How to start an LLC in South Dakota

A limited liability company (LLC) offers liability protection and tax advantages, among other benefits for small businesses.

LLC formation in South Dakota is easy. Just follow these six steps, and you'll be on your way.

1. Name your South Dakota LLC

You'll need to choose a name to include in your articles before you can register your LLC.

Names must comply with South Dakota's naming requirements. The following are the most important requirements to keep in mind:

• Your business name must include the words Limited Liability Company, LLC, or L.L.C.
• Your name must be different from an existing business in the state. You can search the Secretary of State's website to determine if a particular business name is in use. For name availability in South Dakota, check this link.
• The business name cannot contain words used to name a government agency (i.e., State Department, CIA, FBI, Treasury, etc.)

• Certain restricted words (bank, lawyer, attorney, credit union, etc.) may require additional documentation and licensure paperwork.

See a complete listing of South Dakota's naming rules.

Additional considerations:

• URL availability. Even if you don't think you'll need a webpage, you probably will. At the very least, you should reserve the option of having one in the future by buying your domain name now. Before finalizing your LLC name, it's a good idea to check if the URL is available.
• Reserve your name. If you aren't ready to register your LLC but are concerned your name might be taken by someone else, you can reserve it for a small fee. In South Dakota, names may be reserved for up to 120 days by paying the fee and submitting the proper form to the state authority.

2. Choose your registered agent

South Dakota requires you to appoint a registered agent for your LLC.

A registered agent is the person or entity authorized to receive service of process and other official legal documents and notices on behalf of your LLC.

A registered agent can be a person (including yourself or an employee of your LLC) or an entity that offers a registered agent service. They must meet the following criteria:

• Entities (or companies) must provide registered agent services.
• The agent must have an address in South Dakota.
• The agent must be on-site and available to accept documents during regular business hours.

3. Prepare and file articles of organization

The articles of organization is a document that officially establishes your LLC by laying out basic information about it.

Prepare articles of organization and file them with the South Dakota Secretary of State to register your South Dakota LLC properly. Though it sounds like a big job, that simply means filling out a relatively simple online form and submitting it. You can also send it by mail.

To prepare your articles, you'll usually need the following information:

• Your LLC name.
• The name and address of your registered agent.
• Name and address of each of the LLC's organizers.
• A reason why you formed the LLC. This can be a general statement.
• An LLC's duration or time period over which the LLC will exist. In most cases, LLCs are perpetual, meaning the duration is indefinite. A perpetual LLC can be dissolved voluntarily or involuntarily. If your LLC exists for a purpose that will end at a specified date, you will specify that date here.
• Management structure: Will managers or members manage the LLC?
• If the LLC is manager-managed, the managers' names and addresses.
• Whether one or more members will be liable for the LLC's debts.
• The person forming the LLC is required to sign the articles.

Once you file your articles, the secretary of state will review the filing. After you receive approval for your articles, the LLC becomes a legal business entity.

4. Receive a certificate from the state

The state will issue you a certificate that confirms the LLC formally exists after you file and receive approval of the LLC's formation documents. When the South Dakota Secretary of State approves your LLC, you will receive a stamped and approved certificate of organization. You can also access this certificate online.

This certificate will allow the LLC to obtain an Employer Identification Number (EIN), business licenses, and business bank account.

5. Create an operating agreement

An operating agreement is a document that outlines the way your LLC will conduct business.

South Dakota doesn't require an operating agreement, but it is an essential component of your business. Having a readily accessible, written operating agreement is helpful for various reasons, including settling disputes that may arise over financial agreements and other potential litigation. Without an agreement in place, the courts make determinations based on state law, not necessarily what is in the best interest of the LLC and its members.

The operating agreement can include, but is not limited to, the following:

• LLC's name and principal address
• Duration of the LLC
• Name and address of the registered agent
• Information about the articles of organization
• Purpose of the business
• Members and their contribution
• How profits and losses are divided
• Procedure for admitting new members, as well as outgoing members
• Management of the LLC
• Indemnification and liability clauses

6. Get an Employer Identification Number

The nine-digit Employer Identification Number (EIN) is assigned by the Internal Revenue Service to identify your LLC for taxes. You can obtain your EIN by mail or online through the IRS.

The purpose of an EIN is to assist with the following:

• File and manage taxes at the state and federal level
• Open a business bank account.
• Hire employees.

Next steps

Registering your LLC gives you a legal foundation to conduct business. Plan to keep your LLC compliant and in active status on the state's website.

You must file an annual report for your LLC. The first report is due by the last day of your LLC's anniversary month, following the year of formation. All subsequent annual reports will be due by the same date every year.

You might need to make quarterly tax payments and maintain a registered agent for your business.

A registered LLC also makes it possible for you to do the following:

• Obtain permits or licenses necessary to operate your business, including health department permits, zoning permits, home occupation permits, professional licenses, and more. Some states require a seller's permit to conduct sales.
• Register your business with the state's tax agency.
• Open a business bank account.
• Apply for a business credit card.
• Purchase insurance for your business.
• Protect your name and logo with a trademark.