Establishing and operating as a partnership in Oklahoma
Understanding how partnerships are established and operate may help Oklahoma business owners decide if they are the right structure for their needs.
When two or more people in Oklahoma and elsewhere decide to go into business or carry on a trade together, they may choose to establish their companies as a partnership. In exchange for a share in the management and profits of the business, those entering into partnerships typically contribute labor, money or other skills to its startup or operation. Having an understanding of this type of business organization structure may help business owners determine if it is the right option for their companies.
In general, there are three common types of partnerships – general, limited and limited liability. The form people choose may depend on their business plans, needs and objectives, among other factors.
Establishing a partnership
Upon deciding to start a partnership, there are several steps people must take before they can begin operations. First, they must select a business name and check the secretary of state’s business database to ensure it is not already being used. Once they have chosen an available name, they must register it with the secretary of state and complete the appropriate paperwork.
The specific filing requirements and fees vary based on the type of partnership being formed. In addition to registering with the secretary of state, those seeking to establish general partnerships must register with the state’s tax commission. Limited partnerships are required to file certificates specifying their status with the secretary of state and update them annually. To operate as an LLP, people are required to file a statement of qualification with the secretary of state.
While partners share in the profits of their companies, they also share in the losses. Each partner’s personal liability may vary based on the type of partnership they have established. In general partnerships, for example, all the partners share the company’s debts equally. While the general partners in limited partnerships share the losses fully, any limited partners are only liable to the extent of their investment in the business.
Often used by professionals, such as lawyers, accountants and physicians, limited liability partnerships offer partners the most liability protection. With this type of structure, each partner may share fully in the company’s debts, like with a general partnership. However, they typically do not have any personal responsibility for the negligence of any of their fellow partners.
Each year, partnerships are required to report their gains, losses, income, deductions and other annual information from their operations with the Internal Revenue Service. The business itself, however, does not pay income tax. Rather, the partners include their share of the company’s income and losses on their personal tax returns. The tax obligations for partnerships are the same, regardless of whether people have established, general, limited or limited liability partnerships.
Working with an attorney
Navigating the legal process of establishing a business may be a challenge for business owners who are not familiar with the system. Therefore, those who are starting up new companies or looking to restructure their existing businesses may benefit from seeking legal guidance. A lawyer may explain their options, helping them determine which is best suited for their needs and objectives. Further, an attorney may guide them through each phase, so they are able to focus on the operation and success of their companies.