How to Start an LLC in South Dakota
How to start an LLC in South Dakota in 6 easy steps
Step 1. Naming Your South Dakota LLC
One of the very first steps in starting your LLC is naming it. You will need to choose a name that sticks to South Dakota regulations, in addition to a few other naming rules.
Legally Required Designation
Adhering to South Dakota LLC regulations, the name of your business must contain the phrase “limited liability company” or one of the following abbreviations:
- LLC
- L.C.
- LC
- C.
- Co.
- Limited Company
Unique Name
As we mentioned above, it is imperative that your name is distinct from other businesses in the state. You can run a search on the South Dakota’s Secretary of State website to determine which names are available for use.
If you would like to reserve one of the names you see, you can file an Application for Reservation of Name. This form will hold your chosen LLC name for up to 120 days before officially establishing your business. There is a $25 filing fee associated with the form, and you can file it online or by sending it to the address on the form.
You may also want to perform an available domain name search while you are looking for an LLC name. Even if you aren’t sure that you want a business website immediately, it is a good idea to search for and purchase a matching one ahead of time, reserving it for when you need it.
Restricted Words
When choosing an LLC name, keep in mind that you are not able to include any words that run the risk of confusing your business with a government entity. This can include words like “IRS,” “FBI,” “Treasury,” or “State Department.”
You should also be aware that using words such as “bank,” “trust,” or “chiropractor” may require the presence of a properly licensed individual in your LLC and filing additional paperwork.
Using a Trade Name
You can use a trade, or DBA (doing business as), name for your LLC in South Dakota. This means that you will continue using the legally registered LLC name on all official documents, but will use a different registered name when interacting with the public.
To register your DBA name in South Dakota, you will need to file online with the Secretary of State’s office. There is a $10 filing fee for this form, and once the form is processed, the registration will be good for 5 years.
Step 2. Appoint a Registered Agent
A registered agent is required for every LLC established in South Dakota. Your registered agent will be responsible for receiving all legal documents, government communications, and necessary tax documents, acting as a contact point between your LLC and federal agencies or the state of South Dakota. They will also be the responsible party that is contacted in the event of a lawsuit against your LLC.
You can appoint any South Dakota resident, an LLC member, or a registered agent service that is authorized to conduct business in the state as your registered agent. As long as your appointee has a valid state address, they are eligible to be your registered agent.
Step 3. File Your Articles of Organization
In order to legally establish your LLC, you will need to file your Articles of Organization with the Secretary of State. Below, you can see some of the information that will be required on this form.
- Your LLC’s name
- Your LLC’s principal office address
- Your LLC’s registered agent’s name and address
- Your LLC’s organizers’ names and addresses
- Your LLC’s duration, if not perpetual
- If your LLC is member-managed or manager-managed
- If your LLC is manager-managed, the managers’ names and addresses
- If members will be liable for your LLC’s debts
- Your LLC’s organizer’s signature
You can file your Articles of Organization either online or through the mail. There is a $150 filing fee for online filing, and an additional $15 paper fee if you send the form through the mail. You can also pay an extra $50 filing fee to expedite the processing of the form.
Online
To file your Articles of Organization online, you can use the portal on the Secretary of State’s website. Create an account and then follow the prompts to enter the necessary information. You will pay the $150 filing fee upon submittal, in addition to any card processing fees.
By Mail
If you want to file your Articles of Organization by mail, you will need to print out the official form and fill it in. Mail the completed form and a check for $165 made out to the Secretary of State to the address below.
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
Step 4. Create an Operating Agreement
South Dakota does not require you to create an operating agreement for your LLC, but you should consider creating one anyway. An operating agreement sets clear guidelines for how exactly your LLC is managed, the rights that members or managers have, and what to do in the case that your LLC dissolves or experiences a lawsuit.
Most business bank accounts, loan applications, and other business services will require you to have an operating agreement on hand to demonstrate your LLC as a separately operating business entity before you can secure funding or business services.
If you choose not to create an LLC operating agreement, South Dakota LLC law will dictate how your LLC is to be managed in the event of dissolution, conflict, or lawsuit. This may not be in your best interest, so creating an operating agreement is a good idea to protect yourself and your assets.
Step 5. Get an EIN/Tax ID Number
Once your LLC is legally established in South Dakota, you will need to apply for a Tax ID number, also known as an EIN (Employer Identification Number) through the IRS. Any LLC that has more than one member, any single-member LLC that wants to hire employees, or any entity that chooses to be taxed as a corporation is required to apply for an EIN.
Your EIN will be used to identify your business to the IRS on all tax documents and necessary government filings. The number acts much like a social security number for your LLC. If you want to hire employees, file federal taxes, open business bank or credit accounts, or apply for business funding, you will need an EIN.
It is free to apply for your EIN with the IRS, and you can file the application online or by mailing it in. Keep in mind that if you are a foreign filer or do not have a social security number, you will need to file for your EIN through the mail.
Online
The quickest and easiest way to apply for your EIN is online; you will receive your number once your application is completed. Visit the IRS website to apply for your EIN for free.
By Mail
You will need to fill out this form when applying for your LLC by mail. If you are a foreign filer or do not have a social security number, leave section 7b blank. Mail the completed form to the address below. You can follow up on any questions with the IRS at (267) 941-1099.
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Step 6. Keeping Your LLC Running
Even after you have filed your Articles of Organization, you will need to keep up with several state regulations and yearly requirements to ensure that your LLC keeps running smoothly.
