Business Law

Vivid Imagery: The Flow of an Oklahoma Lawsuit

To most people the Oklahoma Court system is a mysterious and complicated place with only “insiders” such as attorneys and judges to understand it.  

The diagram below shows the flow of an Oklahoma lawsuit until it completion in a trial conducted by either a Judge or a Jury.  

This diagram obviously won’t remove all the mystery of the system but hopefully it provides you with a better big picture understanding of the Oklahoma Court system.

 

Posted by Shawn Roberts in Business Law

What is an Oklahoma Buy-Sell Agreement?

You may have heard the term “buy-sell agreement” or maybe the term “Shareholders Agreement.” 

These terms essentially describe the same thing:

An agreement between the people that own a business (either Oklahoma corporation or limited liability company) about how the ownership interest (either shares of stock and units of an LLC) is going to be handled if an owner leaves the business.  An owner may leave a business either voluntarily (think no longer interested in the business, has a better opportunity) or involuntarily (think death or disability).

The buy-sell agreement provides a structure for valuing the ownership interest in the business and then transferring ownership of the interests when a person leaves the company.  If you are interested in reading more about why a buy-sell agreement is critical for Oklahoma businesses, check out the post 3 reasons you need a buy-sell agreement for your Oklahoma small business.

Posted by Shawn Roberts in Blogposts, Business Law

What are the elements of a tortious interference claim in Oklahoma?

You might have heard or seen recently that Bob Bowlsby, the President of the Big 12 Conference accused ESPN, its TV partner, of tortious interference.  Mr. Bowlsby’s claim came out of the University of Oklahoma’s decision to leave the Big 12 Conference for the greener cash pastures of the Southeastern Conference.

The tortious interference claim raises an interesting question: No, not why is Mr. Bowlsby invoking French pastry to express his anger.  Instead, the interesting question is what is a claim for tortious interference in Oklahoma?

The Oklahoma Supreme Court has said that generally “[o[ne has the right to prosecute a lawful business without unlawful molestation or unjustified interference from any person, and any malicious interference with that business is an unlawful act and an actionable wrong.  To win any legal claim, the party bringing the claim must prove all of its elements.  The elements of a claim for tortious interference are:  

1) interference with a business or contractual right;  

2) malicious and wrongful interference that is neither justified, privileged, nor excusable;  and

3) damage proximately sustained as a result of the interference.

In defining the element of “malice”, the Court has said “[t]he element of malice, for malicious interference, is defined as an unreasonable and wrongful act done intentionally, without just cause or excuse.  [Authority]

 

Posted by Shawn Roberts in Blogposts, Business Law

I started an Oklahoma business, I need more money . . . what do I do?

You started a new Oklahoma business, you made it through the rocky first months or perhaps even years. 

Your business is starting to gain some traction; growth is happening, but . . . you need something more.  You need money.  Money to invest in inventory, research, and development, marketing, or perhaps to hire new employees.  Or maybe you access – to new markets, new customers, new talent to hire.

You need that extra spark to take your business to the next level.  What are the options for bringing the extra spark into your business?

Well, there are essentially two options for bringing additional money and talent into your company:

  1. Debt

Debt is just as it sounds: Someone or some business is going to lend your business money, money which your business will have to pay back, likely at a healthy interest rate.  But if cash is what you need, then perhaps a loan is the right solution for you.  There is another, more robust option that opens new possibilities.

  1. Equity

Equity is giving someone or some business an ownership interest in your company in exchange for payment, usually but not exclusively cash invested in the company.  You essentially are adding a business partner who will have some level of control over the business.

The questions to ask before doling out equity in your business including the following:

How much money do you need?

The answer to this question needs to be based on your business plan, projections, and actual performance of the company.  Being able to accurately determine how much additional funding is necessary allows you to negotiate with the new investor coming into the company accurately.

How much control in the company are you willing to give up?

Let’s assume that right now you are the sole owner of the business; you call all the shots, you make all the rules, the buck stops with you.  Bringing on a business partner will permanently change the dynamic of your company. 

  • Do you want to allow the investor to have decision-making authority in the company at any level? What types of issues and decisions are you comfortable giving up control over?  Or Do you want a silent partner?

