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South Dakota Business License Basics

South Dakota Business License Basics

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South Dakota Business License Basics

Starting a small business in South Dakota often means registering with several federal, state, and local agencies. Let’s review common South Dakota business license registrations so your business starts off right.

Related: Guide to starting a business in South Dakota

Setting Up the Business

Before you can apply for business licenses, you should first establish the business structure. This decision impacts your legal responsibilities, taxes, and how much personal liability you might face. Here’s a brief explanation of each type of entity:

Sole proprietorship: This is the simplest form of business structure, where one person owns and runs everything. There’s no separation between the owner and the business, meaning the owner is personally responsible for all debts and legal actions against the business. Taxes are straightforward as the owner reports business income on their personal tax return.

General partnership: Similar to a sole proprietorship, but with two or more people running the business. Partners share profits and losses, and like sole proprietors, they are personally responsible for the business’s debts and legal issues. Partnerships also don’t pay taxes as a separate entity; instead, each partner includes their share of profits or losses in their personal tax filings.

Corporation: A corporation is a more complex entity that is separate from its owners, providing personal liability protection. Owners, known as shareholders, are not personally responsible for the corporation’s debts or legal problems. Corporations can raise money by selling stock and are taxed separately from their owners. This entity requires more requirements, like having board meetings and record-keeping.

Limited Liability Company (LLC): An LLC blends elements of sole proprietorships, partnerships, and corporations. Owners (members) have limited personal liability for business debts and actions. Like sole proprietorships and partnerships, an LLC can pass income directly to owners to avoid double taxation, a common issue with corporations. This structure offers flexibility in management and less strict requirements than a corporation.

What Licenses Do South Dakota Businesses Need?

With the business structure out of the way, we can begin looking at the different types of registrations businesses in South Dakota may need. There isn’t a standard business license, as requirements vary depending on where the business is located and what it does. Here is a general overview of the different registrations your business may need.

General Business License

There is no general business license in the state of South Dakota; however, many cities require businesses to be licensed in order to operate. Rules for business registration vary depending on location and what the business does.  Below are a few cities that have licensing requirements. 

  • Sioux Falls: The Sioux Falls Licensing Office requires certain types of businesses to register, such as businesses serving alcohol, mobile food vendors, bowling centers, shooting galleries, and a few others.
  • Rapid City: Certain businesses in Rapid City need a business license, including contractors, taxis, security companies, etc.
  • Aberdeen: The Aberdeen City Hall issues business licenses to certain businesses such as kennels, garbage haulers, home day care providers, etc. 

DBA Registration

While not a business license, it’s common for sole proprietorships and partnerships operating under a business name that is different from the full name of the owner(s) to register for a DBA (also known as a Doing Business As or Assumed Name) with the Register of Deed’s Office in the county where the business is located.

Take the guesswork out of figuring out what licenses and permits are required to start your business with license research packages from Bizee and LegalZoom.

For as little as $99, you can save a lot of time and know your business is in compliance with local, state, and federal requirements. 

Building & Zoning Permits

The state of South Dakota has specific regulations and requirements for businesses when it comes to signage, building permits, and zoning. 

Building Permits: In South Dakota, building permits are required for new construction, additions, alterations, and repairs to existing structures. The specific requirements and fees for building permits may vary depending on the local jurisdiction (city or county) where the business is located but generally include submitting plans, specifications, and permit applications to their local building department.

Zoning Permits: Local governments in South Dakota establish zoning regulations to control land use and development within their jurisdictions. Businesses must comply with zoning ordinances specific to their location, which may dictate the types of businesses allowed, building heights, setbacks, parking requirements, and other land use restrictions.

Building Signage: Local municipalities set forth sign ordinances that dictate how large a sign can be, where it can be placed, and what lighting or electronic features it may have

Sales Tax License

Any retailer selling, renting, or leasing tangible personal property or products delivered electronically or providing certain services in South Dakota will need to register for a South Dakota Sales Tax License (also called a seller’s permit) from the South Dakota Department of Revenue.

There is no cost for this license.

Certificate of Exemption

Businesses purchasing merchandise to resell will usually want to obtain a South Dakota Certificate of Exemption (also called a resale certificate) to avoid paying sales tax on merchandise resold to customers.

Contractor Excise License

Any person entering into a contract for construction services must have a South Dakota contractors’ excise tax license. Construction services include the construction, building, installation, and remodeling of real property.

More information about the Contractors Excise License is available from the Department of Revenue.

Professional License

A variety of professions in the state are regulated and need to be registered before offering certain services.  A few common professions that require licensing in South Dakota include; architects, plumbers, barbers, and many more.   Additional information, fees, and licensing requirements for professions are available from the South Dakota Department of Labor & Regulation.

In addition to professional licensing from the South Dakota Department of Labor & Regulation, a few other types of businesses, such as food establishments and daycares, also need licensing.

