Start an LLC in South Dakota

In recent years, more and more up-and-coming entrepreneurs choose to launch a standard or Professional LLC in South Dakota, and for a good reason. The state has no income taxation while applying a very light licensing policy, which makes it one of the best jurisdictions to do business in the US.

If you plan on starting your own business but don’t know how to form an LLC in South Dakota, this guide can hopefully provide some answers. 

Aside from outlining the process of starting a South Dakota LLC, the article also details key formation steps like filing fees, LLC documents, and state requirements. You will also find relevant information regarding subsequent business growth and how to maintain a good standing after the initial LLC formation in South Dakota.

An LLC in South Dakota: How To Open?

Choose a Name For an LLC in South Dakota

One of the key steps to business formation is to appropriately name an LLC in South Dakota. To come up with a good brand name is not that easy and is often the subject of many a brainstorm. But what you essentially have to do is find a name that’s both memorable and reflective of your company’s goals and core values.

Aside from that, an LLC business name should naturally be fully compliant. To see the complete list of LLC name requirements, check out South Dakota’s Legislature guidelines. Some of the major rules are:

  • The name should include:
    • Limited Liability Company;
    • Limited Company;
    • Ltd. Liability Company;
    • Limited Liability Co.;
    • Ltd. Liability Co.;
    • L.L.C.;
    • LLC;
    • L.C.;
    • LC.
  • Using words like “trust company,” “university,” “attorney,” etc is only valid if you employ a licensed professional in that field or the company itself holds a permit;
  • The name should not use other business structure designations like “Corporation,” “Incorporated,” “Inc.,” or “Cooperative.”;
  • Any implication to government agencies is forbidden, i.e. using “federal,” “government,” or “city.”;
  • The name must be available; use Name Availability Search to check if your preferred name is not already in use.

If the name is already taken, then it should be amended or replaced. There are a few effective ways to change the name, including:

  • rearranging keywords;
  • Using the singular, plural, or possessive form of a keyword;
  • Changing, adding, or removing a keyword;
  • Using unique spellings;
  • Adding, removing, or changing conjunctions or prepositions;
  • Using the abbreviated or unabbreviated form of a keyword etc.

Not all changes are considered valid as they don’t affect the uniqueness of your name. They include:

  • Spacing;
  • Punctuation;
  • Special characters;
  • Capitalization;
  • Singular, plural, or possessive forms of the same word.

If you already have a valid name but aren’t ready to file your LLC documents? The state lets you apply for a name reservation and keep your name in reserve for 120 days. The service only costs $25.

You can send the Application for Reservation of Name along with the $25 check to:

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

The average review time for this service is 3-5 business days. You can also expedite the processing for an additional $50.

If you’re still not ready to file after the 120-day reservation period, you can file another application, albeit after a mandatory 60-day gap.

This step is altogether optional since you can file your Articles of Organization to open a South Dakota LLC as soon as you find a name.

Apply for an EIN

Most LLCs will need to obtain an IRS Employer Identification Number (EIN) for tax recording purposes. The number is mandatory for anyone who:

  • Plans to make an LLC in South Dakota with more than one member;
  • Hires employees;
  • Wants to open an LLC Bank Account;
  • Elects to pay corporate taxes.

You can send the application by fax, mail, or submit it online.

Fax

Send the filled out printout of Form SS-4 to:

(855) 641-6935

Mail

This method is fairly slow given that you will only be able to operate in South Dakota using your EIN within 4 weeks of the application. If you’re not in a hurry, then download Form SS-4, fill and print it out, then send it to:

Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999

Online

If you prefer faster processing, your best option is to apply online. The application window is only open between 7 a.m. and 10 p.m. EST, but on the plus side, you will be issued an EIN immediately. Note that you can only apply by providing your Social Security Number.

Appoint a Registered Agent For Your South Dakota LLC

Before doing business in South Dakota, every LLC must appoint an agent for service of process and other official correspondence. The agent’s information is a required field in the Articles of Organization, so it’s legally impossible to form an LLC in South Dakota without a registered agent.

Any natural person or legal entity can be a registered agent as long as they have a physical SD address and, in case of individuals, have reached 18 years of age. It’s vital for a South Dakota registered agent to always be present at their registered address during all business hours in order to receive correspondence on your behalf.

As long as the candidate fits these requirements, they can act as an LLC registered agent, meaning it can be:

  • LLC owner;
  • Accountant;
  • Attorney;
  • Partner;
  • Family member;
  • Any company with relevant state licensing.

Another good option is to hire a professional registered agent offered by many online formation services.

For instance, Northwest Registered Agent has one of the best registered agent services in the industry. The company also scans all documents locally and as opposed to just those on the list of mandatory ones which is what their competitors do.

For more information on licensed providers, be sure to check out the list of registered agents on the Secretary of State website.

Prepare an LLC Operating Agreement

An operating agreement is an internal document detailing the company’s operational procedures. Though an operating agreement is not mandatory for creating an LLC in South Dakota, experienced entrepreneurs and attorneys recommend drafting one.

