If you’re looking for a reliable DIY guide for starting an LLC in South Dakota, look no further.
Below you’ll find all the information you need to launch your business and handle any associated costs. Follow each step carefully and your LLC will be established and ready to hit the ground running.
That said, the process can be complex, with various filings and costs, so if at any point you need help, you can hire a cheap LLC service.
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Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your South Dakota LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, South Dakota law provides two requirements that all LLC names must follow.
First, your LLC name must include a business type indicator, specifically the words “Limited Liability Company,” “Limited Company,” or one of the following abbreviations: “L.L.C.,” “LLC,” “L.C.,” or “LC.” On top of that, your name must be fully distinguishable from every other business name on file with the Secretary of State.
“Distinguishable” can seem like a nebulous term, one that’s different from state to state, so let’s take a look at what it means in South Dakota. If you need to distinguish your name, typically making alterations to the following elements will NOT cut it:
- Business type indicators like LLC, Inc., or LP
- Special characters
- Singular, plural, or possessive forms of the same word
To effectively distinguish your name from a similar one, you must use at least one unique keyword or a different arrangement of keywords.
Consider this: your friend Fanny wants to open a flower shop in Pierre, South Dakota. The name she is considering, Flowers by Fanny, LLC is already in use. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the Secretary of State’s records.
Determine the Name Is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Articles of Organization without first confirming it’s available. Use the Secretary of State’s Name Availability Search to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can reserve that name in South Dakota for a total of 120 days.
Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold by sending an Application for Reservation of Name and a $25 payment to:
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
Typically, forms are processed in 3-5 days, although you can request expedited processing for an additional $50. After your 120-day hold expires, you must wait 60 days before renewing it.
Step 2: Choose a Registered Agent
Fanny’s LLC is quickly taking shape, and if it’s going to operate in South Dakota, she’ll need a go-between for state and legal communications. This is called the registered agent.
A registered agent is a key component of your budding LLC, handling all of its sensitive communication with the state so you don’t have to. According to the Secretary of State website: “The South Dakota registered agent functions as the point of contact for a business entity registered in South Dakota.”
LLC taxes, lawsuits, maintenance requirements, and more – the registered agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate. Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside South Dakota and you foreign qualified your LLC here.
But maintaining an agent isn’t just a convenience, it’s required. Registered agent information is a mandatory section in the Articles of Organization, and doing business without a valid registered agent on file can lead to serious consequences, including administrative dissolution.
Now for the practical application, the “how-to.” While filling out the Articles of Organization, just include your agent’s name and address. Then, when you file the form, their information will become part of your LLC’s public record, so be sure to confirm the appointment with your agent beforehand.
Individual as Registered Agent
You may think that an individual registered agent would need specialized training or experience, but this isn’t the case.
Anyone can serve as your registered agent, as long as they are a resident of South Dakota and have a physical address in the state (not a P.O. box). You can even serve as your own LLC’s agent, provided you meet these requirements.
Registered Agent Service
It can be a lot easier, though, to use an LLC formation service as your registered agent, so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free registered agent service. Or, if you’d rather start your LLC on your own, you can use a national registered agent service to cover your agent duties.
During the life of your LLC you may, at some point, need to change your registered agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing registered agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.
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Step 3: File the Formation Documents with the State
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This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.
She’s reserved her unique business name and designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Articles of Organization. This filing creates a record for Fanny’s Florals and Design, LLC with the South Dakota Secretary of State, giving it authorization to commence business in the state.
As you prepare to submit your Articles of Organization, you’ll want to weigh each of your three filing options. Whether you want to do it all from your desk or like to leave a paper trail, there’s a method for you. Regardless of which you choose, the filing fee is $150.
Looking for the quickest and most cost-effective method? File online. Your application will be processed immediately and your LLC will be over the biggest hurdle in the process.
Hard Copy Filing
Filing a hard copy takes a little longer (3-5 days processing time) and carries an additional $15 fee, but if you prefer paper forms, it’s still a totally valid option. Download and complete the application. Then, send it, with your $165 payment, to:
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
If you live near Pierre, you’re also welcome to drop off your form and payment in person at 215 E. Prospect Ave., Pierre, SD 57501.
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
There’s no South Dakota law that says you must adopt an operating agreement. However, an agreement essentially serves as your LLC’s bylaws, outlining all the necessary rules and procedures. It protects your assets in potential legal disputes and legitimizes your business in front of government agencies, banks, courts, and more. Without one, your LLC won’t have the customized processes to operate efficiently or the framework to support it in a lawsuit.
Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decided to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to the tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but our favorite free template is from TRUiC.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it includes all necessary information.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the state will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Okay, so you’ve filed the Articles of Organization, designated a registered agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing, & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a South Dakota LLC running smoothly and in good standing with the state.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
Fortunately for you, South Dakota doesn’t have state personal or corporate income taxes, so you won’t need to pay anything to the state for your LLC’s profits. Nor does the state impose a franchise or privilege tax on its businesses. So, go ahead and cross state income taxes off your list. But this doesn’t mean you’re in the clear yet.
There are certain circumstantial business taxes that your LLC still might need to pay. For example, if your LLC sells merchandise, it will owe a Sales Tax and Use Tax, payable through the Department of Revenue’s Tax Application. Or, if you hire employees, you’ll be subject to the Unemployment Insurance Tax through the Department of Labor and Regulation.
