South Dakota is in the top ten states for doing business in the US. It offers a favorable business environment with great tax incentives, lower energy costs, developed infrastructure, a solid workforce, high quality of life, and low crime.
The best business options in South Dakota fall within such areas as crop growing, ranching, hospitality services, and tourism. You can also gain profit in catering, food services, online training and education, e-commerce, and web design.
With no personal and corporate income taxes and capital gains tax in place, South Dakota is a welcoming spot for limited liability companies that have all chances to thrive in this jurisdiction.
Below, we’ll explain in every detail how to form an LLC in South Dakota, describe all related costs, and touch upon the post-formation steps that are crucial for starting your enterprise on the right foot. When you finish reading, you’ll be able to open an LLC in South Dakota from scratch without a doubt. Also you can use our top LLC companies review, if you don’t want to go all the steps on your own.
If you don’t have time to do all by yourself, choose one of the recommended LLC services:
Table of Content
When launching a business in South Dakota, you can’t go wrong with the LLC structure. Combining the best features of corporations and disregarded entities, an LLC is a match for different entrepreneurial scenarios and types of businesses. It’s a perfect base for a small startup and will easily catch up with quick business scaling. Whatever the scope of your business, an LLC is a great choice.
Taxed as a disregarded entity, an LLC will release you from corporate income tax payments and offer the ultimate flexibility in taxes. You can stick to pass-through taxation when you are small to minimize expenses or switch to a corporate tax system to optimize the tax burden on a growing income.
Similar to corporations, LLCs provide limited liability protection. Hence, you can rest assured your personal assets won’t be used against business commitments since you are not held personally liable for business problems and financial issues. It’s your company as a legal entity that is responsible for all its problems and debts.
In a word, with an LLC on your side, you’ll be able to set up a legal framework for your venture without bloating your startup budget and have a chance to realize your most ambitious business plans.
Before considering the formation procedure in detail, you need to determine what type of LLC you are going to start in South Dakota since that will impact your formation costs and certain registration peculiarities.
|If you reside in South Dakota and plan to open and run an LLC in your home state, you will start a domestic LLC. However, if you live in any other state and register an LLC in South Dakota, you’ll have to register a foreign LLC which entangles higher formation costs.|
Those who are engaged in certain professional activities and limit their business to this should form a professional LLC and get an appropriate professional license to set up such an entity. You should contact the state department to learn what professions call for licensing to start a private business in South Dakota. Normally, these are accountants, medical providers, legal advisors, engineers, consultants, constructors, etc.
To make your LLC formation an easy and smooth process, we’ve worked out a detailed guide that will walk you through each formation step and enlist helpful links and resources you can refer to in South Dakota.
Strange though it may seem, your South Dakota LLC starts with a name. LLCs are not automatically named as disregarded entities. You’ll have to invent a moniker for your future company and make sure you can use it in the state of South Dakota.
Take naming your LLC seriously since it’s a preparation step to further LLC filing. And should your prospected company title fail to match South Dakota business naming regulations, the Secretary of State will decline your formation application.
When formed, your South Dakota LLC will become an independent legal entity with its own powers, rights, and duties. As such, it should have its own identity too. While a statute will function as a company’s passport, an LLC name is its business card.
A good title should work for the company and contribute to its solid business image and reputation. It’s the name that will introduce your business to the market and can make your company noticeable among its rivals. It’s the name that will help you market your products or services and set up your online presence.
Besides, with a properly chosen name, you’ll finish your LLC registration smoothly and without hassle as well as complete other business-related tasks.
When inventing a name for your entity, you are not much limited in your creativity. Feel free to unleash your imagination, inspire with literature, art, science, or geography, and brainstorm to generate some extraordinary versions. Or you can use one of the online name generator tools that will produce a few name options based on input name alternatives.
However, when concocting a business title, remember that there are still certain naming rules (set forth in Section 47-34A-105 of the South Dakota Uniform LLC Act) you should observe to get a moniker that will be accepted by the state regulator:
|To make sure the name versions you have in your mind are available in the state, you can navigate through South Dakota business names using a free search tool on the Secretary of State’s website.|
Avoid using names that are confusingly similar to your desired business name. Should the search result in the message “ No records found”, it means the title you want is unique and available for use.
Similar to other states, South Dakota allows running your business under a name different from the one that appears in your LLC statute or a registered name that is your company’s legal attribute to be used in official documents, public records, state registries, and formal databases.
An alternative name is called a DBA (doing business as), fictitious, assumed, or trade name. It also requires state filing, yet, you can register it only after the LLC formation. The good news is that DBA registration in South Dakota costs only $10 and won’t hit your budget too much.
Since you can get as many DBAs as you need, you can easily build a network business, launch several brands, or run different types of activities without the need to form multiple LLCs.
You won’t be able to open an LLC in South Dakota without appointing a registered agent. It’s also called a resident or statutory agent in other states and is meant to receive your LLC legal mail to further forward it to your company’s address. Why is an agent required by law? And why is it important? Let’s figure it out.