This document contributes to a much smoother operation, providing the following benefits:

  • Ability to avoid South Dakota default laws by outlining the company’s internal processes;
  • Raising your LLC’s profile in the eyes of investors and potential partners;
  • Allocating rights and responsibilities between members;
  • Serving as further proof of personal and business asset separation.

There is no universally approved template for this form given that the South Dakota LLC operating agreement is not mandatory. Its contents are up to the owners as all of it is largely defined by the goals of each company.

Drafting it is much easier with a template though, which you can find online or get from a formation company. Providers like IncFile include an operating agreement template with their free LLC packages. Another way to do it is to hire an attorney, but it could be pretty costly.

Submit the South Dakota Articles of Organization

The most essential step of South Dakota LLC formation is to file the Articles of Organization that legitimize the company. A business entity is considered legal only after the state’s approval of the articles. 

In South Dakota, Articles of Organization usually cover the following:

  • The LLC’s name;
  • The LLC’s office address;
  • The LLC’s purpose (optional);
  • The name and address of each of the LLC’s organizers;
  • The name and address of the registered agent;
  • The LLC’s duration;
  • Whether the LLC will be member-managed or manager-managed, and their names and addresses;
  • Whether one or more members will be liable for the LLC’s debts;
  • The signature of the LLC’s organizer.

You can file your articles with the South Dakota Secretary of State online, by mail, or in person. The filing fee is $150.

Online

Online applications are the fastest and will only take you a few minutes to complete. These filings are also reviewed immediately.

Mail

If you prefer paper documents, you can print out the completed application form and send it through the post. This method requires an additional fee of $15, so your check should be $165 in total. Send all documents along with the check to:

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

These applications are processed within 3-5 business days.

In Person

Pierre residents and visitors can submit the documents in person at:

215 E. Prospect Ave., Pierre, SD 57501

What’s Next: Steps After Registering a South Dakota LLC

Open a South Dakota LLC Bank Account

One of the multiple benefits that attracts owners to conduct an LLC in South Dakota is the limited liability of this structure, meaning that your personal assets will be protected in the event of litigation.

Regardless of the company’s capital at the moment of a lawsuit, creditors won’t be able to claim your personal property and other assets. But this rule is only valid if the funds are clearly separated, so opening a bank account for your company is essential.

For this, you will likely need the following:

  • Copies of the Articles of Organization;
  • Driver’s licenses of the members;
  • Banking resolution that allows one of the members or multiple members of the LLC to open the account;
  • South Dakota certificate of good standing as proof of the company’s status.

File South Dakota Reports and Taxes

All LLCs in South Dakota must file annual reports by their formation anniversary date to inform the state of any changes. You can file at any time but no later than 2 months before the due date.

You can file South Dakota annual reports online or by post. Paper documents should be mailed to:

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

The filing fee is $50 for online submissions and $65 for postal ones. Should you miss your deadline, the company will face a $50 fine and even possible administrative dissolution.

Another important aspect of budget planning is taxation. Fortunately, this state’s LLC tax filing requirements are fairly lenient.

On a federal level, LLCs do not pay income taxes, but it’s rather the owners that file all company profits and losses on their personal 1040 tax returns and/or Schedule C.

As for state taxes, South Dakota also classifies LLCs as pass-through entities. The state also imposes no personal income taxes, a franchise or privilege tax.

Keep in mind that certain companies are subject to additional taxation. If you hire employees, you are required to register with the Department of Labor and Regulation to pay the Unemployment Insurance Tax.

And if you sell goods or services, you are subject to the Sales Tax and Use Tax. You can pay it by filing the paper form with the Department of Revenue’s Tax Application.

Some cities, counties, and municipalities might also impose local taxes. You can learn more about them through your local government’s website.

Obtain South Dakota Business Licenses and Permits 

To create your own LLC, you will technically need to file the Articles of Organization and get them approved. But to commence business in South Dakota, most companies will likely need permits and licenses on all three levels of government:

  • Federal: for more details, check out the U.S. Small Business Administration (SBA) guide;
  • State: visit the South Dakota Department of Labor & Regulation website for further information;
  • Local: contact your local county clerk for more info about local business licenses and permits.

Some of the more common South Dakota permits and licenses include:

  • Business Licenses: although South Dakota doesn’t have a general business license, municipalities can impose their own requirements for LLCs operating in their jurisdictions;
  • Sales Tax License: companies that sell goods and services must obtain the relevant license from the Department of Revenue;
  • Professional Licenses: there are a number of specific licenses that regulate professional fields like accounting, architecture, construction, etc.

You can learn more about Licensing and Registering Your Business at the Office of Economic Development.

Wrapping Up

If you wish to save more of your time and effort while setting up an LLC in South Dakota, it’s possible to hire one of the professional LLC creation services to do it for you.

Plenty of popular online providers, like Northwest, ZenBusiness, or IncFile, come highly recommended by customers and professionals alike. These services can make any South Dakota LLC registration a much smoother experience.

Each of them also offers a range of business services for improving your daily operations. For one, you can use their registered agent LLC services instead of hiring out. Another great addition is their assistance with annual reports that can help you keep your company in good standing.