Step-by-Step Guide to Forming an LLC in South Dakota

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South Dakota LLC Quick Facts

How much does it cost to form an LLC in South Dakota?

Initial LLC State Filing Fee:

Online – $150

By Mail – $165

 

Recurring State Fee: Annual Report – $50

How long does it take to get an LLC in South Dakota?

Online – Immediate

By Mail – 5-7 business days

Don’t want to form an LLC by yourself?

Let IncFile or IncAuthority guide you through the LLC formation process, so you know everything was done right. Only pay state fees!

Quick Reference

The Limited Liability Company (LLC) is a popular entity structure for many businesses starting in the state South Dakota.  The LLC provides personal liability protection and has the potential to save money on taxes. With our step-by-step guide, you can learn how to form an LLC in South Dakota without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Related: How Does an LLC Protect You?

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Costs to form a South Dakota LLC

To form a Limited Liability Company in South Dakota, file the Articles of Organization with the South Dakota Secretary of State.  The LLC filing fee is $150 for online filings or $165 for filings made by mail.

Approval for the LLC is immediate when filing online and around one week when filing by mail.

If you have questions, contact the South Dakota Secretary of State by phone at 605-773-4845 sdsos@state.sd.us.

 

Steps to Form a South Dakota LLC

The steps for filing online or by mail are largely the same.  The screenshots show how to file online.

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

How to Form an LLC in South Dakota

  • In the “Choose a Business Entity Type” drop-down menu, select “(Domestic) Limited Liability Company.”  The brief difference between domestic and foreign is that if your LLC is based in South Dakota, it is domestic.  If the LLC were formed in another state and wanted to do business in South Dakota, it would be foreign.SD Select Business Entity

Step 1: Name the LLC

Enter the name you want for the LLC.  The LLC’s name also has to differ from other entity names registered with the Secretary of State.  Before choosing a name, you can do a South Dakota LLC Name search with the Secretary of State before going through the filing process to be sure the one you want is available.

The name of the LLC must also include a designator at the end of the business name.  A designator describes what type of business entity it is. Available designators include the following words and abbreviations:

  • Limited Liability Company
  • Limited Liability Co.
  • Ltd. Liability Company
  • Ltd. Liability Co.
  • L.L.C.
  • LLC
  • L.C.
  • LC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

Enter the name along with the designator you would like to use twice to confirm the name you want was entered correctly.

Before settling on a name, you may want to do a domain name search to try and match your business name and website address.

Next, the optional field for “Professional Type” may need attention.  Most LLCs will skip this section, but if your business requires licensing before providing services, select the type of licensing to form as a Professional Limited Liability Company (PLLC).

If there is a name you want, but are not ready to register the LLC, you can file the Application for Name Reservation. The name reservation will hold a name for up to 120 days, at a cost of $25.

South Dakota LLC Name Registration

Step 2: Principal Address

In this section, enter the street address, city, state, and zip code of the initial principal office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  You may not use a PO Box for the designated office.  There are also fields for a phone number and email address.  Many people do not provide the phone number as it becomes public record.  The email is required and is the address where the Secretary of State will send notifications when annual reports are due.

A mailing address is needed, and it can be the same as the principal address.  If the LLC records will be sent to a different address, enter that information in the Mailing Address Section.  If the address is the same as the principal office, click on the “Use this address as the Mailing Address also” box to copy the Principal Address address.

Step 3: Select a Registered Agent

To have an LLC in South Dakota, a Registered Agent must be identified.  The Registered Agent can either be a resident or business entity that is registered in South Dakota (Select “Noncommercial Registered Agent”) or a Registered Agent service (Select “Commercial Registered Agent”) who has registered with the Secretary of State.  The agent must have a physical address in the state (PO Boxes are not allowed), is available during normal business hours, and act as a point of contact for service of process to receive legal documents, tax notices, summons, subpoenas, etc. on behalf of the LLC.

If you selected Noncommercial Registered Agent, it is likely the name of that person isn’t listed, so you will enter their name, address and email in the contact fields.