At a glance, an agent seems a minor role and rather a weird formality. However, its function in your business is vital. An agent rep ensures reliable communications between your legal entity and governmental or public authorities, thus keeping an eye on your timely receipt of all filing or reporting requests so that you could provide an opportune response or take the required actions.
The most important agent’s function, though, is obtaining and handling your service of process or court summons, should your LLC be a part of a lawsuit at some point. Court decisions and all lawsuit-related docs are sent to the registered agent’s address by default. If you don’t have an agent, you might fail to receive the document or won’t even know you’ve been sued.
So, an agent rep in South Dakota is a kind of guarantor for your LLC’s good standing status since this role will ensure you catch up with the state compliance requirements.
As for the agent requirements, they are pretty simple. Any adult individual or a legal entity could be appointed your registered agent. The main rule is that a person or entity should have a registered address in South Dakota and be present under that address during normal business hours.
With that, you have two major options when looking for an agent in South Dakota. You can entrust that job to a non-commercial agent or hire a commercial agent service.
Since in South Dakota and other states, there are no restrictions in terms of education, professional expertise, or training for the agent reps, you are free to appoint your friend, neighbor, family member, or colleague for this position. Or you can choose a person with a professional background appropriate for this job such as your business accountant, attorney, business consultant, or tax advisor.
To save some funds and avoid delegating this role to a third party, you can handle the agent’s job on your own. In this case, though, think if you are ready to disclose your personal data to the public since the agent’s info should be enlisted in public records and if you are ready to be bound to your registered address most of the time.
Commercial agent services, in our opinion, are your best alternative for a mail-handling representative in South Dakota. Hiring a service won’t cost you a fortune, yet bring convenience and the ultimate peace of mind. This way, you’ll hit a sweet spot between serving as your own agent and delegating this task to another individual.
The advantages that come with a dedicated agent service are hard to argue:
If you fail to designate a registered agent or your agent rep will fail to duly deliver their duties, it might have serious consequences for your business. The lack of an agent will pierce your LLC’s good standing status and might even lead to administrative business dissolution.
|One more problem is how your LLC will be served if sued. Without an agent on your side, the state can consider the lawsuit even without letting you know about that and rule a default judgment against you. So, mind maintaining an efficient and eligible registered agent on a regular basis.|
You can proceed to your South Dakota LLC registration only when the preparation steps are completed, i.e. you’ve got your business name checked, appointed a registered agent, and got their consent to serve as your rep.
An LLC statute or the Articles of Organization is your major LLC document that gives birth to your company and proves its existence and eligibility. Submitted to the Secretary of State and approved by the regulator, it’s further used to enter your entity info into state registries and business databases of South Dakota to make your LLC visible to the rest of the market players.
By form and content, an LLC statute is a generic document that doesn’t much differ across the states. It embraces basic info about your future entity that will further become a part of the public records.
The Articles of Organization form approved by the South Dakota state regulator and compliant with the statutory requirements is available here. Make sure you have the following data at hand to fill it out:
In the end, you should also state if your South Dakota LLC will be a member-managed or manager-managed company. Besides, you can add any other provisions or data you deem necessary that do not breach the current LLC law.
In South Dakota, you can file your LLC statute online, send your formation documents by mail, or bring them to the Secretary of State’s office in person.
For online filing, visit the South Dakota Secretary of State website, create your personal online account, sign in, and fill out an online form. Online applications are reviewed and approved immediately, so it’s your best option if you are in a rush and need your entity to be registered in the fastest possible manner.
To file by mail, print out the completed Article of Organization form and send it along with the filing fee payment check to the following address:
Secretary of State, 500 East Capitol Avenue,
Suite 204, Pierre,
If you reside in Pierre or close to the Capitol Building, you can hand your filled papers right to the office. Mailed documents are processed within 3 to 5 business days depending on the state office workload while walk-in filings are approved on the same day. You can wait in the Secretary of State’s office and get your LLC statute back in about an hour or so.
First and foremost, an Operating Agreement and the Articles of Organization are two different documents that have different functions. The LLC statute requires state registration and evidences the legal act of LLC formation. It’s a mandatory document for your company to exist. An Operating Agreement, on the other hand, is an internal LLC document that needs no filing and is optional in most US states including South Dakota.
After the LLC statute approval, the formal part of your South Dakota registration is over and your LLC is officially established as a legal entity. However, despite the fact that many entrepreneurs disregard an Operating Agreement, we strongly recommend that you take your time to get into it and execute this document for your LLC.
An Operating Agreement is an LLC bylaw stipulating the rules and policies for ongoing company operations. As such, it works to make sure the business is managed and controlled in a due manner while further protecting the LLC’s corporate veil.
By fixing the owners’ covenants regarding financial decisions and certain internal procedures, the document is meant to regulate the business activities from within and run your enterprise in the way that suits you most.
To explain why you need an Operating Agreement, though it’s not required by the state:
To give your partner agreements legal force, it’s always better to put them on paper and verify them by your signatures. Should any situation occur where you need solid proof or reference to what you’ve initially agreed on for your South Dakota LLC, you’ll have a written document at hand.
