What Does It Take To Form a Corporations Or An LLC?
https://youtu.be/r7tRFEgooIQ
Video Transcribed: Tulsa Attorney Isaiah Brydie with Urban Legal coming at you again with another video. This video is all going to be on corporations and other business structures again, specifically on formation of these business structures. This video, we’re going to be looking at corporations versus LLCs or limited liability corporations.
So going into formation, how do you form each one of these? Well, with a corporation, you file with the Secretary of State, your articles of incorporation. So your articles of incorporation are going to have things like the name of the corporation, the address of the corporation, the founding board of directors of the corporation.
You’re going to take all of those things, you’re going to actually write a legal document and file that legal document with the Secretary of State. The Secretary of State in Oklahoma actually keeps track of all the different types of business structures in the state. You’re going to file that with the proper filing fee.
For a LLC, you file what’s called your articles of organization. It’s really going to have the same language and some of the same information in it. You’re going to have the name of the LLC, the address of the LLC, the general members of the LLC along with any particular members who have some sort of power over the others. You’re going to take all of that information and you’re going to file that with the Secretary of State here in Oklahoma along with the proper filing fee.
So going on from formation, let’s talk about indemnity with these business structures. Indemnification is a very, very important thing when you talk about running your business. It’s basically the principle that says that you and your finances are protected and separate from the finances and the assets of the business, so that if the business is sued, you don’t get sued personally, which it happens a lot more than what you think it would especially in the state of Oklahoma.
When we talk about indemnification in corporations, corporations completely indemnify their shareholders and their board of directors. If you have a corporation, you are completely indemnified from any liability that the corporation may sustain as long as you do a couple of things first.
You have to make sure that the corporation has its own operating funds, its own bank account, and you also need to make sure that any assets or equipment that the corporation is using are either in the corporation’s name or have been leased from you by the corporation or that the corporation is leasing whatever equipment you personally own to itself and you can just do that by of course coming here and having us draft up a lease agreement for you.
If you fail to do those things, a very interesting thing can happen and that’s what’s called, “piercing the corporate veil,” where in spite of you having your corporation, the courts will look at your corporation as basically operating as you and say that there is no distinguishing factors between you, the corporation, and you, the person other than potentially a name and then they’ll go after you personally for any liabilities that the corporation incurs.
For indemnity for a legal liability corporation, liability generally operates the same with some particular changes however. With a limited liability corporation, all of the LLC members are indemnified from liability from other members’ actions and the LLCs actions.
For example, if me and Ruth here get into a LLC together and I screw up on something and I impose liability on the LLC for my screw up acting as an agent of the LLC, we’ll talk about agency and other things with business structures later, but I mess up and I can get the LLC into some hot water, Ruth here will most likely be protected from my mess up and from any liability that is imposed on the LLC because of my mess up. However, I probably won’t be indemnified from that mess up.
Going on from there, we have to look at things from a financial perspective. We have to ask if taxes really matter, which of course they do, they’re taxes. For a corporation, corporations are what’s called double taxed, meaning that a corporation is taxed both at the distribution of revenue and at the distribution of 
dividends to the actual shareholders.
So you’re going to see taxes taken out of corporate funds two times. Whereas LLCs are what are considered pass through entities, meaning that there are only taxed one time and that’s when there is a payment of profits out to the LLC members.
That’s how it looks, some major differences between a LLC and a corporation. I’ll get into the last and one of the biggest ones that people have a question about as far as profits and who can take what and who has power to do what in an LLC and in a corporation in a different video.
