South Dakota LLC Formation
If you're launching a new business or hoping to expand an existing venture, you might be interested in starting a limited liability company (LLC). However, before you can take advantage of the benefits that a limited liability company provides, you must complete the process of forming a South Dakota LLC.
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South Dakota LLC Formation
LLC formation is not difficult, but there are several steps you need to take to get your South Dakota business off of the ground. Even after you've formed your LLC, you must be mindful of the ongoing obligations you'll have as an LLC owner.
Step 1: Name Your LLC
You'll need to pick a name for your LLC that both attracts potential customers and satisfies the requirements of state law. A good way to go about choosing an LLC name is to start with a brainstorming session. Come up with as many names as you can think of that are unique and descriptive. It's good to start with a list of several names because a name or two on your list might be taken already.
Under South Dakota law, you'll need to make sure that your LLC name is distinguishable from the other names registered or reserved with the Secretary of State. How would you know if a name on your list is already on record with the state? You'll need to conduct a name search on the South Dakota Secretary of State website to check for name availability. If you discover that a name you like is already taken, then you need to choose a different name for your business entity.
Also, note that your LLC name must include one of the following phrases or abbreviations:
- Limited Liability Company
- Limited Company
If you settle on a name that's available but you aren't ready to register your LLC yet, you can submit an application for name reservation.
Step 2: Appoint a Registered Agent
A registered agent is a person or company who has the responsibility of accepting legal papers on behalf of a business. You'll need to have a registered agent to comply with the laws of South Dakota.
Note that, under the laws of South Dakota, your South Dakota registered agent must either be a resident of the state of South Dakota or a business entity authorized to do business in South Dakota. You'll need a registered agent who can provide a physical street address for service of process. The person or company you choose must also be available during normal business hours.
Some people choose to use a registered agent service. Visit the Secretary of State website for a list of commercial registered agents.
Step 3: File Your Articles of Organization
Filing South Dakota LLC Articles of Organization is an important step because it creates your LLC. To file online, go to the South Dakota Secretary of State website and choose the appropriate option. To file by mail, you'll need to download the appropriate form and submit it by mail. Note that online filings come with a filing fee of $150, and paper filings cost $165.
South Dakota Articles of Organization should contain:
- The LLC name and address;
- The registered agent's name and address;
- Whether the LLC will be member-managed or manager-managed;
- If it is manager-managed, then the manager's names and addresses; and
- The name and addresses of the organizers;
- The LLC's duration, if not perpetual.
Note that you can file for authorization to do business in South Dakota if you've already formed an LLC in another state, also. The document you'd need to file, in this case, is called the Application for Certificate of Authority.
Step 4: Draft the LLC's Operating Agreement
LLC operating agreements aren't filed with the state, but they're still important. Your South Dakota operating agreement for your limited liability company should include provisions on:
- Rights and responsibilities of members
- Admission of new members
- Voting powers
Step 5: Get an EIN
You'll most likely need to get an Employer Identification Number (EIN) or Tax ID number for your new business. An EIN or Tax ID number is a number assigned by the IRS (Internal Revenue Service) to identify your business. It's like a social security number for business entities. Most entrepreneurs find that they need it so that they can hire their employees and open up a business bank account. Get your EIN for free on the IRS website.
Step 6: Open a Business Bank Account
Keeping your business and personal funds separate is important because you could lose your personal liability protection if you don't maintain this separation. Note that liability protection is one of the main features of LLCs that benefits owners. It keeps your personal assets safe in the event of a lawsuit against your company.
To make sure that you don't lose this important benefit of LLCs, open a business bank account as soon as you can, and get a business credit card or debit card for expenses. It will also make tax preparation and accounting easier.
Frequently Asked Questions About Starting an LLC in South Dakota
1. Do I need to obtain a business license or permit for my South Dakota LLC?
You may need to get licenses or permits for your small business, depending on the location of the business and the nature of the business. Contact your local and state authorities for information about the licenses or permits needed for your particular type of business.
2. Do I need to get a DBA for my LLC?
DBAs or trade names are names other than the legal business name that you use for conducting business activities. You must register the alternate name if you're going to use it for your business in South Dakota. If you're only using the business name that you registered with the state for your business, then you wouldn't need to register a DBA or trade name.
3. How do I handle LLC taxes?
The federal government allows LLCs to be taxed in various ways, so you'll have to decide if you want your company to be taxed as a particular entity. For information about state taxes, contact the South Dakota Department of Revenue.
4. Do I have to do annual reports for my South Dakota LLC?
You'll need to file annual reports for your South Dakota LLC. LLC annual reports cost $50 to file online (or $65 for paper filings). There is a late fee if you miss your deadline.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
South Dakota LLC Formation: Related Resources
Want Help Forming a South Dakota LLC?
Fortunately, forming an LLC can be a straightforward process with FindLaw’s Business Formation Service. But if you need help writing an operating agreement or have any other questions, legal help is available. Discuss South Dakota LLC formation with an experienced business organizations attorney who understands the law and can provide you with critical insight for your business.
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