How to Start Your LLC in South Dakota

An LLC shields your personal assets against business debts or lawsuits, enables the profit and losses to go to the personal tax returns of the members, and provides a management system that can be adjusted to fit your business requirements.

Our guide will guide you on a step-by-step basis on how to establish your LLC, starting with the process of selecting a business name to the process of sustaining your company according to the state regulations.

1. Name Your South Dakota LLC

The importance of the name is that you need to choose one that will represent your business and may create the first impression about your company on the side of the customers. The first step would be to clearly establish your business concept and then ask your trusted friends or colleagues to brainstorm on names. Check online searches to make sure that your ideas are not shared with others and domain availability in case you are going to have a site.

The creativity that is motivated by online business name generators can be translated into your ultimate decision, which ought to be based on your vision of the business and professionalism.

Once you have reduced your choices, visit the US Patent and Trademark Office (USPTO) to make sure that the name is not registered in the country.

Name Reservation

Name Reservation A Name Reservation Form can be mailed to:

Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501

Doing Business As (DBA)

In case you wish to run the business under another name than your LLC will require DBA. As an example, when your LLC is called JJ Waffles and then you want to start a new line of products that you will call JJ Muffins, you can legally use the name of the product. DA also allows you to open a bank account in the name of the DBA. DBAs are registered as a fee of $10 online in South Dakota with the Secretary of State.

2. Select a Registered Agent

South Dakota obliges any LLC to the appointment of a registered agent, an individual or a company who has the right to receive legal and tax documents. This is the agent that will make sure that your LLC gets important notices and remains compliant.

South Dakota Registered Agent Requirements

• Must be 18 years or older
• Physical address in South Dakota (no P.O. Boxes)
• To be available at normal working hours.
• In the case of a business, then it has to be registered to conduct business in South Dakota.

Although you are free to act as your own agent, there are a lot of business owners who register a service of a registered agent as it is convenient and helps not to miss any important document.

3. Decide the way you want your management structure

The South Dakota LLCs may be member-managed and/or manager-managed, and the selection of the appropriate structure depends on the amount of the involvement of the owners in the day-to-day activities.

Member-Managed

There is an active participation of all members in day-to-day operations. Ideal in small firms where all the owners are directly involved in running the firm.

Manager-Managed

The company is operated by non-member managers and the members can be passive investors. Applicable to LLCs that have more than one member or those who wish to have a hands-off position.

In the case of your LLC which did not state the management in the Articles of Organization, it becomes member-managed.

4. Articles of Organization

Your LLC is officially incorporated and formed by the Articles of Organization. You may either do it online or by mail through the Secretary of State of South Dakota.

Information that is required includes

• LLC name
• Business purpose
• Principal office address
• The details of registered agents.
• Member/manager information Organizer information.
• Additional conditions (not mandatory).

Contact Information

Secretary of State in South Dakota
215 E. Prospect Ave.
Pierre, SD 57501
Phone: (605) 773-4845
Website: South Dakota Secretary of State.

5. Prepare an Operating Agreement

Operating Agreement is highly recommendable even though it is not a legal requirement in South Dakota. This document explains the nature of the operation of your LLC, distribution of profits and losses, and resolution of any dispute. Single-member LLCs also have the benefit of having one because it enhances protection of liability and explains the management practices.

A good Operating Agreement Must Incorporate

• LLC name and address
• Duration of the LLC
• Registered agent information
• Membership and management organization.
• Suffrage and the processes of decision-making.
• Financial distributions and allocations.
• Add/removal of member procedures.
• Dispute resolution and legal policies
• Rules of record-keeping and communication.

There are templates which can be found online although professional analysis is recommended so as to make sure that they are aligned with your business objectives.

6. Get an Employer identification number (EIN)

The IRS provides an EIN that is used to identify your business in taxes. LLCs that have more than one member or employee need to have an EIN. A single member LLC that does not have employees is still free to open one or more bank accounts or open a business credit.

The application needs details of the responsible party which is a natural person, who exercises control or direction of the money of the entity. In the case of EIN, the form is filled on the IRS site.

7. Acquire Business Licenses and Permits

These licenses vary depending on industry and location. Federal permits can be issued to specific professions, e.g. food services or healthcare. The requirements at the state level in South Dakota are low but local governments usually demand licenses or permits to run business. In case your business deals with taxable goods or services, then you are needed to have a sales tax license issued by the South Dakota Department of Revenue.

Ordinary Licenses and Permits comprise

• Construction, childcare, food handling, professional services, etc.
• Construction, zoning or fire license.
• DBA registration permits
• Health permits of regulated industries (OSHA).

Agency failure may result in fines, penalties or closure of the agency because of failure to acquire permits that are required. This can be made easy by visiting a business lawyer or a company such as MyCorporation.

8. Determine Your Tax Status

In South Dakota, LLCs are, by default, pass-through, that is, profits and losses are directly reported to the personal tax returns of the members.

Single-Member LLCs

Taxed under sole proprietorships. Schedule C reports profits and self employment taxes are paid.

Multi-Member LLCs

Taxed as partnerships. The LLC submits form 1065 and every member reports personal tax returns of their income subject to self-employment taxation.

LLCs Have the option of taxation as a C-Corp or S-Corp

• C-Corp: There is a corporate tax and dividends paid on the members are taxed separately, which means that self-employment taxes are not imposed on the distributed profits.
• S-Corp: Pass-through tax and they are required to pay the members an acceptable salary. Profits that are distributed to members are not subject to self-employment tax which frequently leads to savings in tax rates of high-income LLCs.

South Dakota does not have state income tax, but could have sales tax, payroll taxes and local taxes.

Further procedures of your LLC

Open a Business Bank Account

Maintains a personal and business bank account, with no liability capped. The banks normally need your EIN and Articles of Organization.

Apply to Business Credit Card

Helps build credit history to borrow funds and facilities, and is able to control the expenses of the business effectively.

Get Business Insurance

Insure your investment with the proper cover. Common policies include:

• General liability
• Professional liability (E&O)
• Workers' compensation
• Property insurance
• Equipment breakdown
• Commercial auto
• Policies of a business owner (BOPs).

Maintain LLC Records

Stock formation documents, operating agreements and any other contracts or legal documents should be kept in place and neat.

Annual Reporting

The South Dakota LLCs are required to submit an annual report on or before the first day of the month of anniversary. Fees are $50 online and $65 by mail.

South Dakota LLC FAQs