Starting a business is an exciting venture — albeit a stressful one. If you’ve decided to start a limited liability company (LLC) in South Dakota, you’re one step closer to being an official business owner. There are several steps to take, with some being more complicated than others.
The official step to getting your South Dakota LLC up and running is to file the Articles of Organization with the Secretary of State. Before you can do this, however, you have to figure out some other details — like who your registered agent will be and whether you need an Operating Agreement. We’ve created this step-by-step guide to decrease confusion and help you on your way to formalizing your South Dakota LLC.
To start an LLC in The Mount Rushmore State, you’ll have to file your Articles of Organization through the Secretary of State’s website. However, before you do so, you’ll need to decide on a name for your business and appoint a registered agent. You’ll also need to decide on creating an Operating Agreement, even though it isn’t a requirement in the state of South Dakota.
While the process is relatively straightforward, this step-by-step guide will break down the process so that you don’t miss any necessary paperwork, fees, or licensing required to start your South Dakota LLC officially.
Step 1: Name Your South Dakota LLC
One of the most important steps in creating your South Dakota LLC is also the very first thing you will do for your business: naming your South Dakota LLC. Start by creating a list of alluring and captivating options that will give your future customers some idea of what you do and what kind of company culture to expect.
South Dakota also has set laws on naming LLCs. As your business will be designated a limited liability company, it is mandatory to place a form of “Limited Liability Company” on the tail end of your business name. You do have some choices about how you would like this designation to appear on all official documents. The following list represents all versions of the LLC title that can be legally applied to your business name:
- Limited Liability Company
- Limited Company
- Ltd. Liability Company
- Limited Liability Co.
- Ltd. Liability Co.
Further, the state bans the use of certain terms in an LLC name. To avoid confusion with other types of business, you can’t use designations for other formal entities like “Corporation,” “Limited Partnership,” “Incorporated,” “Inc.,” or “Cooperative.” You must also avoid words that would associate your business with a government agency, like “FBI,” “federal,” “government,” and “city.”
Last but not least, your business name must be one of a kind. One tip during this process is to key in your names with just their fundamental portions. For instance, if you are considering “Janet’s Ice Cream Parlor,” search for “ice cream” first. Narrow your list to names that differ as much as possible from existing names. South Dakota law provides that a business name be “distinguishable on record” to be utilized for a new business entity. This means that sight changes in spelling, punctuation, or chosen suffix are not enough to form a unique and acceptable name.
Check to see if your business name is available by using our South Dakota business name search tool.
Once you’ve found an available name, you’ll need to determine if you’re ready to file right away or if reserving the name is in your best interest. If you’re not quite ready to finish up the paperwork, you can reserve your chosen name for up to 120 days for a fee.
If you’d rather not deal with this process yourself, we have a business name reservation service that can handle it for you. As part of the service, we also check to see if your desired name is available.
If you plan to use an alternate name for your LLC, you’ll need to complete this process twice. Known as a fictitious name or “Doing Business As” (DBA) name, you’ll need to check that your DBA name is available and compliant with South Dakota’s requirements.
Unlike your LLC’s official name, your DBA name should not have any business entity suffix, including “Limited Liability Company,” “LLC,” or “L.L.C.” The DBA name should also not include any words relating to financial institutions, such as “bank,” “trust company,” “credit union,” or other similar words or phrases.
Once you’ve found an acceptable DBA name, you will need to register it on the South Dakota Secretary of State’s website. To fill out the application, you will need your business’s Secretary of State ID and the name and address of the business’s owner. You will be required to pay a filing fee to register and another filing fee annually to renew your DBA.
To simplify the process and save you from completing all of the paperwork, we have a South Dakota DBA service you can take advantage of.
To make sure you’re entirely in the clear with your business name, visit the United States Patent and Trademark Office website to see whether your business name or logo is federally trademarked. Trademarks can also happen at the state level. To find out if your desired business name is already trademarked and/or apply for a trademark of your own, go to the Secretary of State website page for trademarks.
When you’re coming up with a business name, it’s wise to consider whether you can secure a matching domain name so that your future website can be easily found online. We have a tool to help you do a preliminary domain name search, and our domain name registration service can help you secure the online name that will best serve your company.
We can help you with the administrative aspects, for example, by handling your DBA and domain name registration. These are just some of the services offered in our business formation packages.