When forming an LLC in South Dakota, you can draft a straightforward and simple Operating Agreement, especially if you have a single-member LLC, or go into a more comprehensive and detailed document. By and large, it’s up to you and your partners what to include in your company bylaws.
With no required legal form or template in force, there are several typical points an Operating Agreement usually touches upon:
Note that your South Dakota Operating Agreement should match your current business situation. It’s a living document you need to update to catch up with your changing business scenario, member or manager roles, income allocations, etc. so that it stays functional and efficient.
Yet another immediate step to take once your South Dakota LLC documents are approved by the state is to get a federal tax ID or an Employer Identification Number (EIN) for your newly formed entity.
It’s a unique nine-digit code assigned by the Internal Revenue Service (IRS) to legal entities that functions similar to a Social Security Number (SSN) issued for individuals. It’s your company’s tax designator that will be required in many different financial situations.
Single-member LLCs often choose to use SSNs of their owners for business purposes while multi-member entities are required to obtain EINs. However, we think it’s a necessity for any LLC, no matter the number of members.
Should you need to open a business bank account, register a business license, file an excise tax, hire employees to work, file a corporate tax status for your LLC, or apply for a business loan, you’ll need an EIN in all of those cases.
So, take a few more minutes to visit the IRS website and fill out Form SS-4. You can apply online and get your number almost in an instant or send it by mail and get it back in about two weeks. The choice is obvious we guess.
The best thing is that the IRS issues EINs for free and you don’t need to pay anyone for this service. It’s free, quick, and easy.
|Compare the conditions for opening an LLC in South Dakota with other states:|
South Dakota vs Wyoming
Your South Dakota LLC direct cost will depend on the LLC type and the filing method you choose.
Thus, filing fees for a domestic LLC are $150, $165, and $210 for online, mail, and walk-in applications accordingly. The same filing fees for a foreign LLC are $750, $765, and $810 respectively.
Obviously enough, online filing is the cheapest and the fastest filing method, so we recommend that you stick to that one. Add to your final cost a registered agent’s annual fee if you choose to hire a commercial agent. The price varies from $50 to about $300 depending on the company you select and the scope of service you need.
When your LLC is registered, you are not done with formalities yet. There are some more tasks that will need your immediate attention to keep your business eligible and diligently maintain it. Consider handling the following operational and compliance aspects as soon as your get your formation documents approved.
It’s something any LLC owner should do before running into any business transactions. Separate personal and business bank accounts will keep your personal and company funds split, thus, making it obvious to anyone you deal with that your LLC is an independent entity.
A dedicated business checking account will not only prevent confusion and make accounting much easier but also greatly contribute to maintaining and fortifying your LLC protective shield.
Besides, for creditors and financial institutions, a separate business account is a must when considering business loan applications, issuing credit cards, providing factoring programs, etc.
Just like you seek to safeguard your assets against business liabilities, you should seek added security and protection for your business as well. There will be different business-related situations entailing potential risks and damages. Business insurance is meant to secure your company against those risks to some extent.
There are different types of business insurance, with many of them being specific for certain types of activity, industries, or business scenarios. The most common policies usually acquired by LLCs are:
Business and taxes are as close as lips and teeth. And you really need to dig into LLC taxes to stay compliant with the state and keep your entity afloat.
Unlike corporations, LLCs are pass-through entities, so corporate income taxes won’t be a pain in the neck unless you choose to be taxed as a C-Corp. Your business income will be levied under your personal tax return.
Other types of taxes your South Dakota will be most likely exposed to include sales and property taxes, payroll taxes, and franchise tax. To get a complete list of compulsory charges to pay, contact the Department of Revenue or hire a tax consultant to do it for you.
All South Dakota LLCs should file an Annual Report with the state, no matter the locality and type of activity they conduct. It’s a mandatory state requirement to maintain up-to-date info about all business entities operating in the state.
The reporting due date is the end of the month when your LLC was formed and the filing fee in South Dakota is $50 for online applications and $65 for filing by mail.
|Should you fail to file an Annual Report, you’ll put your LLC’s good standing status at stake. Your company could be marked as delinquent and won’t be able to operate in the state. Delayed filings, on the other hand, are exposed to a $50 penalty for the late submission.|
In South Dakota, you won’t have to get a general business license as in many other states. Yet, most likely than not, you’ll have to register a bunch of other licenses and permits relevant to your location, industry, or activity.
If you run a commercial venture, you’ll need a sales license. Those who are dedicated to some professional activity will need an appropriate professional license
You can contact the South Dakota Office of Economic Development as well as your county and city clerks to find out the licensing requirements set forth for your LLC in detail. Or you can purchase a Business License Search from one of the LLC services and leave the legwork to professionals who will come up with a complete list of required permissive documents for your LLC in the end.
A limited liability company is a welcoming legal structure for many businesses. Start an LLC is easy. Select your state to start.