Forming a South Dakota limited liability company (LLC) can seem daunting, especially if you’ve never started a business before. But there’s no need to worry. We’ve put together this guide to answer all the basic questions you might have.
This article will teach you:
- The steps you must follow when starting a South Dakota LLC
- Helpful tasks to tackle after registering your LLC
- How much it costs and how long it takes to form an LLC in South Dakota
Keep reading to learn everything you need to know about your South Dakota LLC formation!
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Step 1: Name your South Dakota LLC
When forming an LLC in South Dakota, the first step is to choose a business name. When doing so, you must keep in mind that there are naming requirements for LLCs. For instance, some words are required while others are banned.
We’ve explained these rules further below.
Words You Have to Use
South Dakota Codified Laws Section 47-34A-105 says that an LLC name must contain one of the following:
- “limited liability company”
- “limited company”
The statute also lets the word “limited” be shortened to “ltd.” and “company” to “co.”
Words You Can't Use
Your LLC’s name can’t make it seem like your business is part of the government or a different type of legal entity, such as a corporation.
Your LLC name also can't imply that your business does things that are prohibited by law. So, your name can’t make it seem like you commit crimes or that you provide services you aren’t licensed to offer.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
Section 47-34A-105 also says that an LLC name must be “distinguishable” from all of the other business names that have been registered with the South Dakota Secretary of State. This rule makes sure that consumers don’t get confused by two businesses with the same name.
Research the LLC Name You Want
Once you’ve chosen the business name you want to give your LLC, you can check if it’s available with the South Dakota Secretary of State's Business Name Availability search.
If the name you want has already been taken, you typically can’t use it unless the other business consents and changes their name. But, you can also use the name if you get a court order establishing your right to do so.
If your chosen name is available, South Dakota Codified Laws Section 47-34A-106 lets you reserve it for 120 days. To do so, you must mail an Application for Reservation of Name and a $25 check for the filing fee to the Secretary of State at the below address:
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
Get a Matching Domain
Once you settle on an LLC name, we recommend you get a matching domain, even if you don’t have immediate plans for a website.
Competitors can buy your perfect domain and its variations to block you from using them.
Domain squatters sift through public records of newly registered LLCs and will buy their matching URLs, only to relist them with huge markups.
A domain name from GoDaddy.com or a similar registrar will cost you between $20 and $50 per year, with regular specials and sales where you can get large discounts.
It pays to check now.
Once you have your domain name, you can also create a branded email address through GoDaddy.
South Dakota DBA: Using a Fictitious Business Name
When marketing your LLC, you can use a “doing business as” or “DBA” name instead of its full legal name. This alternate name will be how your business is known to the public. It may be less formal, catchier, and easier to remember. DBAs also give you the option to change your LLC’s public name without having to officially change your legal name.
If the real name of your LLC is “Flora’s Flowers, LLC,” you could use a DBA of “Flora’s Flowers.”
But say that you eventually start to sell cacti and succulents as well as flowers in your shop. You could start to go by a new DBA of “Flora’s Plants” so that shoppers know what they can buy from your LLC.
South Dakota calls DBAs “fictitious business names.” They are commonly used by LLC owners. If you want to use a DBA for your LLC, South Dakota Codified Laws Section 37-11-1 requires you to file a fictitious name statement.
You can register a DBA on the Secretary of State’s website or submit a paper form at your local county’s Register of Deed's office. There is a $10 filing fee.
Step 2: Appoint a Registered Agent for your LLC
A registered agent is a person or company that accepts legal papers for a business.
South Dakota Codified Laws Section 59-11-6 says that all LLCs must have a registered agent at all times. Your LLC’s agent must have an office in South Dakota and be available during standard business hours to receive service of process.
Receiving service of process is a legal phrase that means accepting the documents that are sent when a business is sued. So, if your LLC is involved in a lawsuit, your South Dakota registered agent will get the papers.
In South Dakota, you can use a commercial or a non-commercial registered agent. The main distinction is that commercial agents must be “in the business” of serving as registered agents.
Many new business owners think it makes the most sense to name themselves as their LLC’s registered agent. And there certainly are some benefits to this option:
- It's cheap: You're not paying someone else to do it for you.
