Forming a limited liability company (LLC) in South Dakota is a popular choice for entrepreneurs, and for good reason. South Dakota has no state income tax, which means more of your hard-earned revenue stays in your pocket. There’s also no corporate income tax or business inventory tax, which makes growing your business more profitable, too.
The state’s tax advantages, business-friendly regulations, and straightforward process all make it easy for a business owner to form an LLC in South Dakota. This guide will walk you through how to start an LLC in South Dakota and get you on your way to doing business.
How to form a South Dakota LLC in 6 steps
Forming a South Dakota LLC can provide personal liability protection and tax benefits. Let’s break the LLC formation process down into manageable steps to help you stay on track.
1. Choose your business name
The first step is choosing a name for your business. Your LLC name must follow certain rules in South Dakota. For instance, the name must include the words “Limited Liability Company” or the abbreviation “LLC” or “L.L.C.” Avoid restricted terms like “bank,” “insurance,” or “trust,” unless your business has the proper licenses. It’s also smart to choose a name that’s easy to spell and memorable.
Most importantly, your LLC name has to be unique—it can’t be the same as (or similar to) another existing business in the state. Once you’ve come up with some potential names, conduct a South Dakota LLC search to see if they’re available. The South Dakota Secretary of State has a free tool that lets you search for business entity names that are already registered. Once you’ve found the perfect available name, you can register your business or reserve the name for 120 days for a $25 fee through the South Dakota Secretary of State’s website.
2. Appoint a registered agent
Every South Dakota LLC must appoint a registered agent. This is the person or company responsible for receiving important legal documents, such as legal notices or other official correspondence on behalf of your LLC. The agent must have a physical street address in South Dakota (P.O. boxes are not allowed), and they must be available during regular business hours.
As the business owner, you can act as your own registered agent if you live in South Dakota. You can also appoint someone you trust. Another option is to hire a professional registered agent service. This is a smart choice if you’re often out of the office or traveling—these services will often send you digital copies of correspondence to make sure you never miss an important document.
You can always change your registered agent later by filing a Registered Agent Statement of Change with the Secretary of State.
3. File articles of organization
To officially create your South Dakota LLC, you’ll need to file articles of organization with the Secretary of State. Filing the articles involves providing information about your business, such as:
- The LLC name, physical street address, and mailing address
- The purpose of the LLC
- The name, physical address, and mailing address of your registered agent
- The names and addresses of the LLC’s organizers
- The LLC’s duration, or how long it will exist. Most 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.
- Whether the LLC will be member-managed or manager-managed
- If manager-managed, then the name and address of each initial manager
You can file the articles of organization online through the South Dakota Secretary of State’s website or by mail. The online filing fee is $150, while the mail filing fee is $165. If everything is in order, your LLC will be approved, and you’ll receive a confirmation. If you filed online, you’ll be approved the same day. If you filed by mail, it could take a few days.
4. Create an operating agreement
While not required by law, creating an operating agreement is highly recommended for South Dakota LLCs with multiple members. An operating agreement is a legal document that outlines how your LLC will be run. It covers important details, such as the following:
- The ownership structure (who owns what percentage of the business)
- The roles and responsibilities of each member or manager
- How profits and losses will be distributed
- What happens if a member leaves the company
- How to admit new members
An operating agreement can make your business look more professional to a lender or investor and help prevent disputes between the LLC’s members. If there is a dispute, it can help the court settle it—otherwise, the court will just make decisions based on state law, not what’s best for your business entity. You can draft a simple operating agreement yourself using online operating agreement templates.
5. Obtain an EIN and open a business bank account
If you operate your South Dakota LLC as a multi-member LLC, have employees (or plan to have them), offer a tax-deferred pension plan, or file excise tax returns, you’ll also need to get an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is a unique number that identifies your LLC for federal tax purposes.
Multi-member LLCs need an EIN to open a business bank account, and single-member LLCs might, too. Even if you don’t need it to open a bank account, it’s a good idea to get an EIN to help separate the LLC’s debts from your personal finances and maintain your liability protection.
Getting an EIN is simple and free. You can apply through the IRS website and receive your EIN almost instantly. Once you have it, you can use it to open a business bank account. Keep in mind that in addition to your EIN, some banks will require your articles of organization and operating agreement to open an account.
6. Register for state taxes and business licenses
LLCs are usually taxed as “pass-through entities,” which means that members pay taxes on the LLC’s income through their personal income taxes. However, South Dakota doesn’t have a personal income tax or a corporate income tax, so you won’t owe the state these taxes. (You will still need to pay your federal taxes, though!)
Although South Dakota has no state income tax or corporate tax, your LLC might still be responsible for other taxes. If your business sells goods or services subject to sales tax, you’ll need to register for a sales tax license with the South Dakota Department of Revenue. The state’s sales tax rate is 4.2%, and local taxes may add to this amount. If you plan to have employees, you’ll also need to register to pay the Reemployment Assistance Tax through the South Dakota Department of Labor and Regulation.
There is no requirement for a general state business license for South Dakota LLCs, but certain types of businesses might need special permits depending on the industry. For instance, food service, commercial food production, agriculture, health and medical, banking, insurance, and real estate businesses will need relevant business licenses.
You may also need to obtain county or city business licenses. Check with the SD Office of Economic Development or your local county clerk or tax office to see what licenses you need.
