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When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.
An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.
Forming a limited liability company in South Dakota follows the standard process used in most U.S. states and the state does not impose any unusual requirements on LLC organizers. However, the fee for authorizing a foreign LLC to do business in South Dakota is one of the highest in the country at $750. After registration, all LLCs active in the state must file an annual report with the Secretary of State every year.
To avoid a misstep in the filing process, follow these steps to start an LLC in South Dakota, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in South Dakota step-by-step
1. Select a name for your South Dakota LLC
Follow naming requirements
There are 2 major guidelines to follow when naming your LLC in the State of South Dakota:
- An LLC’s name must be distinguishable from the names of existing business entities on file with the South Dakota Secretary of State.
- An LLC’s name must contain one of the following phrases or abbreviations: “Limited Liability Company”, “Limited Company”, “LLC”, “L.L.C.”, “LC”, or “L.C.” The abbreviations “Ltd.” and “Co.” may be substituted for the words “Limited” and “Company”, respectively.
Check the availability of your LLC name
Perform a search with the South Dakota Secretary of State’s Name Availability Search to confirm that the name you’ve selected for your LLC is available in the state.
Reserve your LLC name with the Secretary of State
While not a requirement, you should consider reserving your LLC name to prevent another South Dakota business entity from using it before you are able to file Articles of Organization.
File an Application for Reservation of Name Limited Liability Company with the South Dakota Secretary of State by mail to reserve the name for up to 120 days. The filing fee is $25 and should be paid by check.
2. Designate a registered agent
As in every U.S. state, forming an LLC in South Dakota requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf.
The registered agent must either be a state resident or business entity with a street address in South Dakota OR if the individual or business is based out-of-state, they must have a business office in South Dakota.
3. File Articles of Organization
An LLC is created in South Dakota through the filing of Articles of Organization with the South Dakota Secretary of State.
You can file the articles online or by mail. The filing fee is $150 for online filing (payable by credit card) and $165 for mail filing (payable by check).
The Articles of Organization must provide the following information:
- LLC’s name and address
- LLC’s purpose
- Registered agent name and address
- Whether the LLC is member-managed or manager-managed (include managers’ names and addresses if the LLC is manager-managed)
- Whether one or more LLC members will be liable for LLC debts
- Whether the LLC is perpetual or has a term end date
- The names and addresses of all LLC organizers
- The signature of one LLC organizer
Foreign LLC registration
An LLC formed in a state other than South Dakota that intends to do business in the state must register with the South Dakota Secretary of State.
Complete these steps to do business in South Dakota as a foreign LLC:
- Comply with South Dakota LLC naming rules and confirm that the LLC’s name is available using the Secretary of State’s Name Availability Search.
- Appoint a South Dakota registered agent.
- File an Application for a Certificate of Authority with the South Dakota Secretary of State online or by postal mail. The filing fee is $750 (or $765 for mail filing).
- The application must include either a Certificate of Good Standing or Certificate of Existence from the LLC’s state of origin.
4. Draft an operating agreement
Although not a legally mandated step for forming an LLC in South Dakota, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
5. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
6. Fulfill your South Dakota LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
File annual reports
All LLCs active in South Dakota must file an annual report with the Secretary of State each year. An LLC’s initial report is due the year after it is formed and in every subsequent year. The Secretary of State will issue a reminder 30 days before the report is due.
The annual report can be filed online or through the mail. The filing fee is $50 for online filings or $65 for mail filings. There is an additional $50 fee imposed on delinquent filings.
Register with the South Dakota Department of Revenue
Certain LLCs active in South Dakota must register with the South Dakota Department of Revenue for the purpose of fulfilling a number of state tax obligations. This includes LLCs that collect sales tax on retail goods and services and LLCs with employees.
You can register with the DOR online at their website.
Obtain business licenses and permits
LLCs doing business in South Dakota may be required to obtain one or more state or local business licenses, permits, or certifications depending on their type of business and location.
Check out the South Dakota Governor’s Office of Economic Development: Start Your Business site for information on state business licensing requirements. For information on local licensing requirements, get in touch with a city or county clerk in the area where your LLC is based.
South Dakota LLC checklist
A South Dakota LLC’s name must obey the following guidelines:
- Must be distinguishable from the names of existing business entities on file with the South Dakota Secretary of State.
- Must contain one of the following phrases or abbreviations: “Limited Liability Company”, “Limited Company”, “LLC”, “L.L.C.”, “LC”, or “L.C.” The abbreviations “Ltd.” and “Co.” may be substituted for the words “Limited” and “Company”, respectively.
Formational documents and filing fees:
- Application for Reservation of Name Limited Liability Company – $25 filing fee
- Articles of Organization – $150 online filing fee ($165 for mail filing)
- Application for a Certificate of Authority – $750 online filing fee ($765 for mail filing)
- An LLC is formed in South Dakota through the filing of Articles of Organization with the South Dakota Secretary of State.
Additional legal obligations:
- File annual reports – Required for all LLCs doing business in South Dakota
- Register with the South Dakota Department of Revenue – Required for certain LLCs active in South Dakota depending on business type
- Obtain business licenses and permits – Required for certain LLCs active in South Dakota depending on business type and location