- It's easy: The only address and contact information you have to keep current is your own.
- It's reliable: You will receive all important documents personally.
But some LLC owners find out the hard way that there are also some drawbacks to being a registered agent.
Some of the issues you might face include:
- No privacy: Your name and address will be published on the Secretary of State's website. This means that anyone with an internet connection can find your personal information.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: You also must be available at all times during regular business hours to receive documents. This means no vacations, sick days, or leaving the office for lunch.
- Business interruptions: Client meetings can be interrupted by people serving process. That could be embarrassing or hurt your reputation.
- It's your fault if you miss something: You always have to make sure your address is correct and up to date. If you make a mistake or miss something, you are held responsible.
Using a professional registered agent service can help you avoid these problems. These businesses only charge about $100 per year, and they let you know as soon as your LLC receives any papers.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
If you plan to do business outside South Dakota, you must register as a foreign LLC and keep a registered agent in each state. We suggest that you hire a national registered agent service to meet your needs. That way, you can use one business as your agent in every state where you need one.
Step 3: File Your South Dakota LLC Articles of Organization
Articles of Organization are a document that lists basic details about your company. You will need to file them with the South Dakota Secretary of State to start your LLC.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my South Dakota Articles of Organization?
South Dakota Codified Laws Section 47-34A-203 says that your articles of organization must include:
- The LLC's name.
- The address of the initial designated office.
- The name and address of the registered agent.
- The name and address of each organizer.
- If the LLC’s duration is for a specified term.
- If the LLC will be manager-managed.
- The name and address of the managers.
- If the members will be liable for the LLC’s debts.
- If the LLC is authorized to establish one or more series.
If you choose a commercial registered agent, you only need to list their name. But if you are using a non-commercial registered agent, you must also include their address.
South Dakota LLC Filing Fee
According to the Secretary of State’s Filing Fees, the fee for South Dakota LLC articles of organization is $150 if you file online and $165 if you submit a paper form.
South Dakota LLC Processing Time
Online filings are processed immediately. Paper forms are processed in an average of 3 to 5 business days.
Step 4: Draft your South Dakota LLC Operating Agreement
An operating agreement is a contract that owners of an LLC sign to set the rules for how their business will run. It also lists details about each member's rights and duties.
South Dakota law doesn't say that LLCs must have operating agreements. Still, it is useful to lay out how your business will work in advance. Operating agreements can help your LLC’s day-to-day run more smoothly.
For instance, say one of the LLC’s members wants to sell their share. The operating agreement will list the process that must be followed. It might also state if the LLC can buy back the exiting member’s share or how to split up their duties once they leave.
Here are some other ways an operating agreement can help your LLC:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- They say what the manager has the right to do. Managers also have special duties to the company and the members. The LLC operating agreement should state these.
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business entity now, but you might in the future. It's best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
When drafting an operating agreement for your LLC, you should involve all the members to make sure that everyone has a say in how the business will run. This will let you answer crucial questions upfront and avoid problems later on.
You can read South Dakota Codified Laws Section 47-34A-103 to learn more about the South Dakota state rules for operating agreements.
Step 5: Get an EIN (Employer Identification Number) for Your South Dakota LLC
An Employer Identification Number (EIN) is a nine-digit IRS number that you can use for identification purposes. Just as with your SSN, you can use an EIN to identify your LLC on important papers.
Here are the most common times when you need an EIN:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of these questions is yes, your LLC must get an EIN.
If you own a single-member LLC, you do not need to get an EIN since you can file taxes with your SSN. Still, an EIN can be helpful for other purposes, such as guarding against identity theft or opening a business bank account.
You don't have to pay anything for your EIN. So, there’s no need to hire someone to get one for you.
First Tasks After Registering your South Dakota LLC
Starting a South Dakota LLC is an important first step to set your business up for success. Still, there are several other tasks you should address after you register your LLC.
Open a Business Bank Account
The law doesn’t require you to open a bank account for your LLC, but it's a good idea to do so. Not only will it make handling your finances more manageable, but it can also help protect you from personal liability if your business gets sued.
