Business Entities
Sole Proprietorship
Formation
No filing with the state or a local official is required.
Liability of a Participant
Owner is personally liable on any contracts or wrongful acts.
Agency-principal rules apply to actions of his agents.
Control or Management
Owner has ultimate control over his business. He may hire agents
who are directly under his control.
Transferability of Ownership
Interest
May sell the assets of the business.
Crossing State Lines
May generally cross state lines to do business without registering
in the other state.
Income Tax Status
Profits and losses are reported on the owner’s income tax
return. There is no double taxation.
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General Partnership
Formation
No filing with the state is required. Generally may be formed
without any written agreement.
Liability of Participants
Partners are jointly and severally liable for contract and tort
obligations. Generally, creditors of the partnership must exhaust
partnership property before levying on a partner’s individual
property.
Control or Management
Unless agreed otherwise, all partners have equal rights in management
and the majority rules. Unless otherwise agreed, a unanimous vote
is needed to approve extraordinary matters.
Transferability of Ownership
Interests
Partnership interests are not fully transferable. A partner may
assign his financial rights in the partnership (i.e. right to
receive distributions), but may not assign his management rights
without the consent of the other partners.
Crossing State Lines
May generally cross state lines to do business without registering
in the other state.
Income Tax Status
“Check-the-box” regulations apply. Partners may elect
either pass through or entity treatment.
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Limited Liability Partnership
Formation
A Statement of Qualification must be formed with the Secretary
of State.
Liability of Participants
Partners are not personally liable for obligations of the partnership
if the required $500,000 in security is maintained. However, a
partner is personally liable for his own wrongful acts.
Control or Management
Same as in a General Partnership.
Transferability of Ownership
Interests
Same as in a General Partnership.
Crossing State Lines
The LLP must file a statement of foreign qualification in the
state it wants to do business.
Income Tax Status
Same as in a General Partnership.
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Limited Partnership
Formation
A Certificate of Limited Partnership must be filed with the Secretary
of State.
Liability of Participants
Limited partners are not personally liable for the obligations
of the limited partnership unless they participate in control.
General partners are liable in the same manner as in a general
partnership.
Control or Management
Limited partnerships are managed by general partners. Limited
partners generally do not participate in management.
Transferability of Ownership
Interests
Ownership interests are not transferable. Partners and limited
partners may assign financial interests only.
Crossing State Lines
Must register in the state where it wants to do business.
Income Tax Status
Same as in a General Partnership.
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Limited Liability Company
Formation
Articles of Organization must be filed with the Secretary of State.
Liability of Participants
Members are not personally liable for the obligations of the LLC.
Control or Management
Usually LLCs are managed by one or more managers elected by the
members. However an LLC may be structured to have management by
members without managers.
Transferability of Ownership
Interests
Membership is not freely transferable. A member may assign his
financial rights in the LLC (i.e. right to receive distributions),
but may not assign his management rights without the consent of
the other members.
Crossing State Lines
Must register in the state where it wants to do business.
Income Tax Status
Same as in a General Partnership. Not subject to the OK corporate
franchise tax.
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Corporation
Formation
A Certificate of Incorporation must be filed with the Secretary
of State.
Liability of Participants
Shareholders are not personally liable for the obligations of
the corporation.
Control or Management
Shareholders generally do not manage the corporation. Shareholders
elect directors who appoint officers and oversee management of
the corporation.
Transferability of Ownership
Interests
Shares are freely transferable (unless share transfer restrictions
have been imposed.)
Crossing State Lines
Must register in the state where it wants to do business.
Income Tax Status
A Corporation is a taxable entity separate from its shareholders
(double layer of taxation). Corporations with no more than 75
shareholders may be able to elect subchapter S (pass through)
treatment.
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