Plus, depending on your LLC’s location, it may owe a local tax to its city, municipality, or county. Consult your local government’s website to find out.
The Articles of Organization may have already made your business legitimate, but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.
Fanny’s Florals and Designs, LLC, for example, would need to obtain a Nursery Stock Dealers License from the Department of Agriculture before doing business. You might know exactly which licenses your business needs already, but if you don’t consult the Office of Economic Development’s “Licensing and Registering Your Business” document to find out.
Certain cities and counties require their own specific licenses, so you should also check with your local government.
Once you’ve taken all the steps to start your LLC, you’ll be off and running, making deals and growing the company. But when things are moving 100 miles per hour, don’t forget that South Dakota requires all of its businesses to submit one important recurring filing: the Annual Report.
Every year by the first day of your LLC’s anniversary month, you must file an Annual Report and pay its $50 filing fee. The easiest way to complete your report is online, but you can also submit it via mail by printing the online form and mailing it to the address listed in the Articles of Organization section.
The Secretary of State accepts Annual Reports up to two months prior to your due date. But if you file it more than two months late, you will owe a $50 late fee and your LLC could be administratively dissolved.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your South Dakota LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.
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Frequently Asked Questions
What are the business tax rates in South Dakota?
South Dakota does not have personal or corporate income taxes. Therefore, it doesn’t matter if your LLC is set up to be taxed as a sole proprietorship/general partnership or as a corporation. Either way, you have no income tax obligations in this state.
How quickly does South Dakota process LLC formations?
The Secretary of State should be able to process your LLC’s formation immediately if you file online. Meanwhile, paper filings take 3-5 business days.
How many small businesses are there in South Dakota today?
The state of South Dakota is home to nearly 90,000 small businesses. Entrepreneurs of all backgrounds and business types find that South Dakota is a great place to own and operate a small business.
What are the top small business resources and websites in South Dakota?
The South Dakota chapter of the Small Business Development Center is a great place to start, as they offer a wide variety of tools and resources for South Dakota LLCs. The U.S. Small Business Administration’s South Dakota District Office is another valuable resource, and the state’s Office of Economic Development also has plenty of good info.
Should I form my LLC in South Dakota, or choose a state like Delaware or Wyoming?
Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.
However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.
Where Can I Learn More About the South Dakota LLC Licensing and Permitting Requirements?
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with South Dakota state law. For more information about business licenses and more in this state, check out the South Dakota Governor’s Office of Economic Development’s Licensing and Registering Your Business guide.
Do I Need to File an Annual Report for My LLC in South Dakota?
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a South Dakota LLC Annual Report.
What Is the Total Expected Cost of Operating an LLC in South Dakota?
The overall costs of operating a South Dakota LLC can vary considerably based on the specifics of your business. However, we created a helpful guide to help you identify and plan for every expense your LLC will face in this state.
Should I Use an LLC Service, Hire an Attorney, or Form My Own LLC?
The answer to this question lies in your personal preferences, but we can give some general pointers. An attorney will cost the most by a mile, but also provides expertise you won’t find with the other options. The DIY route is free of charge but can require quite a bit of legwork and provides no peace of mind that the process is being completed correctly.
Using an LLC service means your business will be formed by professionals who know what they’re doing, while also costing significantly less than a lawyer. This “best of both worlds” attribute is what makes LLC services our preferred option.
How Do Online LLC Services Work?
Using an online LLC service removes much of the hassle from the LLC formation process. With these services, all you need to do is provide them with the name, location, and industry your business operates in, along with some info about yourself and your South Dakota registered agent.
The service then registers your Articles of Organization with the state to form your South Dakota LLC.
Start an LLC in All 50 States
We break down the LLC formation process in detail in all 50 states. View all of our LLC formation guides below.
- Start an LLC in Alabama
- Start an LLC in Alaska
- Start an LLC in Arizona
- Start an LLC in Arkansas
- Start an LLC in California
- Start an LLC in Colorado
- Start an LLC in Connecticut
- Start an LLC in Delaware
- Start an LLC in Florida
- Start an LLC in Georgia
- Start an LLC in Hawaii
- Start an LLC in Idaho
- Start an LLC in Illinois
- Start an LLC in Indiana
- Start an LLC in Iowa
- Start an LLC in Kansas
- Start an LLC in Kentucky
- Start an LLC in Louisiana
- Start an LLC in Maine
- Start an LLC in Maryland
- Start an LLC in Massachusetts
- Start an LLC in Michigan
- Start an LLC in Minnesota
- Start an LLC in Mississippi
- Start an LLC in Missouri
- Start an LLC in Montana
- Start an LLC in Nebraska
- Start an LLC in Nevada
- Start an LLC in New Hampshire
- Start an LLC in New Jersey
- Start an LLC in New Mexico
- Start an LLC in New York
- Start an LLC in North Carolina
- Start an LLC in North Dakota
- Start an LLC in Ohio
- Start an LLC in Oklahoma
- Start an LLC in Oregon
- Start an LLC in Pennsylvania
- Start an LLC in Rhode Island
- Start an LLC in South Carolina
- Start an LLC in Tennessee
- Start an LLC in Texas
- Start an LLC in Utah
- Start an LLC in Vermont
- Start an LLC in Virginia
- Start an LLC in Washington
- Start an LLC in West Virginia
- Start an LLC in Wisconsin
- Start an LLC in Wyoming