnership, but the LP is definitely more difficult to form compared to the more casual nature of the general partnership. In this guide, we’ll discuss all the crucial details of forming this business type in Oklahoma.
What Is an Oklahoma Limited Partnership?
There are several significant differences between the general partnership and the limited partnership (LP), starting with the roles of the partners themselves. With a general partnership, the partners split profits evenly and take equal responsibility when it comes to liability ― general partners are personally liable for the company’s debts and settlements.
With a limited partnership (not to be confused with the LLC), there is at least one general partner and one limited partner, which is the term for a partner that does not have managerial responsibilities, and their liability is limited to the amount of money they invested in the partnership.
Sometimes, you’ll hear limited partners referred to as “silent partners” due to their lack of direct involvement in the day-to-day operations of the company.
Another major difference is that the general partnership is not a formal business structure, which means you don’t even need to file formation documents with the state of Oklahoma, or pay any sort of formation fee. The general partnership is simply formed when the partners begin transacting business together.
On the other hand, a limited partnership does have a formal formation process with the Oklahoma state government, and there is also a formation fee involved.
How to Form an Oklahoma Limited Partnership (in 6 Steps)
Step One) Choose an LP Name
Whereas the state of Oklahoma allows general partnerships to operate under the individual names of the partners, that is not the case for limited partnerships, which must have a distinct business name.
Your limited partnership’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In Oklahoma, all limited partnerships are required to have the words “Limited Partnership” contained in the title. Abbreviations such as LP or L.P. are also acceptable. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Another aspect to consider is including language that explains what your business does ― for example, if you’re a realtor, put the phrase “real estate” in your LP name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your limited partnership’s name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LP is to not get too attached to any one business name until you have either reserved the name with the state of Oklahoma, or you’ve officially formed your business.
Before claiming a business name, you’ll first need to check its availability by looking it up on Oklahoma’s Business Entities Search. It’s also advisable that you use the U.S. Patent & Trademark office’s TESS System to see if it has been previously trademarked.
When you establish that a name is available, you may reserve it by completing a Trade Name Report and filing it with the Oklahoma Secretary of State along with a $25 fee. Alternatively, you may choose to simply reserve the name for a 60 day period for a lesser fee of $10.
Get Your Business Domain
To fully embrace the business name, register your URL. With GoDaddy you’ll be able to quickly build a company website so that nobody else can use or take it.
Step Two) Designate a Registered Agent
Every limited partnership in Oklahoma is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Oklahoma Secretary of State,
All Oklahoma limited partnerships must continuously maintain a registered agent and registered office in this state. The agent may be the domestic limited partnership itself, an individual resident of this state, a domestic corporation, limited partnership, limited liability company or a foreign corporation, limited liability company or a limited partnership authorized to transact business in this state. The registered agent accepts service of process in the event of a lawsuit against the limited partnership. The registered office address must be a street address and cannot be a post office address. Rural routes and box numbers are acceptable.”
Without a registered agent in Oklahoma, you could lose your good standing and the state also has the right to dissolve your LP if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend designating a registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File the Certificate of Limited Partnership
At this point, it’s time to legally form your new limited partnership.
Doing so will require the filing of an Oklahoma Certificate of Limited Partnership. To complete the document, you’ll need the following details:
- Name of the limited partnership
- The office address
- Name and address of the registered agent
- Name and address of all general business partners
- The term of existence
- Any other matters the general partners choose to include
- Signature of all general partners
To complete the Oklahoma Certificate of Limited Partnership, you can find it here as a PDF file. After completion, you must send it to the Oklahoma Secretary of State along with the filing fee.
Cost to Form an LP: The state of Oklahoma charges a filing fee of $100 to form a limited partnership.
Processing Time: The Oklahoma Secretary of State lists no standard processing time for the Certificate of Limited Partnership document.
Step Four) Create a Limited Partnership Agreement
While not legally required by the state of Oklahoma, a limited partnership agreement outlines some of the key operating principles of the business. Even though you don’t have to submit it to the state to form your LP, it’s still a vital document that describes the exact nature of the agreement between the general partners and limited partners.