What to do after forming your South Dakota LLC
Learning how to start an LLC in South Dakota is only the first step. After you file the official paperwork, there are a few more things you should do.
Register a domain name
Your domain name is your website address, and it’s essential in today’s economy. In fact, you should start thinking about it as you brainstorm your LLC name and conduct domain name availability searches as you consider different name options. Once you find an available name, domain registration is quick and inexpensive, and you’ll be able to use it as part of your branding and marketing.
Obtain a Certificate of Good Standing
A Certificate of Good Standing verifies that your South Dakota LLC is registered and compliant with all state requirements. While not required for operating, you may need this certificate when applying for loans, renewing business licenses, or entering contracts with other businesses. You can request one from the South Dakota Secretary of State for a $20 fee.
Consider a foreign LLC
If you plan to expand your business into other states, you’ll need to register as a foreign LLC in each state where you want to operate. This is important if you want to have a physical presence, employees, or significant business activities outside of South Dakota. To register, file the paperwork with the other state’s government and pay any required fees.
Annual filing requirements for South Dakota LLCs
All South Dakota LLCs are required to file an annual report with the Secretary of State. This report updates the state of your LLC’s current information, such as your physical address and registered agent. The fee is $50, and reports are due on the first day of the anniversary month of your LLC formation and every year after that. If you don’t file on time, you might have to pay late fees and could even lose your good standing status.
The cost of forming an LLC in South Dakota
Forming an LLC in South Dakota costs a base of $150 for the articles of organization. Additional costs vary depending on the services you choose.
Here’s the full breakdown of South Dakota’s state filing fees:
- Articles of organization: $150 for online filing, $165 for paper filing
- Reservation of name: $25
- Certificate of Good Standing: $20
Overall, it costs anywhere from $150 to $210 to form a South Dakota LLC. If you reserve a name, request a Certificate of Good Standing, and file your articles of organization by mail, it will be on the high end. You’ll also have to pay the annual report fee of $50 one year after you form your LLC, and for subsequent annual reports after that.
How to start your South Dakota LLC with LegalZoom
Learning how to start an LLC in South Dakota doesn’t have to be complicated. LegalZoom simplifies the LLC formation process into just three steps:
- You complete a quick questionnaire. This gathers the key information needed to form your LLC.
- We file your LLC. We’ll submit your articles of organization and all required forms to the South Dakota Secretary of State.
- You receive your documents. Once your LLC is approved, LegalZoom will send you your articles of organization and any other documents you need to get started.
As a business owner, you have enough to think about. Make forming your South Dakota LLC as easy as possible and leave it up to us.
Start an LLC in Any State
FAQs
Do I need a business license for my South Dakota LLC?
South Dakota does not require a general statewide business license. However, you might need specific licenses or permits depending on the type of business. Industries like healthcare, food services, and construction often require special licenses or certifications. Certain local governments, like cities or counties, may also require businesses to have a local license or permit. Check both state and local regulations to determine what you need.
How long does it take to form an LLC in South Dakota?
If you form your LLC online through the Secretary of State’s website, the processing time is typically immediate, and you’ll get your confirmation the same day. By mail, it usually takes 5–7 business days.
How do I correct LLC filing errors in South Dakota?
If you make an error on your LLC’s articles of organization or annual report, South Dakota allows you to correct it by filing Articles of Amendment with the Secretary of State and paying the filing fee. You can update the business name, registered agent, or other key details. Remember to act quickly—some errors, like having the wrong registered agent, could lead to legal trouble.
How do I dissolve a South Dakota LLC?
To dissolve a limited liability company in South Dakota, you must file Articles of Dissolution with the Secretary of State. Before filing, make sure your LLC has fulfilled all financial obligations, including paying off any outstanding debts and filing final tax returns with the South Dakota Department of Revenue. You should also notify any creditors, clients, or partners of the dissolution to formally end business relationships.
Rudri Bhatt Patel contributed to this article.
'%20/%3e%3c/svg%3e)
'%3e%3cpath%20fill-rule='evenodd'%20clip-rule='evenodd'%20d='M9.31239%2025.5316H13.0679V14.1032H9.31239V25.5316ZM11.1913%208.46875C9.93945%208.46875%209%209.25086%209%2010.505C9%2011.5995%209.78211%2012.5389%2011.1913%2012.5389C12.6005%2012.5389%2013.3826%2011.5995%2013.3826%2010.505C13.3826%209.4082%2012.6005%208.46875%2011.1913%208.46875ZM27%2018.9577V25.5316H23.2445V19.4275C23.2445%2017.8609%2022.6174%2016.7664%2021.3679%2016.7664C20.2711%2016.7664%2019.644%2017.5463%2019.3316%2018.1756C19.1743%2018.488%2019.1743%2018.8004%2019.1743%2019.1128V25.5316H15.4165V13.9458H19.1743V15.5123C19.644%2014.7302%2020.5835%2013.6357%2022.6174%2013.6357C25.1234%2013.7908%2027%2015.3573%2027%2018.9577Z'%20fill='white'/%3e%3c/g%3e%3cdefs%3e%3cclipPath%20id='clip0_952_9489'%3e%3crect%20width='18'%20height='18'%20fill='white'%20transform='translate(9%208)'/%3e%3c/clipPath%3e%3c/defs%3e%3c/svg%3e)
