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). This business structure provides protection to business owners by separating them from the LLC's business debts and liabilities. Take advantage of these benefits by completing the process to form your South Dakota LLC. Following a step-by-step guide helps ensure your LLC is properly formed in South Dakota.
Steps to Form an LLC in South Dakota
Name Your LLC
To start an LLC, you need to pick a name for your South Dakota business that attracts potential customers and satisfies the requirements of state law. Choosing an LLC name involves brainstorming to come up with unique and descriptive name options for your small business. It's good to start with a list of several names in case some of your choices are unavailable.
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Under South Dakota law, you'll need to make sure that your LLC name is distinguishable from the other business names registered or reserved with the Secretary of State. You can conduct a company name search on the South Dakota Secretary of State's website to confirm name availability.
Note that your South Dakota 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 not yet ready to register your LLC, you can submit an application to reserve a name.
Get a Registered Agent
A registered agent is a person or company who has the responsibility of accepting legal documents on behalf of a business. You'll need to have a registered agent to comply with the laws of South Dakota.
Note that your 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's website for a list of commercial registered agents.
File Your Articles of Organization
File articles of organization to create your LLC in South Dakota. To file online, go to the South Dakota Secretary of State website and choose the appropriate option. To file by mail, use the paper form. The state fee to file online is $150 and filing by mail is an additional $15 ($165). Online filers can pay by credit card.
South Dakota articles of organization should contain:
- LLC name and address
- Registered agent's name and physical address
- Whether the LLC will be member-managed or manager-managed
- Manager names and addresses if manager-managed
- Names and addresses of the organizers
- LLC's duration, if not perpetual
Draft an Operating Agreement
LLC operating agreements contain rules and procedures for operating a South Dakota LLC. Your operating agreement should be kept on file at your business location. An operating agreement is not required in South Dakota state but can still be important when starting an LLC. An operating agreement can include provisions on:
- Rights and responsibilities of members
- Admission of new members
- Voting powers
Your operating agreement gives you greater control over your LLC and without it, your business will be governed by South Dakota default LLC laws. With an operating agreement, you create your own rules for your LLC.
Get an EIN
You'll most likely need to get an EIN (Employer Identification Number) number for your new business. An EIN 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 employees and open up a business bank account. Get your EIN for free on the IRS website.
Set Up Business and Tax Accounts
Once you form your LLC, you're expected to perform certain steps to comply with South Dakota state laws. Set up an account with the Secretary of State to maintain business filings and receive a business identification number. Check with the South Dakota Department of Revenue to find out if you need to register for state business taxes. You may also want to set up accounts to file state and federal taxes.
Depending on your LLC's type of business, it may be subject to certain state business taxes.
State Business Tax
Since South Dakota has no state or personal income tax, LLCs typically won't owe any state tax on tax returns for LLC income in South Dakota.
State Employer Tax
Since South Dakota doesn't have a corporate income tax, your LLC is only responsible for federal taxes assessed on your business.
Sales and Use Taxes
South Dakota has a single, state-wide sales and use tax rate of 4.5%. You will typically be required to collect sales tax if your business provides goods and services.
Licenses and Permits
Separate from incorporation, South Dakota requires an LLC to have a business license or permit if you're operating a taxable business in the state. For a seller's permit, apply here. There is no fee for a sales tax license. For other types of business licenses, contact the municipal or county government office where your business is registered. Costs vary.
South Dakota requires LLCs to file an annual report before the first day of the second month following the anniversary month of your LLC's formation. The filing fee is $50. Using your business ID, this search tool can help you find out when your annual report is due. To file an original annual report for your South Dakota LLC, use this form. You can also amend an annual report. If your business has been dissolved or revoked, the reinstatement page can help you proceed. Applying for a reinstatement of a dissolved or revoked LLC requires the applicant to file all delinquent annual reports and pay a $150 reinstatement fee.