Your business is growing, and you’re planning an expansion to other states. It’s a good problem to have!
But it’s not quite as simple as choosing another location. Because each state has different rules and requirements for business operations, you may need a “foreign qualification” in each state where you plan to do business.
It’s a common misconception that foreign qualification is only for businesses operating outside the U.S. But in this case, “foreign” refers to any business operating in a state that isn’t the state where the LLC was originally formed.
For example, if your LLC is registered in Minnesota and you are looking to open a second location in South Dakota, you may need to complete a foreign qualification in South Dakota before you can expand there.
Important Note: If you’d like to save time and have the foreign qualification paperwork taken care of for you, many of the best LLC services can handle this task for you.
Foreign qualifying is essentially asking permission to do business in the state of South Dakota. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before starting a business in South Dakota yields consequences that are far costlier than registering in the first place.
Fail to foreign qualify and the Attorney General could stop your LLC from doing business in the state until you’ve been properly registered and paid any necessary fees. Additionally, transacting business in South Dakota without foreign qualifying will prevent your company from maintaining any lawsuits in the state’s courts.
But here’s what failing to foreign qualify won’t do: it won’t invalidate any of your existing contracts, and it won’t stop your LLC from defending itself in any lawsuits. Further, it won’t make one manager or member individually responsible for the company’s debts or other liabilities.
The South Dakota LLC Act has more on these penalties in Sections 47-34A-1008 and 47-34A-1009.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in South Dakota? There can be some confusion around this topic since the state’s LLC Act gives very little detail on what it means. However, we know from tax laws that you are typically considered to be “doing business” and required to foreign qualify if:
Think of it this way: if your LLC is present and profiting off South Dakota’s economy, you’re doing business there.
If you’re unsure whether or not you need to file for a foreign qualification in South Dakota, we suggest seeking legal counsel.
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in South Dakota. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
This list is fairly comprehensive, but it’s a good idea to check out the more detailed one in the LLC Act Section 47-34A-1003. If your only South Dakota business activities appear here, lucky you! You’re most likely exempt from foreign qualifying. Even so, it’s best to take any questions, hesitations, or concerns to an attorney.
Foreign qualification in South Dakota is simple if you know where to find and send your forms. If you or your legal counsel has decided to foreign qualify your LLC in South Dakota, you can register through the Secretary of State’s online filing portal or by submitting an “Application for Certificate of Authority.”
Quite honestly, online is the better option. That’s because it’s both quicker and cheaper. There’s an extra $15 filing fee for all paper forms, and since foreign qualification already costs $750, you probably don’t want to spend much more. On the LLC Forms page, scroll down to the Foreign Limited Liability Companies section and click “File Online” under “Application for Certificate of Authority.” Then, click the “Start a New Business” button, and you’ll be off and running.
If you want to use a paper form despite the extra fee, download this form and fill it out in its entirety. When you’ve finished, mail it off or hand-deliver it to:
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
Whether filing online or by mail, the Secretary of State’s office also requires that you submit a Certificate of Good Standing from the state where you formed your LLC, so don’t forget to include one!
The $750 fee for online filings is payable by card at the end of the filing process. For mailed or hand-delivered forms, include a check – made out to the “Secretary of State” – for $765.
After your form is in and your fee is paid, sit back, take a deep breath, and pat yourself on the back. Your LLC is on its way to foreign qualification, and you’re embarking on another chapter in the life of your business.
It’s important to remember the small details too, as these are the things that can trip up your foreign qualification process. As you complete your paperwork, take a moment to confirm that your LLC name follows all of South Dakota’s business naming rules. They state that your name must:
You can also reserve your South Dakota business name if you’re not quite ready to foreign qualify your LLC.
We think you should foreign qualify your LLC before you begin conducting business in a new state. If you don’t, your business could be subject to a broad range of fines and penalties for operating an LLC in a jurisdiction where you don’t have permission to do so.
You’ll typically need to wait roughly 3-5 business days for the state to process a paper application. If you file online, South Dakota will process your foreign LLC filing immediately.
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.
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a South Dakota LLC Annual Report.
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.
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 foreign qualified 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.
Using an online LLC service removes much of the hassle from the foreign qualification 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 Application for Certificate of Authority with the state to qualify your LLC to do business in South Dakota.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
South Dakota Business Resources
Foreign Qualification by State
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