 

  • Do you want to use a mix of voting interest and non-voting interest to structure the control in the company the investor/partner has? In a corporation, this would usually be referred to as using preferred shares of stock versus common shares of stock.

 

  • Are you willing to provide the investor with the option to purchase a more significant interest in your company in the future? Using, for instance, a time-based option or performance-based option?

 

What intangible value is the investor bringing to the company?

Can you bring on an investor who has experience moving businesses like yours from point A to point B or even further?  How about an investor with contacts with potential suppliers and customers in your industry with whom you do not have contact?  Or an investor who is willing to get into the trenches with you and help grow the business?

 

How will you value your company?

To properly bring investment money into your company, you need to know what your company is worth to value the equity you provide to the investor accurately.

 

How will you and your investor separate if one of you wants to leave the company?

Obviously, you are planning on your relationship with the investor being successful, and hopefully, it will be.  However, if it is not successful or one of you simply decides you want to leave the company, you need a written plan for how the exit can happen and how the person leaving the company will be compensated for their equity ownership interest in the company.  This type of plan can usually be addressed in the operating agreement if the company is a limited liability company.

Posted by Shawn Roberts in Blogposts, Business Law

Super Easy Business Search on the OK Secretary of State’s Website

Have you ever wanted to know whether you dealing with a legitimate entity?  That is, a real corporation or real LLC?

For companies based in Oklahoma, finding out the legitimacy is snap, by doing a free search on the Oklahoma Secretary of State’s Website.  You can get to the site here and below I recorded a short screencast to walk you through the search process step by step.

 

Posted by Shawn Roberts in Blogposts, Business Law

Making the rules while playing the game: Check out the new guidance from the SBA on the Paycheck Protection Program program

The United States Government rode to the economy’s rescue in March when it enacted the Paycheck Protection Program (PPP), established by Section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (the “Act”). 

The PPP provided funding for businesses and nearly everyone connected to the economy including Oklahoma small businesses, employees, and independent contractors.  The PPP is administered by the United States Small Business Administration (the “SBA”), meaning the SBA makes up the rules for the PPP loan program. 

In what was certainly a path leading to confusion and difficulty but perhaps a path required by the severity of Coronavirus National Emergency, the SBA made the rules for the PPP during, after, and while it was distributing the funds from the PPP.  That means Oklahoma small businesses and businesses around the United States received PPP loan funds and since then have had to address new rules.

In a bid to try to ease the confusion, yesterday, May 6, 2020, the SBA issue these PAYCHECK PROTECTION PROGRAM LOANS Frequently Asked Questions (FAQs):

Paycheck-Protection-Program-Frequently-Asked-Questions
Posted by Shawn Roberts in Blogposts, Business Law

Why does the Oklahoma Secretary of State show my LLC as terminated or expired?

The Summer Solstice Seen from GOES East from NOAA Satellites

The Oklahoma Secretary of State is the record keeper for Oklahoma limited liability companies. 

You start with the OK SOS to form an Oklahoma limited liability company and the OK SOS tracks your entity through its.  One piece of data you can find when searching for a limited liability company on the OK SOS website is the entity’s status.  Status is usually expressed as either:

Active

Termination

Suspended

As you might guess, you want your company to be active and you need to fix your LLC’s status if it is terminated or suspended. 

Why does an Oklahoma LLC’s status show terminated or suspended? 
Here is what the Oklahoma Secretary of State says:

It means the LLC or LP is not in good standing with the State of Oklahoma due to a late Annual Certificate. Annual Certificates are due on the formation date of the entity each year, and a 60 days grace period is given to file them. After 60 days if there has been no Annual Certificate filed, the entity becomes inactive and not in good standing.

https://www.sos.ok.gov/business/faq.aspx

How do you get your LLC back in good standing?
I provide the steps to back to good standing with the Oklahoma Secretary of State in this Blog Post.

Posted by Shawn Roberts in Blogposts, Oklahoma limited liability company

What are the consequences when an Oklahoma corporation is suspended by the Oklahoma Secretary of State?


In a previous Blog Post, I talked about why a corporation ends up being suspended by the Oklahoma Secretary of State.  This Post discusses some of the consequences for a suspended corporation.

