Think about your LLC a year from now: raking in profits and taking South Dakota by storm. You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees – before you sell a single product, there are startup costs associated with launching an LLC in South Dakota.
While you’re making plans and dreaming big, make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common South Dakota startup fees here.
Quick Note: If you’d like to keep your costs of starting an LLC as simple and low as possible, consider hiring ZenBusiness – a reliable business formation service. To get a better idea of the value they offer and how it works, we compared them to the two most well known services:
Bare Minimum Cost to Start an LLC in South Dakota
- Optional: LLC Name Reservation Fee
- $25 for a paper filing
- Required: Articles of Organization Fee
- $150 to file online, $165 to file a paper copy
Overall South Dakota LLC Formation Costs
LLC Name Reservation Fee
South Dakota’s LLC formation process doesn’t require that you reserve a business name, so this fee is completely optional. It’s $25 and will place a 120-day hold on your name. If you’re ready to start your business right out of the gate, name reservation probably isn’t for you, since filing the Articles of Organization will automatically register your name. But if you’ve come up with a perfect business name and aren’t ready to start your business, reserving it can be a good idea.
Articles of Organization Fee
This is the big one, the most important (and most expensive) form that you’ll file to start your South Dakota LLC. The $150 filing fee is a little steep, but the Articles of Organization is what makes your business official, so it’s worth it. You can file online or using a hard copy, but paper forms cost an additional $15 to file ($165 total). The bright side is that this is a one-time filing – as long as it’s accepted – so you won’t be paying the fee again.
Business and Professional Licenses
Not all LLCs need to obtain professional licensure before doing business, but some do, even after filing the Articles of Organization. For example, an investment advising firm must obtain licensure through the Department of Labor & Regulation Securities Division and a car dealer through the Motor Vehicle/Motor Fuel Division. Outside of state agencies, cities and/or counties often have their own business license requirements, so check with the Office of Economic Development and your local government to see which (if any) your LLC needs.
LLC Formation Service
Starting an LLC can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC formation service. These services take care of the registration process for you, so you don’t have to spend the time on research, paperwork, and filings.
Most of these services (like ZenBusiness and Northwest) offer basic LLC formation service like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, Operating Agreements, and expedited filing.
Registered Agent Service
Appointing a registered agent is an important part of your LLC formation process. Your registered agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with South Dakota business law. In short, you need an agent you can trust.
While you can be the registered agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A registered agent service ensures that your annual reports and other forms are filed efficiently and on-time, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
Not all registered agent services are equal, so you’ll need to be careful in choosing one. Fortunately, we’ve done some research for you, and we recommend Northwest Registered Agent. In addition to registered agent services, Northwest also handles LLC formation — and they’ll include a registered agent free for one year when you form your business with them. We think they’re the most reliable choice, but if you’d like to evaluate all your options, check out our Best Registered Agent Services guide.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2000.
Cost variations depend on the experience and location of the lawyer. You have a lot of great options, and making the right choice can be a daunting task. But a site like Avvo can help. Avvo offers access to a database of South Dakota business attorneys, sortable by location, rates, areas expertise and more. By comparing and evaluating your options, you can be sure that you find a good fit.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into South Dakota. Foreign LLCs don’t need to file the Articles of Organization; rather, they must file the Application for Certificate of Authority.
All foreign business entities are required to foreign qualify in South Dakota, or they could incur some pretty severe penalties. Avoid them by submitting an Application for Certificate of Authority online or by mail. This form is quite a bit more expensive than the Articles of Organization: $750 for online submissions and $765 for paper ones. Fortunately, this is also a one-time filing, so you’ll only need to pay the fee once.
LLC Annual Fees
All of the previously mentioned fees have been startup costs, single payments. But LLCs have maintenance fees too, namely the Annual Report. After starting your business, you will need to file an Annual Report before the LLC’s anniversary date each year. This is to ensure that the Secretary of State can keep its records current and accurate. Filing online will cost you $50 and on paper, $65. You should plan this payment into your yearly budget.
Income taxes are simple for South Dakota LLCs – they don’t apply. The federal government considers LLCs “pass-through” entities, which means the individual owners/members report income and losses on their personal tax returns, although South Dakota doesn’t have corporate or personal income taxes. Nor does the state impose a “franchise” or “privilege tax on its businesses.
But this doesn’t mean that your LLC is completely off the hook. There are certain circumstances under which the company will be required to pay taxes. If it sells merchandise, it will owe a Sales and Use Tax and need to register here. Or, if it maintains employees, it will owe an Unemployment Insurance Tax (apply here). For more information visit the Department of Revenue website.
What If I Don’t Pay?
Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
If you don’t file your formation documents – the Articles of Organization or Application for Certificate of Authority – you won’t be allowed to do business in the state. Miss an annual report and you will incur a $50 late fee; plus your business will be labeled “delinquent.” Delinquent companies cannot foreign qualify in most other states, apply for business loans, renew some professional licenses, and more. On top of that, if your LLC remains delinquent for too long, it will be administratively dissolved.
Delinquent tax payments also come with penalties. The late fee for a Sales Tax payment is 10% of the total amount owed, plus 1% interest per month. The Unemployment Insurance Tax carries a late payment penalty of $25 per month and a late filing penalty of $25 per month.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in South Dakota.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees – like Annual Reports and business taxes – so your business doesn’t fall out of good standing.