Having a South Dakota LLC is a better and cheaper option than having other business structures. A limited liability company (LLC) reduces the owners’ personal liability and protects their personal assets. One can start an LLC in two ways, domestic LLCs or foreign LLCs (LLCs in more than one state). By following some basic steps, you can easily form an LLC in South Dakota.
On this page, you’ll learn about the following:
- How to Start an LLC in South Dakota
- After Starting your South Dakota LLC
- South Dakota Foreign LLC
- Why an LLC in South Dakota
- Top Businesses in South Dakota
- South Dakota LLC Formation Review
How to Start an LLC in South Dakota
An LLC or a Limited Liability Company is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. This section gives you a step-by-step guide on how to start a South Dakota LLC.
Step 1: Decide a Name for Your LLC
Deciding on a business name is the first step to start an LLC. In South Dakota, before you name your LLC, it is important to note a few things. Firstly, make sure the name is available to use. If the name is available, then check if the name complies with all the South Dakota business naming requirements. Once you pass through them, you can successfully name your business.
Why do you need a proper business name?
If you want your LLC to have special identification, your company name is essential. However, many people face lots of issues by avoiding focus on choosing a business name for their LLC business formation filings.
Because of this, here are some of the major benefits of choosing the best LLC corporate names.
- To help establish a company’s presence in the market, a proper business entity type will help you. This also creates a new identity that will resemble your LLC.
- After you’ve properly chosen the name for your LLC, you will have no problems finishing the registration process.
- You can only get the EIN number when you have your name registration certificate with you.
Requirements when deciding a name for your LLC
LLC Name Search: A business name search is required to check if the desired name is available or not. If the name is available then the business owner has to fill up a name reservation form and send it to the Secretary of State, South Dakota. To do the name search, one has to visit the Business Entity Search page on the official Secretary of State website. Send the name reservation form to the below address by mail to reserve your LLC name in South Dakota. The cost of a name reservation is $25.
Important Quick Links:
Secretary of State
500 East Capitol Avenue
Pierre, SD 57501-5070
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Step 2: Assign a Registered Agent in South Dakota
A registered agent, or business entity, is a person that will act or work on your behalf. This person or business will receive significant tax forms, legal forms, formation documents, any internal document, a notice of lawsuits, and other official government correspondence in South Dakota. Choosing a South Dakota registered agent for service of process for your LLC is required.
Make sure your registered agents are residents of South Dakota or have a physical street address. It could also be a business with an office address. Here are the recommended agents list and employees for you:
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Note that availing of the services of professional registered agents would be your best option since you are guaranteed that whoever is handling your legal affairs knows their stuff well. You will enjoy peace of mind and focus only on running your business, as the ‘professionals’ take care of all legal matters.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in South Dakota. Compare them to check the best yet cheapest option for you. Besides, they can guarantee you professional service because they have been in the business for years.
Step 3: File Articles of Organization in South Dakota
A Certificate of Name Reservation is needed to file Articles of Organization, as other states call it. You need to make reports of this certificate with the South Dakota Secretary of State, with a starting fee of $150 to file. LLC cost in South Dakota includes other taxes and fees. You may file them online or by mail.
This South Dakota Certificate of Formation is a legal document needed to form your business officially. It will indicate details about your LLC in South Dakota, like if it is a member-managed or managers-managed. LLCs with employees need to check South Dakota’s government portal for the guidelines to hire employees.
Before you start filings, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your South Dakota LLC will offer.
How to File Online
Go to the Secretary of State Online Service. Select “non-subscriber.” Fill out the online form. The website will alert you if your county does not support online filings after selecting your principal county. To know more about online filing, visit the South Dakota Certificate of Formation.
How to File by Mail
If you prefer filing real-life forms for your South Dakota LLC registration, then you can download the South Dakota Limited Company Certificate of Formation. Read the form thoroughly and fill it out. It will have to fill, among others, your name, city, state, zip code, and signature. You may also file in person by visiting the office on business days.
Mail To: Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
Step 4: Create Your South Dakota LLC Operating Agreement
A comprehensive operating agreement is a document that legally outlines the proprietorship and operating procedures of your LLC This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
When it comes to an LLC operating agreement South Dakota does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all your details of business operation. This document would be useful if you decide to dissolve South Dakota LLC later.
Step 5: Filing a South Dakota LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes and taxes in general. It is like a Social Security number dedicated to a business’ taxes. The EIN is necessary for any active business or any form of business for that matter.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Before sending the form, ask for EIN Assistant. Enter details of your LLC, and finally complete the form and send it to the address given.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
And that’s all! Congratulation, you are now done with all the necessary steps to form your South Dakota LLC. If you still haven’t used a professional service from here, I strongly recommend having one to handle the remaining tasks.
