If you’re a licensed professional looking to start your own business, you need to make sure you pick the right entity type. One of your options is to create a professional corporation (PC), an entity that provides liability protection and is specially tailored for those who need a license or other certificate to properly practice in Oklahoma. Let’s take a closer look at how a PC structure works and if it is a good fit for your business.
Determine whether an Oklahoma PC is the right corporate structure for you
Oklahoma provides multiple options for professionals seeking to form a business entity. Oklahoma considers professional services to be services rendered by:
- Physicians, surgeons, or doctors
- Physical therapists
- Registered nurses
- Professional engineers
- Land surveyors
- Occupational therapists
- Others detailed by statute (Oklahoma Corporations Code Chapter 18)
In addition to PCs, Oklahoma’s Professional Entity Act permits professional limited liability companies (PLLCs), professional limited partnerships (PLPs), and professional limited liability partnerships (PLLPs) to be formed for the purpose of rendering professional services.
Oklahoma PC Features
Professional corporations must comply with the requirements dictated by Oklahoma law, including:
- Mandatory meetings
- Issuance of shares
- Voting requirements
Despite the stringent formalities, PCs do protect the directors and shareholders of the PC from being held personally liable for the debts of the PC.
Like a general/regular corporation, ownership of the company is distributed through stocks among the shareholders of the PC, while day-to-day operations of the PC are handled by the board of directors.
By default, Oklahoma PCs pay taxes on the business’s profits, and the shareholders are taxed for the profits again on their individual tax returns. This is known as “double taxation.” In some circumstances, Oklahoma PCs can elect S corporation tax status, mirroring that of a PLLC.
Oklahoma PLLC Features
Instead of shareholders, members comprise the ownership of PLLCs. Unlike a PC, PLLCs are not bound by strict formalities of corporate governance and have the flexibility to outline the duties, responsibilities, rights, and powers of their members.
Because the liability protections for PCs and PLLCs in Oklahoma are similar, most professionals opt for the PLLC due to the simplicity of formation and freedom to outline their own management structure.
PLLCs automatically receive “pass-through” taxation status, meaning that the company’s profits are taxed only once, on the individual tax returns of the PLLC’s members.
Oklahoma PLLP Features
Like PLLCs, Oklahoma PLLPs allow general partners to detail the organization, management, and procedures of the business through a written agreement. The general partners, or members, of a PLLP own a membership interest in the company but are protected from being held personally liable for the debts of the company. PLLPs are not taxed as businesses. Rather, the general partners are responsible for including their share of the profits and losses of the business on their personal state and federal tax returns.
Choose a name for your Oklahoma PC
Oklahoma law requires all corporation names to contain one of the following words or their abbreviation:
The chosen word or abbreviation must also be modified by the word “professional,” “PC,” or “P.C.”
Beyond these naming requirements, the name chosen for your Oklahoma PC has to be available in the state. The Oklahoma Secretary of State website provides a Name Availability Search tool to allow you to search for registered Oklahoma business names.
If you have the right name selected for your Oklahoma PC but aren’t quite ready to form your business, there is always a chance someone else could register their Oklahoma business under the same name. All the hard work you put into figuring out the perfect name would be wasted. You can prevent this disappointment by using ZenBusiness’s name reservation service.
Once you’ve decided on a name for your business, you might want to advertise your brand to potential customers. Many clients search for products and services online, so securing an online presence is crucial to having a competitive business. A business domain name is a unique name claimed through the domain registrar to represent a company’s brand online. With ZenBusiness’s domain name service, we can help secure your domain name to prevent it from being purchased by someone else.
Select an Oklahoma registered agent
Oklahoma law requires every Oklahoma PC to maintain a registered office and a registered agent within the state. The registered agent can be the PC itself, an individual who resides in Oklahoma, or another entity to serve as a registered agent. The law requires an Oklahoma registered agent to maintain a business office identical with the registered office that is open during regular business hours to accept service of process on behalf of the PC. The registered office address must be a physical address located within the state.
Complete your Oklahoma Certificate of Incorporation
To register an Oklahoma PC with the state, you must file a completed Oklahoma Certificate of Incorporation, sometimes referred to as Articles of Incorporation. The individual responsible for signing the Certificate of Incorporation is referred to as the incorporator. Oklahoma permits any person, partnership, association, or corporation to incorporate or organize an Oklahoma PC. The incorporator can also act as an officer, director, or shareholder of the PC.
Establish a corporate record in Oklahoma
Oklahoma PCs are not required to create records like bylaws and meeting minutes to maintain corporate status. However, it’s still recommended that you keep a record of these and other important business documents.
Designate an Oklahoma PC board of directors
If the incorporator’s powers terminate upon the filing of the Certificate of Incorporation, the incorporator names the initial board of directors for the PC in the Certificate of Incorporation filing form. The initially appointed board of directors serves until the first annual meeting of shareholders or until their successors are chosen.
Oklahoma law requires every director to be duly licensed in the profession or related profession in which the PC was formed to offer service. Thus, if your Oklahoma PC is a law firm, every director must be legally authorized to practice law in Oklahoma.
Create Oklahoma corporate bylaws
Corporate bylaws outline the internal workings of your PC. Even when bylaws are not required by statute, having corporate bylaws that outline how the business operates is always a good idea. Bylaws typically detail:
- Responsibilities of officers
- How stocks are issued
- Shareholder ownership rights
- How officers are chosen
- How to remove officers or directors
Drafting and adopting bylaws is typically one of the first orders of business for the board of directors of a PC.
