How to Start an LLC in South Dakota (May 2024 Update)

From Mount Rushmore to the Missouri River, South Dakota is filled with natural beauty and opportunity. As an entrepreneur, forming a South Dakota limited liability company (LLC) allows you to tap into that potential while limiting personal liability.

Getting an LLC up and running here is easier than you may think if you follow some key steps. This comprehensive guide will walk you through the entire process, from reserving your business name all the way to submitting important annual filings. Read on to learn exactly what it takes to form an LLC in South Dakota.

Choosing and Reserving Your SD LLC’s Perfect Name

The first order of business when starting a South Dakota LLC is to decide on a name. This may seem simple, but there are a few legal requirements to keep in mind:

• The name must contain words like “Limited Liability Company,” “Limited Company,” or abbreviations like “L.L.C.” You can also abbreviate “limited” as “ltd.” and “company” as “co.”
• Your LLC’s name cannot be the same as any other business registered in the state. You’ll need to perform a name search via the Secretary of State’s website before settling on something.
• Certain restricted words like “bank,” “university,” or “fire department” cannot typically be used unless you obtain special permissions.

Once you’ve brainstormed some ideas that meet South Dakota’s naming rules, you can double-check availability by reserving the name for up to 120 days. Simply file an Application for Reservation of Name with the Secretary of State’s office along with the $25 fee.

Another important consideration is to make sure the domain name and/or social media handles match the LLC name you want to use. Registering a domain now even if you don’t plan on having a website yet is wise to lock in branding and prevent confusion down the road.

Appointing a Registered Agent for Official Business Communications

Before submitting your formal LLC paperwork, you must designate a registered agent on record with the state. This is the person or company responsible for accepting legal communications and official documents on the LLC’s behalf.

The registered agent requirements per South Dakota law are straightforward:

• They must have a physical street address in South Dakota where documents can be served. A P.O. box does not qualify.
• They need to be available at said address during normal business hours to receive things like lawsuit notices in person when necessary.
• After accepting items like summons or tax documents, the agent must then promptly forward those materials to the appropriate LLC members or managers.

You can choose a trusted friend or family member to save costs. However, hiring a professional registered agent service lends peace of mind since they safeguard your home address from public listings. It also guarantees someone official is keeping tabs on important mail if you’re away or unable to receive it for whatever reason.

Preparing and Submitting Your Articles of Organization

To legally establish your LLC, the South Dakota Secretary of State requires submitting Articles of Organization. Colloquially known as “filing your articles,” this crucial step isn’t as scary as it sounds.

You can either fill out a simple online form through their business filing portal or print the articles form to mail in with a small fee. Just make sure you have the required details handy, mainly:

• Your LLC’s official name
• The initial street address where your LLC will be based
• Your registered agent’s name and contact information
• The organizer’s name (the person actually submitting the articles)
• Whether your LLC will be member-managed or appoint outside managers
• If utilizing managers, their names and addresses

That’s the bare minimum information needed. You can also optionally include things like the LLC’s purpose, duration, and additional provisions. Double-check everything before submitting to avoid headaches from amendments down the road!

Crafting an Operating Agreement to Govern Your SD LLC

With your articles filed, you might think the hard part is over—but not so fast! You still need an operating agreement to officially organize and manage the inner workings of your South Dakota LLC.

While not legally required, having this documented agreement between members is non-negotiable for all practical purposes. Specifically, it establishes important rules and procedures for:

• Determining each member’s ownership percentage based on their contributions
• Divvying up profits or losses
• Procedures for adding or removing members
• Voting rights for major business decisions
• Steps and conditions for dissolving the LLC altogether

You’re essentially creating a manual on how you’ll handle finances, operations, disputes, changes in membership, and even shutting down if needed. Get your operating agreement drafted early on to prevent issues down the road.

Obtaining an EIN for Tax and Bank Account Purposes

The Employer Identification Number (EIN) is how both state and federal agencies identify your business for tax and legal matters.

You can easily get your unique 9-digit EIN in a few minutes by applying directly on the IRS website. While only compulsory for South Dakota LLCs with employees or special tax status, you’ll still need an EIN for crucial steps like opening a business bank account.

It also helps maintain the separation of your company’s tax obligations from your personal finances. For these reasons, don’t skip obtaining an EIN even if you’re a single-member LLC without workers!

Additional Steps to Keep Your SD LLC Compliant

Congratulations, your LLC is officially registered and ready to start doing business! But the work doesn’t stop here—you still need to take care of a few housekeeping matters to keep things running smoothly:

Open a Business Bank Account ASAP

Commingling personal and business funds is a huge legal liability, so open dedicated LLC banking accounts right away.

For more information, take a look at our article on the key benefits of business checking accounts.

Consider Insurance Needs

While LLC status affords personal asset protection, you still need adequate commercial insurance coverage for potential issues down the line. Price compare plans but don’t wait to get insured.

Stay on Top of Annual Reporting

South Dakota requires all LLCs to submit annual reports at the end of your original filing month to confirm operating details and contacts. Missing the $50 filing leads to fees and potential dissolution if delinquent too long.

Lean On Available Business Resources

For hiring, licensing, grants, workspace assistance and more specialized help, check out South Dakota’s small business development centers and workforce service agencies.

Determine the Best Tax Status Strategy

By default, South Dakota LLCs utilize pass-through taxation but can file as S-corps or C-corps instead depending on which saves more. Consult a tax pro to map out the optimal route.

And that wraps up the steps for starting a compliant LLC in South Dakota from square one! While the filing process seems lengthy on paper, the state provides ample resources and support to simplify formal business registration. Plus the tax perks and friendly business laws here make it a tempting place to plant roots as an entrepreneur.

Hopefully this guide gave you clarity and confidence to get your South Dakota LLC up and running. But don’t hesitate to connect with an attorney or small business service for personalized help—they can provide assistance with filings, operating agreements, licensing, and more to give your new endeavor the best shot at success!