Step 2: Appoint a Registered Agent in South Dakota
South Dakota requires every LLC to have a registered agent — a person or entity acting as the point of contact for all legal matters. This individual’s contact information must be provided when filing the Articles of Organization. If used, the state of South Dakota will deliver all necessary legal as well as correspondence from the Secretary of State to your registered agent, who is legally required to accept service of process.
As the owner, you can act as your South Dakota registered agent. While serving as your own registered agent might seem like a straightforward solution, it’s actually not the best idea. The agent needs to provide a physical address, not just a P.O. box. If you use your business address, you risk having sensitive paperwork like lawsuits delivered in front of clients.
Instead, you may benefit from using our registered agent service in South Dakota. This way, you can rest easy knowing that your privacy is protected through our 3rd Party partner, and you have a reliable point of contact for essential documents.
Step 3: File South Dakota Articles of Organization
Once you’ve decided on a name and appointed a registered agent, the next step is making your South Dakota LLC official.
Filing official government documents like this can be intimidating and/or complicated for many people, which is why we’re here. With our business formation plans, our professionals handle the filing for you to make sure it’s done quickly and correctly the first time. But, although we can handle this for you, we’ll show you how the process works below.
To do so, you’ll need to complete your Articles of Organization — sometimes known as the Certificate of Organization in other states — and file it with the South Dakota Secretary of State. To accurately fill out this form, you’ll need the following:
- Principal mailing address. This is the address of your place of business. If you have a store or office, it would be that location. If you work from home, it would be your home address.
- Name and address of registered agent. Make sure that the person or entity you list as the registered agent is consistently available during standard business hours. If the entity is a commercial registered agent, you will need to include their CRA number (which can be obtained from the agent) on the form.
- Name(s) and address(es) of the organizer(s) forming the LLC. This refers to you. If other partners are joining you in creating your company, their names should be listed here (if there are more than four, list them on separate pages and attach them. You will have the opportunity to upload or addend attachments as you come near the form’s end. Every organizer listed will need to sign at the end of the document.
- Management structure. This section asks if your LLC will be managed by its members or if the members will appoint a manager or managers to run the company. If you check the box for manager-managed, you’ll need to list the names and addresses of the manager(s).
- Effective date. You can choose to have your business officially start when the Articles of Organization is filed by leaving “Yes” selected. If you would prefer the business to begin on another date, you may specify that date.
- Email notification. You will have the opportunity to select whether you wish to receive email notifications from the Secretary of State’s office about events, due dates, and any other items pertaining to your business. While it is not required, leaving “Yes” selected ensures that you never miss out on information that could potentially save you a lot of time and money later.
- Member liability. You will be asked whether any LLC member is to be held liable for any debts or liabilities the LLC may incur. You likely do not want this. One of the benefits of an LLC is the added protection it gives members. For instance, if the business is sued, your LLC structure helps differentiate you and decreases the risk of you having to hand over personal assets to cover business liability.
You can fill out the document on paper and mail it or use the online portal to submit your paperwork. If you choose to file the Articles of Organization by mail, it is slightly more expensive, with online submission requiring a nonrefundable fee and mail submission requiring a similar nonrefundable fee.
For those who choose to mail their document, it should be sent to:
Secretary of State Office
500 East Capitol Ave.
Pierre, SD 57501
If you have us handle filing your Articles of Organization, once the state approves your LLC, your paperwork will be available from your ZenBusiness dashboard, where you can keep it and other important paperwork digitally organized.
Once you get your physical paperwork back from the state approving your new LLC, you’ll want to keep it in a safe location along with your other important documents, such as your operating agreement, member certificates, contracts, compliance checklists, transfer ledger, etc. We offer a customized business kit to help you keep these important documents organized and looking professional.
By now you’re realizing how often you’ll need to supply an address for your new business. That can be unsettling for some business owners, especially those running their business from home. In instances where you’re not required to give the registered agent address or official principal address for your business, a virtual business address can come in handy.
Step 4: Create an Operating Agreement
Although South Dakota doesn’t require LLCs to have an Operating Agreement, it’s in your and your company’s best interest to adopt this internal document. A well-drafted Operating Agreement can do wonders for your business and set your LLC up for success.