File Annual Reports
Every LLC that is conducting business in South Dakota will be required to file an Annual Report. This report is to update the state on the status of your LLC and make sure all of the business’s information is kept up to date.
You will need to file this report by the first day of the second month of the year following your LLC’s establishment; reports will be due on the same date each subsequent year. You can file either online or by printing out the form above and sending it to the following address.
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
Keep in mind that there is a $50 filing fee for the form and an additional $15 paper filing fee if you choose to file through the mail. If you are late in filing, you will need to pay a $50 delinquent report fee on top of the original filing fee. If you neglect to file your annual report altogether, your LLC could be at risk for involuntary dissolution by the state.
Separate Your Business Finances
A business credit or debit account can help keep your LLC’s finances separate from any personal ones, establishing the LLC as an independently operating business. It is not required by South Dakota to open a business bank account, but it may be a good idea to establish one anyway.
You will most likely need to show your Articles of Organization, Operating Agreement, EIN, or possible other LLC documents to open a bank account for your LLC. Compare all of your options before making a choice on which bank account to open, as different banks will have different minimum required balances or credit spending limits.
Keep up With Federal and State Taxes
It is important to keep up to date with both federal and state tax burdens when running your LLC, as this will help your business operate without any major penalties or tax issues.
Federal Tax Requirements
There are several different tax structures you can choose from to use in your LLC that may meet different company needs, and each tax structure comes with its own unique type of federal taxation. This article can help you gain an in-depth understanding of the differences between each type and help you decide which is best for you.
In general, most LLCs are taxed as sole proprietorships or partnerships. This means that you will be expected to file Schedule C along with your individual income tax return to declare any income that you receive through your LLC. When using this tax structure, you should keep in mind that you will most likely need to pay self-employment tax (which has a rate of 15.3%), in addition to any income tax. You may also need to make quarterly estimated tax payments to avoid any IRS fines.
If you want, you can choose to have your LLC taxed as an S Corporation or a C Corporation. You will need to fill out IRS Form 8832 and IRS Form 2553 to choose this designation. After these forms have been processed, your LLC will be treated as a corporation and expected to file a separate corporate tax return with the IRS.
South Dakota Business Taxes
Fortunately, South Dakota does not have a state-wide business tax requirement, nor do they have a state corporate tax requirement. Additionally, you will not be liable for any individual income taxes, which is especially beneficial for those who are treating their LLC as a pass-through entity.
However, you may be liable for state property, tourism, or sales and use tax, depending on the type of business that your LLC conducts. You can read more about the taxes and who might be liable for them on the South Dakota Department of Revenue’s website.
State Employer Taxes
If your LLC has employees, you may be liable to pay state employers taxes. Because there is no personal income tax in South Dakota, you will not need to pay withholding taxes on a state level (though you may need to federally, so make sure to understand if you owe this tax or not).
That being said, you will most likely need to pay unemployment insurance taxes on your employees on a state level. This tax can be registered for and paid through the South Dakota Department of Labor and Regulation.
Acquire Necessary Permits and Licenses
While there is no general business license in South Dakota, you may be required to obtain permits and licensing on a city or county level. Professional licensing may also have city and county requirements, so be sure to check with your locality’s clerk’s office to understand the permits that you need.
If you will be paying taxes in the state, you will likely be required to obtain a business tax license through the South Dakota Department of Revenue. You can find more information on that here, and information on operating your business, including licensing, here.
Additionally, you may be required to obtain certain permits and licenses for your LLC on a federal level. Whether this is needed depends mostly on the type of business you are running and the services you are offering. For help determining if you need to meet additional federal licensure requirements, you can use the directory on the U.S. Small Business Administration’s website.
South Dakota LLC Resources
The below list of resources can help guide you through every step of the way in starting your South Dakota LLC.
- Available LLC name search
- Available domain name search
- Reserve an LLC name
- Register a DBA name
- Articles of Organization form
- Articles of Organization online file
- IRS EIN free online application
- Annual Report form
- Annual Report online file
- South Dakota business tax information
- South Dakota Department of Revenue
- South Dakota Department of Labor and Regulation
- South Dakota tax license information
- Information on starting a business in South Dakota
- U.S. Small Business Administration
South Dakota LLC FAQs
These frequently asked questions about starting an LLC in South Dakota can help put any of your remaining worries to rest.
In South Dakota, it costs $150 to file your Articles of Organization online, with an additional $15 paper filing fee if you file through the mail. You can also reserve an LLC name ahead of time for $25 or register a DBA name for $10.
The cheapest way to start up your LLC in South Dakota would be to file your Articles of Organization online, without reserving an LLC name ahead of time or registering a DBA name. Doing it this way will only cost you $150 to get your business established.
On average, it will take 2 to 3 weeks to form your LLC in South Dakota if you file online. It can take up to 6 weeks if you choose to file through the mail. You can optionally pay $50 for expedited services which can get your LLC formed in as little as a week.
How much your South Dakota LLC pays in taxes depends on the individual tax structure that you have set up. Fortunately, you will not need to pay state income or corporate taxes, so the only taxes that you need to worry about are federal taxes and specialized taxes like sales and use or employer taxes.
You will need to file state reports annually with the South Dakota Secretary of State. This report is due each year on the first day of the second month the year after your LLC’s establishment. There is a $50 filing fee associated with the form.
If you are done conducting business under your LLC in South Dakota, you will need to file Articles of Termination with the state. There is a $10 filing fee for this form, and you can file it either online or through the mail.
You will also need to consult with your LLC’s operating agreement to review the agreed-upon terms for shutting down your business and completing all operations.