How to start an LLC in South Dakota
For entrepreneurs in South Dakota, one of the most popular business structures is the Limited Liability Company, or LLC. LLCs offer the advantage of protecting an owner’s personal assets from lawsuits related to the business, and they also have fewer maintenance requirements than a corporation. So, how do you start an LLC in South Dakota?
The primary requirement is to file the Articles of Organization with the South Dakota Secretary of State. However, there is more to it than just that! The guide below breaks down how to start a South Dakota LLC from start to finish.
Consider utilizing an LLC formation service
The first decision to make is whether you will complete the application process on your own, or opt to use a professional LLC formation service. Both methods have pros and cons.
If you do the work on your own, it will take longer, but you’ll save a bit of money. Follow the steps below to form a South Dakota limited liability company on your own.
If you use a service, you’ll have to pay a bit extra (starting at $49), but you will save a lot of time and hassle. These services guide you through the entire process, ensuring that everything is handled accurately and efficiently. If you run into any roadblocks, you will be able to contact support to receive customized help.
There are many South Dakota LLC formation services, but the two most recommended are Northwest Registered Agent and ZenBusiness. Of these, Northwest is famous for its excellent personalized service, while ZenBusiness is more budget-friendly and still offers quality service.
Name your new company
Next, it’s time to name your business! You will want to come up with a name that is memorable for your clients/customers, and that also describes your business/industry well. Beyond this, the name must meet a handful of requirements set out by South Dakota law.
For one, the name must actually contain “limited liability company”, or an approved abbreviation such as “L.L.C.” or “LLC”.
Equally important, the name cannot be too similar to any already-established business in the state (businesses in other states are fair game, although you’ll want to research any copyright issues first). To confirm availability, you can search a database of all registered firms in South Dakota.
Once you have selected a name, you can move on to step #3 below. Or, if you’re not quite ready but you want to reserve the name anyways, you can reserve the LLC name for 120 days by filling this form.
Using a Doing Business As/DBA in South Dakota
South Dakota also allows for the use of “doing business as” names, otherwise known as DBAs or trade names. Once your LLC is registered, you can add on additional DBAs, which serve as secondary names that you can legally do business under. This is useful for branding purposes, and for situations where your business activities expand beyond your initial plans (by opening a second restaurant, for example, under the same LLC parent company). You can register DBAs online – each registration is good for 5 years.
Appoint a Registered Agent
A registered agent is an individual – or a business – tasked with being the primary point of contact for your company. It is their job to handle legal notices, tax documents, and other communications that are sent to your business.
All SD LLCs must have a Registered Agent – and you must select your agent before moving on to the next step (as you will need their information to file the necessary paperwork).
The Registered Agent you choose must be either a resident of South Dakota or a company licensed to do business in South Dakota.
So, you have two choices: Appoint yourself, an employee, or a trusted associate. Or, use a professional Registered Agent service.
If you use a service, we recommend Northwest Registered Agent if you want exceptional service, or ZenBusiness if you want a budget-friendly option. ZenBusiness includes the first year of Registered Agent services free with an initial LLC formation package (which is just $49).
Create an operating agreement
Note: This step is optional, but highly recommended.
Most LLCs should have an operating agreement, even though they are not technically required. Why? Because operating agreements establish ownership structure and operating procedures for a new company, in a legally binding manner.
This makes operating agreements particularly important for situations where more than one owner/stakeholder is involved because the agreement establishes ownership rights in a clear way.
If you use ZenBusiness for your LLC formation, you will find a detailed operating agreement template that you can use to draft your agreement. You may also wish to use the services of a local business law expert.
File LLC Articles of Organization
The LLC Articles of Organization must be filed with the SD Secretary of State. This can be done through the mail, or online. If filing online, the state fee is $150 – it’s $165 if filing by mail/in person, due to additional processing costs.
To file online
Follow the instructions online here to file the LLC Articles of Organization. Pay the $150 filing fee by credit or debit card.
To file by mail
Fill out and print the form, and include a check or money order for $165 made payable to the Secretary of State. Mail the documents to:
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
After submission, you will simply need to wait for the documents to be processed. You will be notified if there are any issues. This can take up to a few weeks, depending on the current processing time from the SD Secretary of State.
Apply for an EIN
Employer Identification Numbers, or EINs, are federal tax IDs issued by the Internal Revenue Service. They are used to identify your business for various tax filings purposes and are also a federal requirement before you can hire employees. Plus, they are also required for many other important activities, like opening a business bank account.
To apply for an EIN, simply fill out this application on the IRS website. The application is free, and unless there is an issue, EINs are issued very quickly.
Apply for business licenses & permits
While the Articles of Organization will establish your LLC as a legal business entity in the state of South Dakota, it’s not the only requirement that you will need to satisfy. Various other applications for business permits and/or licenses may also be necessary. The specific tasks that you will need to complete will vary depending on the type of business you are running (and how regulated the industry is), as well as the location(s) where you operate.
South Dakota itself has a variety of requirements for certain businesses. You can download a licensing & registration guide from the South Dakota Office of Economic Development. For example, you may need to get a state liquor license if you plan to serve alcohol or a state permit for various other business activities.
Local governments may also require general business licenses and other permits. You’ll want to check with city/county governments in all areas that you plan to operate to see what your requirements are.
And the federal government, too, may require permits for certain business activities.
Employers will also need to register for the Reemployment Assistance Tax (formerly unemployment insurance tax). Additional tax registrations may also be required.
Keep your business in good standing
Long after the initial formation process, there are many ongoing tasks that you will need to take care of in order to keep your business in good standing. There are requirements on every level of government: federal, state, and city/county.
As usual, the specific requirements depend on what type of business you are running, and where it’s located. That said, there are a handful of requirements that most businesses will face. These are listed below.
South Dakota LLC Annual Report – due every year for all LLCs in the state
South Dakota sales tax returns
South Dakota employer tax/payroll tax returns
City and county tax returns
Federal tax returns
Federal employer tax returns
Federal business/income tax returns
Permit renewals – yearly
Business license renewals – yearly
There may be other requirements, as well. Do your own research to see which specific requirements your business will face. Then, make a comprehensive list of everything you’ll need to tackle – and set due date reminders in your calendar so you don’t miss anything.
Services like Northwest Registered Agent and ZenBusiness can also help with this process if they are your Registered Agent. They can help file certain reports – like annual reports – and send reminders for other key due dates.
Open a business checking account
Once you have your EIN and business license/formation documents, you will be able to open a business bank account. And really, you should do this as soon as possible once your business is formed.
Business owners should always do all they can to ensure that their personal and business assets are kept separate. This is important for liability issues, as well as for keeping your bookkeeping efforts clean and accurate.
The best way to do this is to use separate accounts for business and personal activities. You can open a business account at most financial institutions, from large banks to local credit unions. Just call ahead to see what their requirements are, as they may differ from bank to bank.
You may also wish to look into business credit cards, business insurance, and other financial products for your company at this time.