Business Law

Business Guidelines - Actions Speak Louder than Words

by Brandon Baker

We are privileged with the opportunity to serve many privately-held businesses.  Often, the company’s organizational documents (such as an operating agreement for an LLC or bylaws for a corporation) provide good governance practices for the company. However, the actions of the owners and officers unintentionally stray from the terms of those documents.  In certain circumstances, such failures could result in a loss of the liability protection afforded by the company.  As the old saying goes, “actions speak louder than words.”  


We suggest the following guidelines for operating a privately-held business in a conscientious manner:

  • The company’s officers should review the company’s organizational documents on a regular basis (at least annually), to ensure the company’s current operating practices, books, and records are consistent with the organizational documents.
  • The company should have a separate bank account, titled in the name of the company and used solely for company business.
  • Company funds should not be used for personal expenses, unless properly documented for repayment as one would do with a third party.  
  • The company should maintain sufficient operating capital to conduct the company’s ordinary business activities.
  • All agreements should be made in the company’s name, with the signature block noting the title of the individual signing on the company’s behalf.
  • Any assets used for company purposes should be owned, leased, or otherwise properly titled in the company’s name.  
  • The company should maintain sufficient insurance coverage for liability, casualty, workers' compensation, and other matters as appropriate for its business.
  • The company’s officers should act in accordance with their fiduciary duty to the company’s owners.
  • The company must stay current on taxes and required fees to government agencies.  Anyone conducting business in Oklahoma, whether it is a limited liability company, corporation, partnership, individual or otherwise, is now required to file an annual Business Activity Tax Return with the Oklahoma Tax Commission.  Generally, the tax is $25.00.  The Business Activity Tax, once paid, may be applied as a credit against certain taxes and fees, such as the annual fee paid to the Oklahoma Secretary of State by limited liability companies.


Each company is different and these recommendations may not apply to every company in every circumstance.  However, these suggestions will hopefully provide some helpful guidelines for the privately-held business operation.

Annual Maintenance for the Oklahoma LLC

by Brandon Baker

Limited liability companies, or “LLCs,” have become very common in the business marketplace.  One of the primary benefits of the LLC business entity, as opposed to the corporation or the limited partnership, is the LLC’s ease of operation.  However, “low maintenance” does not equal “no maintenance.”  Thus, Oklahoma LLC owners need to be attentive to certain annual maintenance requirements for their company.


Oklahoma LLCs, unlike corporations, are not required to pay annual franchise tax to the Oklahoma Tax Commission.  Instead, LLCs must file an Annual Certificate with the Oklahoma Secretary of State each year and pay a $25 annual fee.  The Annual Certificate is a simple form which recites the LLC’s name, states the street address of its principal place of business, and confirms that the LLC is an active business entity.  The Annual Certificate is due each year on the anniversary of the LLC’s creation (the date the Articles of Organization were originally filed with the Secretary of State).  


The process of filing the Annual Certificate is now conducted almost entirely through email and online filing.  The Secretary of State sends an annual reminder to the LLC’s email address of record prior to the anniversary date (usually two months in advance).  The annual reminder email contains a link, which the LLC’s owner or officer can use to file the Annual Certificate online.  


However, a surprisingly high number of LLCs fail to file an Annual Certificate each year.  If just one Annual Certificate is not filed in a timely manner, the LLC ceases to be in good standing under state law.  The loss of good standing prevents the LLC from filing lawsuits, filing documents with the Secretary of State (other than an Annual Certificate), and may hinder contractual business dealings, though it does not totally prevent them.  The good news is that the Secretary of State has streamlined the process for reinstating an inactive LLC.  An LLC can simply file an application for reinstatement, along with all past-due Annual Certificates, and payment of accrued annual fees.  


The Oklahoma LLC is an excellent choice for those looking to form a new business entity.  Though they are extremely user-friendly, Oklahoma LLCs do involve some ongoing annual maintenance.  Please feel free to contact our office if you have any questions or concerns about your current company, or if you are considering the formation of a new business entity.  

A Few “Best Practice” Resolutions for Businesses at Year-End

by Jon Austin



Just as we often spend time at the end of the year contemplating both the year behind us and the one before us, setting goals, reviewing accomplishments and so forth, the end of the year is also a good time to review similar items for any business. With that in mind, we offer the following non-exhaustive list of some items you may want to consider in your end-of-the-year business review.  


Limit Your Litigation Exposure. One of the effects of a bad economy is increased litigation. Studies have shown a majority of companies report being involved in ongoing litigation during the economic downturn, with contract obligations and employment issues topping the list. Although avoiding litigation may be impossible, you can control certain aspects. 

  • Keep company assets separate. Business and personal assets and records should be kept separate and distinct. A company’s limited liability protection is easily lost by commingling personal and business assets.  
  • Make sure contracts are in the company name. It is important that the proper person or entity (business vs. individual) be identified as the party to the contract. And, when you sign documents, be sure to identify your representative capacity when signing in behalf of a business (e.g., president, manager, etc.).  Otherwise, others can seek to impose personal liability upon you for obligations of the business.
  • Implement and update a document retention policy. A policy governing the retention and destruction of old company documents is a good business practice. The policy needs to be prospective, objective, and rigorously followed to ensure documents are destroyed according to an established schedule and, otherwise, documents are retained according to the retention policy. If you become involved in litigation and your practice of destroying documents appears to be arbitrary and not according to a prescribed policy, courts will often presume the worst and may allow the other side to use it against you. Also remember, a company’s internal documents are not privileged – whatever you say, even in an e-mail or text message, could become public in a lawsuit. 