You are not required to pay for a registered agent. Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or are still employed and don’t want their employer to find out.  Hiring a company like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.

Select a Registered Agent for South Dakota LLC

Step 4: Organizer(s)

An LLC Organizer is someone involved with the formation of the Articles of Organization.  The Organizer may or may not become a member, such as a mentor, attorney, or accountant, but any of the initial members can be listed as an organizer.

For most LLCs, the members will also be the organizers.

At least one organizer is required.  Enter the name and address for each organizer and click add.

South Dakota LLC Organizers

Step 5: Period of Duration & Delayed Effective Date

Period of Duration – In this section, you can indicate how long the LLC will remain in existence.  Most LLCs will choose a Perpetual duration; however, some businesses (usually investment-related) will have a specific closure date.

Delayed Effective Date – If you want the LLC to start immediately, leave this field blank.  If you want the LLC to start later, enter a date less than 90 days in the future.  The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business isn’t going to have any activity until the start of the year.  By delaying until the following year, they will reduce the number of end-of-year filings.

SD LLC Delayed Effective Date

Step 6: Management

This section asks if the LLC is Member-Managed or Manager-Managed.

  • Member-Managed LLCs have an active involvement in the management and have the authority to act on behalf of the LLC.
  • Manager-Managed LLCs are hired by the members to run the LLC, similar to a CEO of a corporation.  This is generally used when there are passive members in the LLC, and the members do not actively manage or operate in the affairs of the business.

Most LLCs are Member-Managed.

Select Member-Managed or Manager-Managed in the “Managed by” drop-down menu.

Next, select “Yes” or “No” to the question of whether one or more of the members will be liable for the debts and obligations of the LLC.  Most filers are going to choose “No.”

South Dakota LLC Manager vs Member Managed

Step 7: Beneficial Owner(s)

This is an optional section, and each member of the LLC is typically considered a beneficial owner.  Entering their names with the LLC filing puts their names and address on public record.

SD Beneficial Owners

Step 8: Add Additional Articles

This is an optional section and not used by most LLCs.  Here you would include additional rules for the operation of the LLC.

Step 9: Recipient(s)

Another optional section which isn’t used by most filers.  If the filings need to be mailed to an attorney, entity formation company, or another party, enter their information here.

Step 10: Review

Review that all the information is correct.  If there are no corrections, click “Next.”

Step 11: Signature

Have an individual forming the LLC to sign and accept the terms and conditions.  Click the “Next” button to save the information and proceed.

Step 12: Pay and File

Pay and file the Articles of Organization.

If mailing, send the ​​​one original and one copy of the Articles of Organization and filing fee to:
Secretary of State
500 East Capitol Avenue, Suite 204,
Pierre, SD 57501-5070

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Tasks After Forming Your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a South Dakota LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: South Dakota operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original LLC formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Occasionally, a bank will request a South Dakota Certificate of Good Standing to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting a business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Sales Tax License – In order to sell products and certain services, registration with the South Dakota Department of Revenue will be necessary.

Related: What Business Licenses are Needed in South Dakota?

Get Business Insurance

Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:

General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won’t cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – mandatory in most states if you have employees, this insurance covers medical expenses that occur because of an accident or injury that happens to one of your employees while they’re at work.

Related: 7 Types of Insurance Your Business May Need

File the Annual Report

LLCs are required to file an annual report with the South Dakota Secretary of State.  There is a $50 state fee to file the South Dakota Annual Report (Form CL-1) and is due by the last day of the anniversary month of the LLC. For example, an LLC formed on November 5th, 2020 would have its first annual report due on November 31, 2021.

Related: How to File a South Dakota LLC Annual Report

 

Common Questions When Starting An LLC

You can act as your own registered agent, provide you are a resident of the state and are generally available during normal business hours. 

It’s sometimes thought that the LLC and business license are the same, which they aren’t.  Business license requirements vary by location and the type of business being operated. 

An out-of-state LLC wanting to do business in another state will have to register as a foreign LLC with the new state’s Secretary of State.

Businesses that require state licensing and offer professional services such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. often must file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.

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