The following are benefits of drafting an Operating Agreement for your South Dakota LLC:
- Avoids South Dakota’s default LLC rules. Your LLC can create its own internal rules in the Operating Agreement, which can fit your business’s individual needs.
- Adds another layer of protection between the owners’ personal assets and liability and those of the business.
- Helps secure funding from investors and lenders.
- Outlines acceptable actions for the business, including the authority of the LLC’s members and managers.
- Creates a succession plan should the owner leave the business or become incapacitated.
- Provides guidelines for adding and removing members to the LLC.
Because the state of South Dakota doesn’t require an LLC Operating Agreement, there is no form to fill out and file with the Secretary of State. However, you should still consider turning to a trusted source to help you with creating an Operating Agreement. We offer your South Dakota LLC a customizable template to help you get started with your Operating Agreement to help protect your assets and company.
Step 5: Apply for an EIN
An Employer Identification Number (EIN) allows the IRS to identify your LLC on financial paperwork, like your annual tax filing. It’s also sometimes called a Federal Employer Identification Number (FEIN) or Tax ID Number. Your nine-digit EIN is unique, and no other LLC will share it.
If you are the only member in your LLC and don’t have any employees, you may not be required to have an EIN. You should still get one, though. You will need it if you hire employees down the line, for example — or if you want to open a business bank account.
You can get your South Dakota LLC’s EIN through the IRS website, by mail, or by fax, but if you’re unfond of dealing with that particular government agency, we can get it for you. Our EIN service is quick and eliminates the hassle.
Once you’ve secured an EIN, you’ll be able to open a business bank account. Having separate accounts for your business and your personal banking is critical for sorting out your finances at tax time and helps you avoid commingling funds. Commingling funds can not only make your taxes more difficult, but it could also be used against you if someone takes you to court to challenge whether you and your LLC are truly separate entities.
We offer a discounted bank account for your new business. This allows for unlimited transactions, online banking, a debit card, and more. When you want to authorize others in your business to use the account, we offer a banking resolution template to simplify the process. For further help managing your new business’s finances, try the ZenBusiness Money App. It can help you create invoices, receive payments, transfer money, and manage clients all in one place.
South Dakota LLC FAQs
How much does it cost to start an LLC in South Dakota?
The state fees for forming a South Dakota LLC range from $150 to $225, depending on factors such as your method of filing, whether you choose to reserve your business name, etc. Note that fees change over time, so you should check the Secretary of State website for the most recent fee schedule.
What are the benefits of an LLC in South Dakota?
LLCs aren’t the only type of business you can form in South Dakota. However, an overwhelming majority of entrepreneurs opt for this business structure, thanks to the many benefits it offers compared to other entities. Unlike a corporation, for example, an LLC helps you avoid double taxation. It also offers customized ownership options and has simpler reporting requirements. Our guide to LLCs offers greater clarity on LLC benefits.
Forming a South Dakota LLC will further allow you to benefit from the following advantages:
- Increased asset protection. In general, LLCs help protect your personal assets by differentiating between you and the business entity. South Dakota further bolsters such asset protection thanks to measures like Domestic Asset Protection Trusts. Only a minority of states allow DAPTs, which can help you avoid added tax and administrative fees on your assets.
- Robust support for small businesses. The South Dakota District Office of the U.S. Small Business Administration (SBA) offers many resources for entrepreneurs, including seminars on important topics like understanding financial statements and exporting products overseas. Funding programs for small businesses are also available.
- Excellent tax conditions. South Dakota has no personal income tax, corporate income tax, business inventory tax, or personal property tax. This can save your LLC, and you personally, significant money over time.
With these state-specific benefits on top of the overall advantages an LLC offers, starting your business in South Dakota is undoubtedly a wise move.
What is the processing time to form my South Dakota LLC?
Your Articles of Organization will be processed with the South Dakota Secretary of State immediately after payment is received if you file online. Filing by mail takes a bit longer — between one to two business days.
South Dakota has options for expediting your filing for an additional fee. If you’re in a hurry to form your LLC and don’t want to jump through the hoops of the state’s expedited filing processes, we can handle it for you with our faster filing speeds service.
How is a South Dakota LLC taxed?