Know Your Contracts. Do you know when your lease expires?  Or when your biggest customer might start shopping for a lower price?  Entering into a contract is only the first step to ensuring the intended benefits are realized. A good practice is to keep a summary of the significant obligations and liabilities in every major contract. It’s also good to keep a contract calendar with all key dates on one calendar to ensure you do not inadvertently breach a contract or lose a time-limited contractual right. The end of the year is a great time to review and update your contract calendar.


Keep Things Current. Current organizational records can mean the difference between business-level liability and personal liability. We recommend updating organizational records on an annual basis, so the end of the year is a perfect reminder to review the organization’s records for the year. 


  • In Oklahoma, limited liabilities companies must file an annual report with the Secretary of State and pay a $25 annual fee.  Corporations must file an annual franchise tax return with the Oklahoma Tax Commission.  
  • Corporations, both for profit and non-profit, must also hold annual meetings in accordance with their bylaws, and minutes of the shareholder’s meeting and board of director’s meeting should be kept with the corporate record books. Although limited liability companies do not have the same requirement, we believe it is best practice for the owners to have similar documentation.


Non-profit corporations must generally follow the same requirements of any other corporation under Oklahoma law, including keeping board of director minutes with the corporate records. Most Oklahoma non-profits are also required to file and renew annually the Registration Statement of Charitable Organization with the Secretary of State. 


Public charities must also file an annual information return (Form 990) with the IRS.  The last several years have seen substantial changes to the Form 990, both in terms of which version is required (often depending on revenue and assets) and in terms of what information the organization must provide. The most significant change has been the transition of the Form 990 from a reporting form with mostly “fill in the box” type responses to an organizational governance form that relies on extensive narrative responses and seeks to move away from a one-size-fits-all approach. Certain governance practices and policies are now encouraged through their inclusion on the Form 990. Implementing new governance practices now should result in less scrutiny later by the IRS. Private foundations are still required to file Form 990-PF with the IRS, which is a modified version of Form 990 tailored for the distinctive characteristics associated with private foundations.


One best practice is for the organization to require officers and board members to annually review and agree to a conflict of interest policy. A good conflict of interest policy will consider, among other things, actual and perceived conflicts between the organization and its directors and employees, especially with respect to financial considerations such as salaries, contracts or purchases that benefit directors or employees, leases between the organization and a director or employee, and benefits provided to directors or employees who are related through family, marriage, or business interests. 


We have had the privilege of helping establish and counsel many businesses and non-profit organizations. If you have questions about anything discussed here or if you would like our assistance with an annual review of your business practices, we would be pleased to help. 

A Closer Look at the Private Foundation

by Jon Austin

In 1936 Henry Ford’s son Edsel started and funded the Ford Foundation, now one of the most famous private foundations in the world, to promote philanthropic goals shared by the family. The Ford Foundation has been actively funding the family’s charitable goals for seventy-five years and at the end of 2009 had over $10 billion in assets. In the world of private foundations, the Ford Foundation is the exception; there are over 120,000 private foundations in the United States and approximately 75% of them have less than $10 million in assets. But the purposes and benefits of private foundations are uniform to all, from the smallest to the largest.

Private foundations have a number of useful purposes and you don’t have to be worth billions for it to be a valuable planning tool. One of the most common reasons people create private foundations is tax reduction.  There are other significant benefits, including:

  • Promoting and directing long-term charitable giving for certain specified purposes; and
  • Creating a family purpose that will provide common ground and common goals to guide future giving efforts.


Private foundations are only one of many methods commonly used to fund charitable purposes and reduce taxes. However, private foundations generally have three distinctive characteristics:

  • Most or all of the funding comes from a single source, usually a family or business, rather than from the general public;
  • Distributions from the foundation are typically in the form of grants to public charities or government entities, rather than the foundation directly operating charitable programs; and
  • Grants and administrative expenses come out of the foundation’s endowment or investment income of the endowment, rather than through a fundraising program.


Private foundations are not without their trade-offs. Like most other planning techniques with significant tax benefits, private foundations are subject to a number of complex and sometimes burdensome rules.  These rules are intended to prevent “abuse” of the benefits and ensure a private foundation is managed consistently with the charitable purpose of its creation. There are rules associated with funding the foundation, including restrictions on how much stock or other ownership interest a foundation can hold in a business, and percentage caps on the amount deductible as a charitable contribution. There are also rules regarding the ongoing operation of a private foundation, such as the requirements the foundation generally distribute at least five percent of the foundation’s net investment assets each year, make annual filings with the IRS and pay a small tax on certain investment income.  There are also substantial due diligence and conflict of interest requirements the board must adhere to. Particularly relevant to many business owners are the self-dealing rules that impose severe limitations on business transactions (e.g., selling, leasing, etc.) between a foundation and related parties.


The private foundation is not, however, the only way to reach many common charitable goals. Another option, the donor advised fund, operates in much the same manner but is generally easier and less expensive to set-up. The trade-off is less control over the assets and the long-term direction of the giving. And for many people, other more common gifting and estate planning techniques will accomplish their goals without the complexity often associated with a private foundation. But for people with a real philanthropic passion, or people with a potential estate tax concern, the private foundation is a worthwhile option to consider.


Our firm is routinely approached by persons with charitable intentions to assist them in evaluating the alternative means by which their charitable intentions might best be fulfilled, including the possibility of setting-up private foundations.  We are honored to contribute in this important aspect of planning and gifting. Whether you are taking the first step of exploring the options or you are working to implement a complex charitable gifting plan, we would consider it a privilege to help.