Oklahoma Business Law

The legal building blocks of a successful Oklahoma business

When building a house, at least a well-built house, you need a solid foundation, good materials, and someone who knows what they are doing to assemble all the pieces.

A similar principle applies when building an Oklahoma business: You need to have solid component parts and you need to know how the parts fit together.

This post is intended to discuss the items that an Oklahoma business needs to address to build a foundation for success.  Of course, as part of building your new business, you need to assemble a support team, a concept I talk about in this blog post.

The beginning: Organizational Structure
This means fundamental formation:  if you are a corporation filing your certificate of incorporation with the Oklahoma Secretary of State and if you are a limited liability company filing your articles of organization with the Oklahoma Secretary of State.

Your business’s constitution
 Similar to how a country might have a constitution or a city might have a charter, Oklahoma corporations and limited liability companies have a central governing document: for limited liability companies it is an operating agreement and for a corporation it is bylaws.

Ensuring your business standing is “good”
Once you form your company and enact your constitution, you need to ensure you are taking the very simple steps necessary to remain in good with the State of Oklahoma:

If you are a corporation, you need to file a franchise tax return each year (see more about that —> here);

If you are a limited liability company you need to file an annual report (see more about that —> here)

The people running the business
For a corporation, it goes, from the top down, shareholders, members of the board of directors, and officers run the corporation on a day-to-day basis.

For a limited liability company, members (the owners) choose the manager(s) who run the day-to-day operations of the company (unless the LLC is “member-managed).

Note: If you are starting a business with at least one other person, it would be a good idea to consider my blog post The questions you need to ask when starting an Oklahoma business with another person

Contracts
At the core of a successful business are the relationships it has with its employees, customers, and products and services.  For those relationships to be clear and operate efficiently, you need written contracts.  Among other things, a written contract defines the terms of your relationship, the money, and how the relationship ends.

Intellectual Property
Your business’s intellectual property is an asset that is often overlooked or disregarded.  What is intellectual property?  In practical terms, intellectual property is things like your business’s name, its logo, its marketing slogan as well as private and proprietary information that provides your business with an edge over its competitors.  How do you protect your intellectual property? You use the items listed below:

Intellectual property has value just like more tangible assets such as inventory, furniture and fixture and buildings.

Finance
As a means of addressing finances and simply making a wise decision, get a CPA involved with your business.  Not for simply for doing your taxes, but also for advising you on tax strategy and ensuring you have a sound accounting structure in place.  And if you need financing, consider my article I started an Oklahoma business, I need more money . . . what do I do?

Taxes
This category is simple yet eminently important.  Obviously, you need to calculate your taxes, file your returns and pay any tax due (unless you are an Oklahoma limited liability company). The CPA I referenced above should be helpful in all things tax, both Oklahoma tax and the IRS.

 

Surely there will be other legal-related issues, both that you can anticipate and those legal issues that you cannot anticipate.  This post is a start.  I am available to help with all of your Oklahoma business’s legal issues.  Feel free to email me: sjr@shawnjroberts.com

 

 

Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma limited liability company

Okay, I want to start an Oklahoma business, what do I need to do?

So you decided you are going to start your own business?

Going to be your own boss?

I am sure you are excited and pumped up with the energy that flows from seeing how you can make a positive change in your life.

At some point, you will need to start putting the ideas into execution and that point is where I can help.  I help small business owners get from the conception stage to the operation phase.  Birth through adulthood and independence so to speak.

But where do I start, you are probably asking yourself?

Surprisingly, there are very few legal requirements controlling the start of a business. Sometimes it may be as simple as starting advertising and then providing your service or product when you have customers.  While legally the steps could be few, practically it is wise to plan and prepare to pave the way for success.
 
Below is a post from the Oklahoma Secretary of State that seems helpful to me. I would be telling you similar things so rather than do that, here is a link to the post (https://www.sos.ok.gov/business/infoSB.aspx).
 
This post starts out with the conclusion that you are going to create a corporation or a limited liability company, both being referred to as an “entity.” However, it also touches on other items that are important. Also, here is a link to a post from the Oklahoma Department of Commerce that is helpful in understanding the items to consider when starting your business.
 