No one likes to talk about the cut that Uncle Sam will take from their business, but forming an LLC in South Dakota means becoming acquainted with what you will have to deal with on the federal and state levels. An accountant specializing in business taxes is highly recommended here, but let’s break down the basics of your LLC tax expectations below.
Federal LLC taxes:
- If you are the sole member of your LLC, you will include all of your business income and expenditures with the traditional calculation of your individual taxes.
- If your LLC contains any members outside of yourself, you will be expected to treat your LLC as a partnership. As mentioned above, an EIN will be mandatory, as will a yearly filing of an information return that will specify the exact amounts that every employee and member of your LLC invested in or received from the business, including yourself.
- If you would prefer to be taxed as a C corporation, you can complete form 8832, which means income from the business will be taxed on the business tax return each year, and the profits distributed to the owners will be taxed again on their individual tax returns.
- If you have worked a typical job before, you will know that employers take taxes out of each paycheck, but as a business owner, you are responsible for doing this yourself based on what your company is making. To avoid penalties at tax time, making quarterly estimated tax payments will be necessary.
- You will also be responsible for taking Social Security, Medicare, and federal taxes out of any paychecks owed by the employees of your South Dakota LLC.
South Dakota LLC taxes:
- Unlike nearly every other state in the country, South Dakota does not have personal state income tax. This means that you, as an employer of South Dakota workers, will not need to withhold state income tax on employee wages. However, you will still need to have your employees fill out form W-4 to make sure federal taxes are properly withheld.
- South Dakota LLCs will be subject to a standard sales and use tax of 4.5%. A municipal tax will also be remitted on the same form.
- Business taxes can be paid online in South Dakota and are typically due quarterly, although some exceptions apply based on revenue. Checking in with the IRS annually to see if your taxation schedule has changed due to increased or decreased revenue is always a wise thing to do and ensures that you are paying in the appropriate manner.
If you want to determine your bookkeeping, accounting, and tax needs, check out our Free Accounting Assessment.
Do I need to file my Operating Agreement with the state of South Dakota?
No. The Operating Agreement is kept internally by the owner and partners or managers. While some states legally require LLCs to have an Operating Agreement, South Dakota is not one.
What tax structure should I choose for my South Dakota LLC?
Your South Dakota LLC can be taxed as a partnership, corporation, or single-member LLC. Each tax classification has its own requirements in terms of reporting and responsibilities.
The default option allowing your LLC to be taxed as a sole proprietorship (“disregarded entity”) or partnership is usually the most straightforward. The LLC itself will pay no taxes; instead, the LLC owners will pay their share of the LLC income on their personal tax returns.
Although South Dakota doesn’t have many types of taxes (no personal income, corporate income, or business inventory), there is still sales tax to account for you if you sell products or services. The state sales tax is 4.5%. There are also city sales taxes to take into account, depending on your location.
Does South Dakota allow a Series LLC?
A Series LLC is a unique structure of a limited liability company permitted in only a handful of states. Under this framework, multiple independent LLCs operate under a single parent entity. Each LLC has its own members, assets, obligations, and liabilities — and each one is protected from the liabilities of the others. South Dakota does not allow Series LLCs.
Which licenses and insurance are required for an LLC in South Dakota?
You’ll need to make sure your LLC has all the licenses and permits it’s required to have by law. Unfortunately, because licensing varies by industry and location and can occur on the federal, state, and local levels, there’s no central place to check to see if you have all the licenses and permits you need. You’ll have to do some research.
If you don’t have the time or inclination to do all this research, or if you just want the peace of mind to know that your business has all the licenses and permits it’s legally required to have, our business license report service can do the work for you.
How do I file an annual report for my South Dakota LLC?
Every year, you’re required to file an annual report to keep your South Dakota LLC compliant and in good standing with the Secretary of State.
To keep things simple, your annual report’s due date will be the same each year: the last day of the anniversary month following the year of formation. While the last day of your anniversary month is the deadline, you can submit your annual report one month prior to the due date.
We can help you with your annual report in a couple of ways. Our South Dakota annual report service will help you file your annual report, and our Worry Free Compliance service not only helps with filing your annual report, but also sends you other important compliance reminders and helps you with two amendment filings each year.
How do I dissolve an LLC in South Dakota?
If for any reason, you decide to dissolve your LLC, you can do so online or via mail by filling out your South Dakota Articles of Termination form. The filing fee is $10.