The information included in a limited partnership agreement does vary depending on the nature of your business, the size of your company, and some other variables. In general, it’s good to get the following information down in writing:
- The term (in years) of your partnership
- Identities and roles of general and limited partners
- Initial capitalization and ongoing capital contributions
- Allocation of profits/losses
- Management structure
- Voting rights and meeting plans
- Accounting and record-keeping practices
- Conditions for transfer and dissolution
Step Five) Handle Taxation Requirements
Limited partnerships require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LP functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LP for free through the IRS.
To determine which state-level taxes your limited partnership is required to pay and pay them, you must first register your limited partnership with the Oklahoma Tax Commission (OTC).
If your limited partnership buys or sells any goods, you will most likely be liable to pay sales tax and use tax. If you have any employees, other withholding taxes will likely be necessary.
To determine your tax responsibilities and gather more information on Oklahoma taxes, consult the Information Sections of the OTC website for more details. For those who require further assistance, the state has Taxpayer Assistance Offices which can be consulted at your convenience, or you may choose to attend one of the state’s Business Tax Workshops near you.
Depending on where in Oklahoma your business is located, you may also need to pay local taxes.
For example, Oklahoma City has its own sales, hotel, and use tax and Tulsa has a local lodging tax. To ensure you’re meeting all local tax requirements, you’ll need to consult the tax section of your local government website.
Step Six) Obtain Business Licenses and Permits
Oklahoma has no standard business license, but depending on the nature of your limited partnership you may be required to obtain several state or locally-issued licenses and permits.
Most state-level licenses are industry-specific. The most common businesses that require additional licensing include those involved in construction, retail, restaurants, bars, wholesale, consumer credit services, and transporting. Thankfully, the Oklahoma Department of Commerce provides extensive explanation and resources on its Business Licensing and Operating Requirements page.
Outside of state-level licenses, you’ll also want to consult the local government of the municipality in which your LP does business in order to ensure it meets all local requirements. For example, Oklahoma City, Tulsa, and Edmond all have their own specific licensing and permit requirements that must be met in addition to state licenses.
Would You Prefer a Professional Form Your LP?
If you would rather have a professional take care of your formation paperwork for you, you have a couple of options. The less expensive choice is to hire a business formation service to create your limited partnership.
While some service providers stick to less complicated business entities like limited liability companies, some of our favorite options also provide LP formations ― namely, LegalZoom and BizFilings. Either one of them should do a great job forming your new LP.
If you want the maximum possible degree of expertise, you should also consider hiring a business attorney to form your limited partnership. This is certainly a more expensive route, but if you want the peace of mind that every step is completed correctly ― and that all of your options have been thoroughly explored ― hiring a lawyer is a great option.
Next Steps: What to Do After Creating an Oklahoma LP
Open a business bank account
We highly recommend that you establish a business bank account so that your business and personal finances are maintained separately. This is important because it helps protect your personal assets, and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
When it comes to insurance, there is no state law which requires employers in Oklahoma to offer group healthcare insurance, but there are several other types of insurance that your Oklahoma limited partnership may need to carry. For example, if you have any employees, you will likely need both state unemployment insurance (UI) as well as workers’ compensation insurance. For more information on unemployment insurance and how to pay it, you’ll need to consult the Oklahoma Employment Security Commission. To obtain workers’ compensation insurance, you’ll need to contact your business’s insurance agent. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
Income reportingLimited partnerships do not file business tax returns. Instead, the income is passed through the business entity to the partners, who then claim their share of profits or losses on their personal tax returns. Still, LPs do need to file an annual information return with the IRS, in which you report your business income, deductions, gains, and losses for the year.
In order to remain in good standing with the state, Oklahoma requires that all limited partnerships file an annual report. The annual report, which is often referred to as an “Annual Certificate,” must be filed each year by the anniversary of the date of your LPs formation. This may be done by completing the document here as a PDF or filing it online through the Online Business Filing System.
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.