One place where I come into the process is to help you set up an entity: either an Oklahoma corporation or Oklahoma limited liability company.  There are several reasons why you want to have an entity own and operate your business.  The most important of which is you want to avoid being individually (i.e,, personally) liable for issues created by your business.  To understand Oklahoma individual liability, check out this blog post.
Posted by Shawn Roberts in Blogposts, Business Law

The Team you need when you start your new Oklahoma Business

People put together teams for purpose of winning football games, building automobiles, and traveling into space, among other things. 

One value of the team is that all team members have different roles, which when brought together provides the organization with a sum greater than its parts.

As an Oklahoma business owner, you need a team as well.  The team brings skills and experience that you likely do not have.  Who are the critical team members for the Oklahoma small business that wants to maximize its efficiency and effectiveness?

Accountant
For a business to be a long-term success, it must properly manage its money and ensure that it complies with all tax laws from the Oklahoma Tax Commission and Internal Revenue Service.  An accountant (a/k/a “CPA”) brings tax knowledge and experience helping businesses comply with all tax laws.

Insurance Agent
No business expects things to go wrong.  However, a prudent business owner knows that things sometimes go wrong anyway, often through no fault of the business owner.  For these situations, insurance is critical.  Not just any “insurance” but insurance coverage that meets your specific business’s liability needs.  This is where an insurance agent comes in:  You can draw on the experience of the insurance agent as to what type of insurance you need and how much coverage you need.

Attorney
Considering who authored this Blog Post, you are probably not surprised that an attorney made the team.  Nonetheless, an Oklahoma attorney is a valuable team member because the attorney brings legal knowledge combined with experience.  The attorney has seen many of the issues small businesses run into, knows the type of documents the business needs and can counsel the business on best practices to avoid legal issues.  The attorney has answers to questions like: What type of legal organization should I be?  How do I protect my business when employees leave?

 

Have you assembled your team?  If not, why not?

Posted by Shawn Roberts in Blogposts, Business Law

The questions you need to ask when starting an Oklahoma business with another person

There is nothing like the excitement of starting a new business.  Even more so when you have a partner, someone to share the experience with. 

Things are probably never as good as when you are infused with the pure adrenaline of seeing your dreams become reality. 

–BUT–

things happen, businesses fail, and even worse sometimes businesses succeed.  When these events happen often the business is closing, an owner wants to leave, or an owner dies.  The time to sort out these situations and to plan for these situations is while things are good and calm, which means at the businesses’ inception.

Consider these questions when you are starting a business with another person:

  • Are you, as an owner, protected from having the liability of the business seep into your personal assets?
  • What if the business gets sued?
  • What if someone quits or is fired?
  • Do you have the proper type and amount of insurance?
  • How do you buy out the person who has left?
  • How much do you pay the heirs of an owner who has died?
  • How do you determine the value of their interest in the entity?

I help people answer these questions and put processes in place to make these circumstances happen as smoothly as possible.  If you would like to talk about these things, please feel free to reach out to me.

Posted by Shawn Roberts in Blogposts, Business Law

What is an Oklahoma Stock Purchase Agreement?

An Oklahoma Stock Purchase Agreement is used when the buyer is going to purchase all of the owner’s interest in the company that owns the business.

For example, if you are buying a restaurant and the restaurant is owned by Smith Corporation, in a stock purchase you would buy all of the outstanding stock of Smith Corporation. By purchasing all of the outstanding stock, you end up stepping into the shoes of the previous owners. That means all assets and liabilities that the previous owners have, you now have except for anything that is expressly excluded in the asset purchase agreement.

Curious about the difference between an Oklahoma Stock Purchase Agreement and an Oklahoma Asset Purchase Agreement?  Check out this post that contains an explanation.

 

Posted by Shawn Roberts in Blogposts, Business Law

What is an Oklahoma Asset Purchase Agreement?

An Oklahoma Asset Purchase Agreement is used when a buyer wants to only purchase specific assets of a business rather than the entire business.

For example, purchasing the restaurant mentioned above through an asset purchase agreement would probably mean purchasing the physical location, the inventory and equipment, goodwill associated with the restaurant, and perhaps other information related to customers. In an asset purchase agreement, the buyer is only responsible for the assets he purchases and the liabilities that come with those assets.

Curious about the difference between an Oklahoma Asset Purchase Agreement and an Oklahoma Stock Purchase Agreement?  Check out this post that contains an explanation.

Posted by Shawn Roberts in Blogposts, 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

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