Employer Identification Number (EIN)

Many businesses register with the Internal Revenue Service (IRS) for an EIN (also referred to as a FEIN, Federal Employer Identification Number, or Federal Tax ID Number). The EIN is the business equivalent of an individual’s Social Security Number. South Dakota corporations, Limited Liability Companies, partnerships, and sole proprietorships with employees will all need to register for one. Sole Proprietorships without employees can use the owner’s Social Security Number.

Learn how to apply for an EIN

Next Steps

These are some of the most common business licenses a new business in South Dakota will need to register for. While it’s a good start, there are so many different licenses that may be needed, be sure to double-check with the City Clerk’s Office, Chamber of Commerce, and/or Economic Development office in your area before opening your doors.

South Dakota Business License Basics

South Dakota Business License Basics

6 Responses

  1. Hi Greg,
    I am interested in starting a small business selling handmade paper products at a couple local retail stores in Custer, SD. From reading, it looks like I don’t need an LLC. Do I need both an EIN and business license? I appreciate any guidance.

    1. Hi Eve

      You are right that you don’t have to get an LLC. Don’t take this as legal advice :), but for a business with low liability concerns, which it sounds like yours is, an sole proprietorship will be fine. The main benefit to the LLC is that if your business were to be sued, it would be the LLC that would be sued (unless you were negligent) and your personal assets would be safe. If you are going to operate your sole proprietorship under a fictitious business name (meaning not your full first and last name), you will want to register for a DBA with the Secretary of State – https://startup101.com/how-to-register-a-dba-in-south-dakota/

      As a sole proprietorship, an EIN will only be required if you hire employees. If it’s just you, your “business tax id” is your social security number.

      As for business licenses, there is no state business license, and it doesn’t look like there is a business license requirement in Custer City, though you may want to verify by calling City Hall at 605-673-4824.

      Since you are selling a physical product, you will want to get a Sales Tax License from the Department of Revenue – https://startup101.com/how-to-register-for-a-sales-tax-license-in-south-dakota/. In addition, you will want to get your resale certificate as well, so you don’t pay sales tax on the paper products that you are selling (the retailer will be collecting the marked up sales tax)

      I don’t know if you saw this page yet or not, but it may be a helpful resource too – https://startup101.com/south-dakota/

      Hope this helps. Let me know if you have any other questions!

      Greg

    2. Hi Greg.
      I havnt been able to find straight answers. I just sell handmade stuffed animals from home by myself in aberdeen, SD. People typically pay me personally for them, rarely has anything been sold online where tax is collected. I just started selling and I want to do things right but I don’t know what I would need if anything.

      1. Hi Makenna

        There are a few exceptions, but sales of a product are taxable in South Dakota, regardless of whether the sale was made in the state or online (and sent to a resident in SD). It gets a bit more complicated when making online sales outside of South Dakota as each state has different requirements of when sales taxes need to be collected. The good news is that the threshold in most states is $100k in sales or 200 transactions annually.

        At a minimum, you will need to register for a sales tax license with the South Dakota Department of Revenue https://dor.sd.gov/businesses/taxes/sales-use-tax/. At this point, it sounds like the only other registration you may need is to register for a Fictitious Business Name if you plan to operate under a business name rather than your first and last name.

        I hope this helps. Let me know if you have any other questions.

        Greg

  2. Hi Greg,
    I don’t really know where to start. So, I am looking to start a blog and a YouTube channel. On these platforms, I will be using a different name for myself. At some point I plan to use the website of my blog to have an online store selling digital and physical goods. Some of those physical goods would be things like opened/used products. (Trading cards, old electronics, etc.) I live in Huron. What things do I need to get to make sure that I am doing this right?

    Thanks,
    Nathan

    1. Hi Nathan! From the little bit that I know about you and your business, I think your first order of business will be to figure out your business entity (See step 3 -https://startup101.com/south-dakota/). Depending on which way you go, there are differences in registering a business name.

      Unless you register as a corporation, you won’t have to register for an Employer Identification Number – https://startup101.com/how-to-register-for-a-south-dakota-ein/ and would use your social security number for the business.

      Next, you will want to look at getting the business registered. Fortunately, it’s pretty straightforward since you are operating online. There isn’t a state business license, so we would want to look at any city requirements. It’s not common, but some cities require licensing for all businesses, but from what I see from the City of Huron, there isn’t anything that you would need to do – https://www.huronsd.gov/224/Online-Forms-Documents.

      The last thing I would look at is the Sales Tax License https://startup101.com/how-to-register-for-a-sales-tax-license-in-south-dakota/, since you are selling physical goods.

      I hope this gets you a pretty good start, but to get a second opinion, you may want to contact the Greater Huron Development Corporation to see if there is anything else that you may need.

      Let me know if you have any other questions and looking forward to your success!

      Greg

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