After Starting your South Dakota LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business bank account
- File South Dakota business permits & licenses
- Get liability for business and professional liability insurance with coverage for employees
- File a South Dakota LLC annual report or biennial report
- Already existing LLCs that wish to operate in South Dakota must register as South Dakota foreign LLC.
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
South Dakota Foreign LLC
To register a South Dakota foreign LLC, one has to file the foreign LLC formation certificate with the Secretary of State, South Dakota. Forming a foreign LLC allows you to operate your business in more than one state in the USA as a single business entity. Check South Dakota Foreign LLC to know more about having a foreign LLC.
Why an LLC in South Dakota
If an entrepreneur is looking forward to starting an LLC and looking for the best incentive programs, they should choose to go for LLC in South Dakota. The main reason for that is a reduction in different tax liabilities and diverse business funding options. There are several benefits that the state is offering to the new start-ups that are discussed below.
Privacy of the trust documents
Many trust documents are signed and preserved under the state government when a new LLC is built. They ought to be kept private, but all the states cannot provide the same level of privacy and protection to those documents. Still, some states like South Dakota where the rules regarding privacy are the best in the states. Here the documents are not required to be submitted publically.
Only the information filed in front of the court during the starting of South Dakota LLC, which has proceedings to modify, can be sealed.
South Dakota Reinvestment payment Program
When a business is thinking of upgrading their business or relocating it from one place to another, then they can take the help of a reinvestment program. In this program, a business entity can get a reinvestment incentive from the government. The amount of less than or equal to the payment LLC will be paying as sales and use tax for the particular reinvestment project is provided. The Board of Economic Development is openly taking the application of relocation of LLCs.
Variety Benefits Program of South Dakota
If entrepreneurs start an LLC in South Dakota, then they get eligible for various types of benefit programs offered by the government. Some of them are discussed in detail below.
- The first incentive is related to job applications and hiring. An LLC hires a candidate who belongs to a high–need category or belongs to high-demanding areas. The government will bear half the cost of hiring that particular employee.
- Those start-ups are thinking of purchasing new machinery for their business. The government issued tax-exempt bonds, which an entity should file if they want to get credit out of their money-incentive project.
- A fixed amount of working capital is required by an LLC to keep its business running. The South Dakota WORKS program can provide this capital under which the cost of payrolls, start-up, and construction of buildings can be covered.
Top Businesses in South Dakota
Before an entrepreneur forms an LLC in South Dakota, it is advised that they should learn the details about the state’s economy. They should go through the top businesses formed in the state and their contribution to the state. An overview of it is discussed below in brief.
Finance and Service sector
Most of the population of the state is working under the service sectors of the state. The service sectors mainly include financial services like taxation and advisory, tour and travel services, educational services, and healthcare. The service sector has helped in generating employment in the state after the great depression and is now accountable for contributing around $8.2 billion to the state.
The state’s agriculture focuses on corn, rye, wheat, flaxseed, and soybean. Apart from these crops, there is a flourishing industry of high-quality wool production in the state. People have high-quality machinery that they use for the rearing of wool and later sell them.
Also, there is a small fisheries market in the state which is established near the Missouri River. The overall contribution of the agriculture sector to the GDP of South Dakota is nearly $5 billion.
State manufacturing is dependent only on raw agricultural materials. The primary industry that is found in the state is wool processing and its textiles. Other than that, there are businesses of wooden products and furniture making and food processing. There are a few numbers of an industry that makes computers or light machinery in the state. The total income of the manufacturing sector of the state is $4.52 billion.
There is a huge scope of small businesses in the state due to its small size. Some of the best ideas that are working well in the state are:-
- Cattle Ranch
- Account Consultancy
- Well water drilling
South Dakota LLC Formation Review
Time needed: 5 minutes.
Just to recap, here are the easy steps again when forming an LLC in South Dakota. Click on the steps in this list to read the full detail.
- Name your South Dakota LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a registered agent
In South Dakota, it is mandatory to select a registered agent for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
If you are a resident of South Dakota, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $150 (domestic LLC) and $765 (foreign LLC), LLC costs in South Dakota include $50 for Annual Reports every year. LLCs are liable to pay sales tax of 4.5% every year
It takes no time (immediately) to get a South Dakota LLC if you file it online. For the mail filing, it takes 1 to 2 business days to get an LLC.
Every year all the LLC have to submit an Annual Report and pay $50 to the South Dakota Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens.
Having an LLC is easier than other forms of business. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. On the other side, the formation of LLCs requires less paperwork and fewer legal complexities. If you have any questions, leave a comment below.