Form a General Partnership in Oklahoma

Forming a partnership in Oklahoma is a much simpler process than other business types. In fact, general partnerships form automatically anytime two or more people decide to run a business together.

Continue reading to learn how to form a general partnership in Oklahoma.

Step 1: Determine if you should start a general partnership

Many business owners form general partnerships because they are easy to form and require almost no paperwork. In fact, the only real requirement of a general partnership is that multiple people have to agree to run a business together. All partners in a general partnership have a say in how to run the business. They also share equally the profits, losses, assets, and liabilities of the business. Now let’s take a closer look at the specific pros and cons of general partnerships. 

Pros

The advantages of a general partnership include:

• A simple formation process
• Straightforward distribution of revenues and expenses
• Low maintenance costs
• No corporate income tax liability

Cons

As with anything else, general partnerships have their drawbacks:

• It’s harder to transfer ownership interests
• There are fewer opportunities to raise capital for the business compared to corporations
• All partners share joint and several liability for the business
• No personal asset protection

Keep in mind we’ve only covered the essential pros and cons here. To get a full understanding of whether a general partnership is right for you, it’s best to consult a legal or financial advisor. Whether you’re 100% sure that general partnerships are right for you or completely undecided, it’s wise to consult a professional. 

Step 2: Choose a Business Name

Now that you’ve consulted with a trusted advisor and decided that forming a general partnership is the best way forward, you need to choose a name for your business. For obvious reasons, you’ll want to select your business’s name carefully. If you choose to use the names of you and your partner for the business’s name, then you do not need to file any name registration forms with the state. If you want to use another kind of name, you must file a special certificate with the state. If you already have a name in mind, check to see if your business name is available.

Step 3: File a Fictitious Name Certificate (if needed)

If a general partnership’s name doesn’t include the names of its partners, then it must use what Oklahoma calls a “fictitious name.” In other states, these names are called “trade names” or “DBA” (“doing business as”) names. Oklahoma requires that all general partnerships file a fictitious name certificate before operating under a trade name.

Keep in mind that your business’s fictitious name cannot be the same as any other business’s fictitious name. You can check to see if your business’s name is available on the Oklahoma Secretary of State’s website.  We can also help you navigate the process of getting a DBA for an Oklahoma business.

Step 4: Draft and sign Partnership Agreement

Once you’ve chosen your name, you’ll need to determine how your business will operate. The best way to set these rules is by drafting an Oklahoma General Partnership Agreement. A Partnership Agreement can touch almost any topic you think is appropriate for your business. Common Partnership Agreement topics include:

• How to resolve conflicts between partners
• How to handle a partner’s death or disassociation
• The rights and responsibilities that each partner has
• How to dissolve the partnership

You do not need to file a Partnership Agreement with the state. Just make sure that it is signed by all partners and kept in a safe place. Although Oklahoma does not require that a general partnership have a Partnership Agreement, it’s vital that you have one. If you do not have a Partnership Agreement, then the rules of Oklahoma’s Revised Uniform Partnership Act apply. In most cases, the state’s default rules will be far less favorable than the rules you draft yourself. 

Step 5: Obtain licenses, permits, clearances

While you do not need to register as a general partnership in Oklahoma, general partnerships must still obtain all applicable licenses and permits. Oklahoma does not offer businesses one general license. Instead, various factors control which licenses your business needs, including:

• Where your business is located 
• What industry your business is involved in 
• Your business’s specific activities
• Whether your business handles certain regulated materials, such as firearms and alcohol

Determining the permitting, licensing, and clearance requirements for your business isn’t easy. Aside from state permit requirements, you also need to consider federal and local license requirements.

Thankfully, we can help you out. In collaboration with our partners at Avalara, we can compile a Business License Report for you. Using the information you provide us about your business, this report can identify all of your licensing and permitting needs at every level of government. 

Step 6: Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) allows your general partnership to file federal taxes. It’s analogous to a social security number for businesses. Because it’s necessary for filing taxes, the Internal Revenue Service (IRS) requires general partnerships to have an EIN.

However, the IRS does not automatically issue new businesses an EIN. Instead, you have to apply for one on your own. But don’t let applying for an EIN distract you from getting your business off the ground. Let us give you a hand with our Employer ID Number Service. 

Step 7: Get Oklahoma State Tax Identification Numbers 

Your business will probably need to pay certain state taxes. Oklahoma views general partnerships as “pass-through entities,” which means that they don’t need to pay corporate tax. However, business partnerships in Oklahoma still need to file an annual Partnership Income Tax Return.

Furthermore, Oklahoma allows pass-through entities to elect to pay Oklahoma corporate tax under its Pass-Through Entity Tax Equity Act of 2019. You can register your business to pay Oklahoma state taxes and obtain a state tax ID number with the Oklahoma Tax Commission. 

Forming a Business Partnership in Oklahoma: Next Steps

With your state and federal tax numbers in hand, you’re almost ready to go. Just make sure that you obtain a business bank account before you open your business’s doors. You may also want to take out a good business insurance policy. Congratulations, you now have an Oklahoma general partnership. You will also want to keep up with your taxes.

How We Can Help

Believe it or not, starting an Oklahoma general partnership is significantly easier than forming an LLC or a corporation. However, forming a partnership is just the beginning of your business journey. As you grow and develop your business, you’ll need to fill many other needs. Whatever comes your way, we’re standing by to help. With our carefully-developed suite of business development and maintenance services, including our Worry-Free Compliance Service, we can smooth out the road ahead and help keep you on the path of success. 

If you decide that forming a general partnership isn’t your best option, then we can help you form an Oklahoma LLC or an Oklahoma corporation.