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.
The 5 steps to form an LLC in South Dakota:
To start an LLC in South Dakota, 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. Visit the South Dakota Secretary of State’s business name availability search page to find an available LLC name. 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.
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 filing fee of $25.
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 $10 filing fee to register and a $10 filing fee annually to renew your DBA.
If you plan to operate beyond South Dakota, you may also want to trademark your name at the federal level. This gives you exclusive use of your business name across the entire United States. Head to the website of the U.S. Patent and Trademark Office to search the trademark database. You can then apply for an available trademark online.
You can also apply for a trademark at the state level, which is often easier and quicker. Fill out the South Dakota Trademark Registration application and submit it with a $125 fee. You’ll need to mail it to:
SD Secretary of State Office
500 East Capitol Ave.
Pierre, SD 57501
Choosing a unique name also makes it more likely that you’ll be able to secure a domain name for your business. Your website address should be easy to remember and ideally parallel to your business name. Use an online search tool to check whether relevant domain names are free.
The above steps clarify that creating a business name is about more than finding a catchy moniker.
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 your company is subpoenaed or sued, the state of South Dakota will deliver all necessary documents 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. If you use your home address, anybody looking up your LLC’s registered agent details — which are a matter of public record — will know where you live.
Instead, you may benefit from hiring an outside registered agent service — one that is authorized to do business in South Dakota and has a permanent address in the state. This way, you can rest easy knowing that your privacy is protected, 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. 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 of $150 and mail submission requiring a nonrefundable fee of $165.
For those who choose to mail their document, it should be sent to:
Secretary of State Office
500 East Capitol Ave.
Pierre, SD 57501
Step 4: Create an Operating Agreement
While 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.
Since 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. You should still consider turning to a trusted source to help you with an Operating Agreement.
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). 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. It’s easy and free to get your EIN, so there’s really no reason not to. Just head to the IRS website to start your application. Alternatively, you can call the IRS Business and Specialty Tax Line at (800) 829-4933.
How much does it cost to start an LLC in South Dakota?
Starting an LLC in South Dakota is relatively affordable. Filing your Articles of Organization through the mail or online will cost $150 online or $165 via mail. On top of the fee associated with filing your Articles of Organization, if you choose to reserve your desired name ($25), forming an LLC in South Dakota will cost a minimum of $175. However, hiring a registered agent and obtaining any required licenses, permits, and insurance policies can cause the price to rise.
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.
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.
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 a 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.
South Dakota LLC FAQs
- 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.
- 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. rnrnThe 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. rnrnAlthough 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?
While South Dakota doesn’t require a general business license to operate in the state, some businesses will be required to have certain licenses and permits. The South Dakota Governor’s Office of Economic Development offers a list of business types that must obtain special licensing and information on applying if needed.rnrnWhile the list can be helpful in securing state licensing, there are many other licenses and permits your LLC might need, such as federal, local, and industry-specific licenses. You’ll need to do some research to find out what’s required for your business.rnrnWhen it comes to insurance, what you need can range from professional liability insurance to unemployment and workers’ compensation insurance. South Dakota’s Department of Labor and Regulation has a Division of Insurance that produced this handy guide on everything you need to know.rnrnIn both instances, we recommend hiring a professional service like ZenBusiness to do the research for you. We can provide you with a comprehensive package of all the licenses and insurance required for your South Dakota LLC and help you file any necessary paperwork.
- How do I dissolve an LLC in South Carolina?
If for any reason, you decide to dissolve your LLC, you can do so online or via mail by filling out your South Carolina Articles of Termination form. The filing fee is $10.