Are you in the process of starting your business and got stuck on how to form a South Dakota LLC? When starting an LLC for the first time, it’s common to have a lot of questions and feelings of uncertainty, but fortunately, we have a step-by-step guide to help you through it.
Related: Starting A Business In South Dakota Checklist
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Steps To Start A South Dakota LLC
Step 1: Choose a Name for the LLC
The first step in forming a South Dakota Limited Liability Company is to make sure the name you want is available.
To get started, do a South Dakota LLC name search before registering the LLC, as the name of each LLC must be distinguishable from other entity names registered in the state of South Dakota. The South Dakota Secretary of State makes it easy to search and verify if your LLC name is available.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
- Limited Liability Company
- Limited Company
- L.L.C.
- LLC
- L.C.
- LC
Additionally, Limited can be abbreviated as Ltd. and Company abbreviated as Co.
A comma may be used after the business name and before the designator. “Rushmore Roots LLC” and “Rushmore Roots, LLC” are both acceptable.
If you want to use an LLC name but are not ready to register it, you can file an Application for Name Reservation with the Secretary of State to hold a name for up to 120 days.
Step 2: Appoint a South Dakota Registered Agent
Every LLC in South Dakota is required to have a registered agent, who is simply someone with a South Dakota street address who will be responsible for any legal correspondence, such as if the business is served papers in the event of a lawsuit.
LLC owners in South Dakota have two primary options for fulfilling this requirement. Many choose to act as their own registered agents, particularly if they reside in the state. However, some opt to hire a professional registered agent service. This choice is often preferred in two scenarios: when the LLC owner lives out of state or wants to keep their personal address off public records. Professional services offer the added benefits of ensuring compliance with state regulations and managing important legal correspondence, making them an attractive option for those seeking convenience and privacy in their business operations.
Related: How To Appoint A South Dakota Registered Agent
Step 3: File the South Dakota Articles of Organization
The paperwork to officially create an LLC in South Dakota is called the Articles of Organization. To submit the paperwork, either file online through the South Dakota Secretary of State’s website. If you prefer to fill out and mail the application, download the Articles of Organization Form.
Related: How To Fill Out The South Dakota Articles Of Organization
When filling out the Articles of Organization, a few sections can be confusing. Let’s review a few of these sections to help get your LLC started right.
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 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, which are not often provided as the phone number becomes a 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 should 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.
Organizer(s): An LLC Organizer is someone involved with forming the Articles of Organization. The Organizer may or may not become a member, such as a mentor, attorney, or accountant, but any LLC member can be listed as an organizer.
For most LLCs, the members will also be the organizers.
Period of duration: In this section, you can indicate how long the LLC will remain in operation. 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 made close to the end of a calendar year, but the business isn’t going to have any activity until the start of the next year. You can eliminate the need to file a partial-year business tax return by delaying the start date until the following year.
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 corporation’s CEO. This is generally used when there are passive members in the LLC and the members do not actively manage or operate in the business’s affairs.
Most LLCs are Member-Managed.
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 addresses on public records.
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What To Do After Forming A South Dakota LLC
Once the LLC has been formed, there are a few additional steps to take. Below is a list of the most common tasks.
Prepare a South Dakota LLC Operating Agreement
The LLC operating agreement is a document that governs the framework of an LLC and 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 (South Dakota included), 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.
Obtain an EIN
If the LLC will hire employees or is owned by more than one member, an EIN is required.
The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Like an individual’s social security number, the EIN identifies business entities for tax purposes.
Related: How To Register For An EIN
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.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, various business licenses and permits will likely be 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: To sell products and certain services, you will need a South Dakota Sales Tax License from the South Dakota Department of Revenue.
Related: How To Register A Business In South Dakota
File the South Dakota LLC Annual Reports
LLCs are required to file a South Dakota LLC Annual Report with the South Dakota Secretary of State. There is a $50 state fee for filing the South Dakota Annual Report (Form CL-1), which is due by the last day of the LLC’s anniversary month. For example, an LLC formed on November 5th, 2024, would have its first annual report due on November 31, 2025.
File the Beneficial Owner Information Report
Beginning in 2024, any individual who owns at least 25% or has “substantial control” of an LLC or corporation in South Dakota or any other state must file the Beneficial Ownership Information (BOI) form with the Financial Crimes Enforcement Network (FinCEN).
This is a separate requirement from the beneficial owner question in the Articles of Organization.
South Dakota LLC FAQs
What is an LLC?
The Limited Liability Company (LLC) is a popular business structure (also called a business entity) for many businesses starting in the state of 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 that helps to protect the business owner’s personal assets.
Besides asset 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.
How much does it cost to start an LLC in South Dakota?
The state filing fee to start an LLC with the South Dakota Secretary of State is $150 to file online.
How long does it take to start an LLC in South Dakota?
South Dakota LLCs formed online are processed immediately with the Secretary of State, while mailed-in forms can take 5-7 business days.
Is there a yearly fee for an LLC in South Dakota?
Each year, an annual report and $50 annual report fee will need to be sent to the South Dakota Secretary of State.
What is a South Dakota Foreign LLC?
A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC formed in another state that wants to operate in South Dakota. Physically operating means having a presence, such as having an office or hiring an employee.
What is a Professional Limited Liability Company?
Businesses that require occupational licensing in South Dakota, such as accountants, attorneys, veterinarians, etc., can register for a Professional LLC (PLLC), but it is not required.
Is South Dakota the best state to form an LLC?
It’s generally best to form an LLC where you reside and will be doing the work, however, there may be reasons to form one in another state.