Some of the benefits of an LLC bank account are:
- Convenience: Keeping things separate makes your LLC's bookkeeping much simpler.
- More business opportunities: Your LLC can only receive credit card payments through a business bank account. You can also do business with people who won't take personal payments.
- Personal asset protection: Mixing your personal and business funds could cause you to be held responsible for the LLC's debts.
Of the three, personal asset protection is the most crucial.
One of the main reasons that LLCs are so popular is that they are distinct legal entities from their owners. This separation, called the “corporate veil,” stops business creditors from making you pay your business’ debts with your personal assets.
However, if you mix or “commingle” your LLC’s funds with your own, the corporate veil can be “pierced” in a lawsuit. If the corporate veil is successfully pierced, you can be held personally liable for your LLC’s debts.
So, in order to maintain the legal separation between yourself and your LLC, we suggest that you open a separate account for your business.
Get Business Insurance For Your South Dakota LLC
When starting an LLC in South Dakota, you should make sure you have appropriate business insurance coverage. It’s important to understand the risks of your particular industry so you can choose the right policies for you.
You should consider at least the following types of insurance:
- General liability insurance: You'll need this if there's an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers' compensation insurance: Unlike most other states, South Dakota law does not require employers to obtain workers' compensation insurance coverage. However, it is highly recommended that you purchase this insurance so your LLC can avoid being sued by an injured worker.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your South Dakota Company Compliant
Once you have started an LLC, you must remain compliant with your ongoing legal obligations. For instance, depending on your industry, you may need to pay taxes or get a business license or permit.
It is important to stay up to date on the latest legal requirements for your LLC. This will help you ensure you're in good standing and following the law.
South Dakota Business Permits and Licenses
Some businesses will need to get a business license or permit to operate. The South Dakota Governor’s Office of Economic Development has created a resource on Licensing and Registering Your Business that provides helpful information.
South Dakota Tax Requirements
If you sell physical goods or particular services, you may need to collect and pay sales tax. You can learn more on the South Dakota Division of Taxation’s website.
Federal LLC Tax Filing Requirements
LLCs are considered “pass-through” entities. This means that all profits and losses from an LLC will be reported on Schedule C of its owners’ individual tax returns, while the LLC itself won’t be taxed.
Regardless of whether you hire any workers, you must also pay Social Security and Medicare taxes. If you do hire employees, you'll be required to withhold payroll taxes from their wages.
Annual Report and other Filing Requirements
There is a $50 filing fee if you file online or a $65 fee if you submit a paper form.
South Dakota Business Formation Quick Links
- Internal Revenue Service — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Business Name Availability (SOS)
- Start a New Business (SOS)
- Register a DBA – Business Name (SOS)
- File an Annual Report (SOS)
- LLC Forms (SOS)
- Filing Fees (SOS)
- Business Resources (SOS)
- Domestic Business Corporations Informational Pamphlet (SOS)
- Name Requirements: South Dakota Codified Laws Section 47-34A-105
- Name Reservation: South Dakota Codified Laws Section 47-34A-106
- Fictitious Business Name: South Dakota Codified Laws Section 37-11-1
- Registered Agent: South Dakota Codified Laws Section 59-11-6
- Articles of Organization: South Dakota Codified Laws Section 47-34A-203
- Operating Agreement: South Dakota Codified Laws Section 47-34A-103
- Annual Report: South Dakota Codified Laws Section 47-34A-211
South Dakota LLC FAQs
How much does it cost to start a South Dakota LLC?
According to the Secretary of State’s Filing Fees, the filing fee for South Dakota LLC articles of organization is $150 if you file online and $165 if you submit a paper form.
What is the processing time to form my South Dakota LLC?
Online filings are processed immediately. Paper filings are processed within an average of 3 to 5 business days.
What are the benefits of a South Dakota LLC?
LLCs protect their owners’ personal assets while sole proprietorships do not. An LLC can also provide tax benefits that a corporation does not.
Where do I check if my South Dakota LLC name is available?
Once you’ve decided on the name you want to give your LLC, you can check if it’s available with the South Dakota Secretary of State's Business Name Availability search.