The Oklahoma Tax Code provides for multiple penalties if a corporation’s charter is suspended:

  • The directors and officers become liable for any and all debts of the corporation incurred or created with their knowledge, approval, and consent as if the directors and officers were partners;
  • Any contract entered into by the corporation during the suspension is voidable;
  • A court cannot grant to the corporation any legal relief in a lawsuit until the corporation is “reinstated” (meaning back in good standing); and
  • The corporation loses its right to sue or defend in any court of this state, except in a suit for forfeiture of its charter.
    MONCRIEFF-YEATES v. KANE 

 

The upshot of these penalties is that you may lose the protection from the Wall of Separation I mentioned in this Blog Post. Needless to say, if you do business through a suspended corporation, you lose a lot of the protection the corporation normally provides and subject yourself to substantial but unnecessary legal risk.

Posted by Shawn Roberts in Blogposts, Business Law

Why did the Oklahoma Secretary of State suspend my corporation?

View along Adelaide Street from George Street with the buildings decorated for the Royal Visit, 1954 https://www.flickr.com/photos/statelibraryqueensland/

The Oklahoma Secretary of State is the record keeper for among other things Oklahoma corporations and Oklahoma limited liability companies.  To form a corporation, you submit paperwork to the Oklahoma Secretary of State.  To form and maintain a limited liability company, you also submit paperwork to the Oklahoma Secretary of State.  So, as you might expect, the Oklahoma Secretary of State keeps records about whether a corporation is in good standing, suspended, or terminated.

Reasons an Oklahoma corporation is suspended
You may have searched the Oklahoma Secretary of State’s records and found a corporation you own and discovered that the corporation was “suspended.” The suspension is usually connected to the Oklahoma Tax Commission.  Corporations are usually suspended because either the owners have failed to file an annual Oklahoma Franchise Tax Return and/or failed to pay the franchise tax. Sometimes corporations are suspended for failure to file an Oklahoma corporation income tax return:

–> Failure to file Oklahoma Income Tax Return
According to the Oklahoma Tax Commission, any corporation doing business within or deriving income from sources within Oklahoma is required to file an Oklahoma Corporation Income Tax Return, whether or not a tax is due.

–> Failure to file a franchise tax return
The Oklahoma Tax Commission says:
Oklahoma Franchise Tax is due and payable July 1 of each year unless a Franchise Election Form (Form 200-F) has been filed. The report and tax are delinquent if it not paid on or before September 15. 

How is a corporation’s charter suspended?
If a corporation fails to pay the required franchise tax, the Oklahoma Tax Commission enters an order suspending the corporation’s charter and then send the order to the Oklahoma Secretary of State directing that the corporation be suspended.

Posted by Shawn Roberts in Blogposts, Business Law

How does forming an Oklahoma corporation help protect you from liability?

STS-114 Thermal Protection System from NASA on The Commons

I advise people to form an entity, such as a corporation, to provide protection for them from the liability their business can create.  You can read more about individual liability and why you need to protect yourself from individual liability in this Blog Post.

The protection from individual liability for the people who own the company is one of the essential benefits of having a corporation. 

Example
Think in terms of a landscaping business that accidentally hits a gas line leading to people being injured and the property being destroyed.  The landscaping business is going to be responsible for huge damages.  But, if the landscaping business was working through a corporation, there is a good chance that the liability will stop with the corporation and not bleed into the corporation’s owners’ assets.  If the owners were operating the business without a corporation or Oklahoma limited liability company, as sole proprietors, the owners’ assets would be at risk of being taken to pay the damages from the accident (liability insurance coverage might limit the owners’ risk in this scenario). 

The Wall of Separation
I refer to this protection as the “wall of separation.” The corporation (or in many cases the Oklahoma LLC) is the “wall” between the individuals who own the company and the liability created by the company.  On one side of the wall rest the owners’ assets and on the other side of the wall sit all the unknown liabilities that come from operating a business. 

When is the wall’s protection lost?
One way the wall breaks is when a corporation’s charter is suspended.  

 

Posted by Shawn Roberts in Blogposts, Business Law