Hold first board meeting
Oklahoma law requires corporations, including PCs, to hold an initial meeting within 30 days of registration with the Secretary of State for the purpose of electing a board of directors and adopting bylaws. Thereafter, PCs are required to hold annual stockholder meetings.
Handle Oklahoma tax obligations
To maintain legal compliance, Oklahoma PCs have to stay up to date on paying their taxes. That includes federal taxes, state taxes, and local taxes, if applicable.
Corporations are taxed as C corporations by default, which is commonly referred to as “double taxation.” That means that a corporation’s profits are taxed both at the corporate level and on the personal tax returns of the corporation’s shareholders.
However, your Oklahoma PC can elect S corporation status if it has:
- Less than 100 stockholders
- Only one class of stock
- No business entities as owners of the corporation
- No foreign shareholders
S corporation status makes an Oklahoma PC a “pass-through” entity, which has tax liability similar to an LLC’s. In a pass-through entity, the profits of the corporation are taxed once, on the stockholders’ personal income tax returns.
For corporate income taxes, Oklahoma imposes a flat 6% tax on federal taxable income.
For-profit corporations operating within Oklahoma are also required to file and pay a franchise tax. The franchise tax is calculated at the rate of $1.25 for each $1,000.00 of capital employed in or apportioned to Oklahoma. Only corporations with capital of $201,000.00 or more are required to remit the franchise tax. The maximum amount of franchise tax a corporation can pay is $20,000, while the minimum is $250.
Some local governments require additional tax payments for operating your business within the limits of a certain county or municipality. Check your local city or county government website for any added tax obligations.
Obtain Oklahoma Business Licenses and Permits
Unlike some states, Oklahoma doesn’t require all businesses in operation to obtain a general business license. However, a license or permit may be required in certain industries. For example, construction contractors must obtain licenses to provide plumbing, electrical, and HVAC services. Licenses for other activities may also be required by counties and municipalities.
Because PCs offer professional services, directors and stockholders must keep their professional licenses up to date as well.
ZenBusiness can compile a single report for you listing the licenses and permits you will need for your particular business at the local, county, state, and federal levels. This can save you the time and effort of compiling your own checklist and help you avoid missing important requirements.
Acquire insurance for your Oklahoma PC
It’s important to obtain insurance to protect your company from unexpected liability or losses. The type and amount of insurance you need may vary depending on your specific operations, so it’s a good idea to speak to an insurance agent about your individual circumstances.
Workers’ Compensation Insurance
Oklahoma employers must provide workers’ compensation insurance to their employees. A failure to do so can result in penalties up to $1,000 per day and subjects the employer to liability in a negligence action by an employee. Employers can purchase insurance from a private company or obtain approval to be a self-insured employer.
General Business Insurance
Oklahoma businesses may purchase general business insurance that combines business property insurance and business liability insurance. General business insurance can protect your business from costs associated with damage to your business and against claims from other parties alleging property damage or a personal injury caused by your business. This coverage isn’t required in Oklahoma, but it’s strongly recommended to protect your business assets.
Oklahoma doesn’t require physicians to carry medical malpractice insurance, nor does it require attorneys to obtain legal malpractice insurance. But obtaining malpractice insurance for your Oklahoma PC is still recommended in these industries, as it can protect your PC from serious liability issues in the event a former client sues for malpractice.
Open a business bank account
To open a business account, you need an employer identification number (EIN). EINs are issued by the IRS and operate as essentially a social security number to identify your business. ZenBusiness can retrieve an EIN for you with our EIN service.
How ZenBusiness can help you operate your Oklahoma PC
Although ZenBusiness doesn’t offer professional entity formations, we do offer services that can help you operate your Oklahoma PC more easily. Services that can help you with:
- Finding a registered agent
- Reserving a business name
- Securing a business domain name
- Staying compliant with state filing requirements
- Applying for an EIN
- Opening a business bank account
The formalities of operating a business can slow you down and distract you from more important tasks. ZenBusiness can provide the assistance you need to help run and grow your business.
Oklahoma PC FAQ
- What are the filing fees for an Oklahoma PC?
Filing fees change frequently. You can find the most up-to-date information at on the Oklahoma Secretary of State’s website.
- Do I need a lawyer to form an Oklahoma PC?
You don’t need an attorney to form an Oklahoma PC. You can complete many business formation tasks yourself, with the help of ZenBusiness.
However, if you have any questions or concerns about the legal consequences that can arise in the operation of your business, it’s best to consult a lawyer licensed to practice in Oklahoma.
- Does Oklahoma have other professional entity types?
In addition to a professional corporation, Oklahoma allows professionals seeking to incorporate their business to form a PLLC, a PLP, or a PLLP.
- Can professionals from different fields form an Oklahoma PC together?
Oklahoma requires PCs to be formed for the purpose of rendering one specific type of professional service or related professional service. However, professionals in the same industry with different specialties can form a PC together. For example, a PC providing legal services can include a family law attorney and a criminal defense attorney as members of the same PC.
- Will I be taxed as an S corporation or a C corporation in Oklahoma?
By default, PCs in Oklahoma are taxed as C corporations. S corporation tax status can be obtained by meeting certain requirements and filing an election form.