How to Form a South Dakota LLC: A Guide For New Business Owners

When you decide to start a new LLC in South Dakota there will be a list of set guidelines you need to follow to ensure you are able to set up your new business to be in good standing. Typically, this will include a checklist that acts as a guiding source of information for new business owners. Choosing to form an LLC in South Dakota will provide you with advantages such as ease of formation, flexibility in ownership, and the liability protection that is granted to business owners in South Dakota. However, to maintain these benefits you will be required to keep your business in good standing and compliant with all state requirements. These requirements will include:

1. Choosing a business name - Your business name is required to be unique and distinguishable from other active businesses in the state, and include a designator such as "LLC" or "Limited Liability Company".

2. Appoint a registered agent - All LLCs formed in South Dakota will need to have an active registered agent for their business. This person will be responsible for receiving any service of process or important notices that are sent to your business.

3. Submit your Articles of Organization - This document will form your LLC in South Dakota officially and will include your business information, registered agent information, and ownership information.

4. Draft an operating agreement - The operating agreement will be what outlines the roles and responsibilities of the owners of the business as well as detailing the financial and operational procedures of the business.

5. Obtain an EIN - Your EIN, or employer identification number, will be issued to your business by the IRS and will act as a social security number for your business. This will be required for filing taxes, hiring employees, and opening a business bank account.

6. Open a business bank account - A dedicated business bank account will ensure the clear separation of personal and business finances, as well as establish credibility and allow you to easily track your business funds.

7. Maintain ongoing compliance - After formation you will need to file annual reports and register for certain business licenses to continue to legally operate and stay in good standing with the Secretary of State.

This guide will provide tips and the best ways to complete each of these steps in order to form your new South Dakota LLC. You can choose to either do this on your own or you can hire a service like Firstep to complete this process for you. Either way, this guide will be able to give the information needed to correctly form your new LLC and ensure you are aware of each step along the way that is required so you aren't forgetting anything to be in good standing with the Secretary of State.

Step 1: Choosing a Business Name

The first step of forming a new LLC in South Dakota will be to choose a business name. Your business name will be important as this will be the first thing potential customers see when they are interacting with your business. It is helpful to choose a name that relates to the products or services you are offering so customers can remember you more easily and be more likely to become repeat customers. Be aware to not use any misleading or confusing wording in your name such as "bank" or "insurance" as this can lead to potential problems down the road and also more confusion for your customers.

Your business name will be required to be unique and distinguishable from other active businesses registered in the state. While brainstorming business names, you will want to have the South Dakota business search tool open to be aware of which names are available to you. South Dakota does not hold business names for any reason, so if there is not an active business with the name then it will be available for you to use. This will include if a business has been administratively dissolved by the state or if it was voluntarily dissolved themselves.

Step 2: Appoint a Registered Agent

All LLCs that are registered in South Dakota will be required to have an active registered agent. Your registered agent will be responsible for receiving any service of process or important notices that are sent to your business by the courts or the Secretary of State. There will be a list of requirements your registered agent will need to me in order to be in this role, and these requirements will include:

• Be at least 18 years old

• Have an active physical address in South Dakota (PO Box doesn't count)

• Be available during regular business hours at your listed address (Monday-Friday 9am-5pm)

As long as your chosen registered agent meets these requirements, you can choose whoever you would like for this role. You can be your own registered agent, appoint a trusted family member or friend, or you can hire a service like Firstep to handle this process for your business. It's important to keep in mind that your Articles of Organization will list your registered agent address which will be public record. If you want to avoid having your personal address be viewable by the public and value privacy, then appointing a trusted friend or family member or hiring a service like Firstep will allow you to avoid having to do this.

Step 3: Submit Your Articles of Organization

After you have chosen your business name and have your registered agent in place, you will be ready to submit your Articles of Organization to officially form your LLC with the South Dakota Secretary of State. To find this form you will go to the South Dakota business website and navigate to the link that says start a business. This will take you to a page where you will need to select the type of business you want to form, in this case it will be a domestic LLC. Once you advance to the form you will be required to enter the following:

• The business name including a designator

• Principal office address information

• Business email address

• Mailing address information (if different than principal address)

• Registered agent information

• Enter the organizer information including first and last name, and the address of the individual

• Choose if the LLC duration will be perpetual or not

• If you want to delay the effective start date of the LLC, you will enter it now

• Choose if the LLC will be manager managed or member managed

• Beneficial owners of the LLC (optional)

• Add any additional articles required for your filing (optional)

• Enter the recipient, only if you are mailing in any paper documents

• You will now be taken to the review page to ensure there are no typos or mistakes

• To be sent an email copy of a link to download your certified documents, provide an email address

• Provide a signature to authorize the document

• Pay the $150 filing fee to submit your Articles of Organization

After submitting your Articles of Organization in South Dakota, there will be no wait for this to be processed. These filings are typically processed immediately when filed online, and if you enter a recipient email you will receive an email with your certified documents attached. You are able to either file this document on your own or you can hire a service like Firstep to complete this process for you to ensure the form is properly filled out.

Step 4: Draft an Operating Agreement

With your LLC officially formed with the South Dakota Secretary of State, a highly suggested next step will be to draft an operating agreement. This document will outline the roles and responsibilities of the owners of the business, establish the financial and operational procedures that the business follows, the voting rights of the members, and the processes for how members join and leave the business.

Operating agreements are not legally required in South Dakota, but they are extremely helpful for new business owners for the benefits and structure they provide to businesses. This document is able to help standardize the business procedures which are able to help you avoid internal disputes by having a clear set of steps for solving disagreements and detailing what members are allowed to do.

The operating agreement will not be filed with any government or state agency, as this will mainly be used for internal purposes. It is not required by the South Dakota Secretary of State to be in good standing, but you may be required to present this document when trying to open a business bank account.

Step 5: Obtain an EIN

After you have completed your operating agreement, you will need to obtain an EIN for your new LLC. Your EIN, or employer identification number, will be issued to your business by the IRS and will be required to file taxes, hire employees, and open a business bank account. Each business will only be issued one EIN and these numbers do not expire, so it's important to store this document and number in a safe place to ensure you don't lose it and need to retrieve it from the IRS later on. You can choose to either obtain this EIN on your own or you can hire a service like Firstep to complete this process on your behalf.

If you have gotten an EIN before and either lost or forgotten it you will need to retrieve your EIN from the IRS. This will require you to submit a certain set of forms to the IRS to prove you are an authorized member of the business, and also to ensure you are getting the correct EIN for the correct business. There currently are no processing times listed by the IRS, so this can be a lengthy process to wait for these documents to get approved. If you do need to retrieve your EIN, it's best to do this before any important dates such as tax season or if you need to hire employees. Whether you are retrieving an old EIN or you are obtaining a new EIN, Firstep is able to handle this process for you so you can focus on managing your business.

Step 6: Open a Business Bank Account

Now that you have formed your LLC in South Dakota officially you will need to set up a business bank account as soon as you obtain the necessary documents. To set up a business bank account you will need your Articles of Organization, an EIN, and sometimes may need your operating agreement as well. A dedicated business bank account will ensure the clear separation of personal and business finances, which strengthens the liability protection that is granted to LLC owners. These protections, commonly referred to as the corporate veil, is what shields your personal assets in the case of any lawsuits of significant debts that are incurred by your business. If either of these do happen, courts and debt collectors are only able to go after your business's assets and unable to go after your personal assets.

The protections granted to you by the corporate veil will only be active if your business is meeting certain requirements, which include maintaining a clear separation between your personal and business finances, keeping your business in good standing with the Secretary of State, and ensuring you treat your business as a completely separate entity from yourself. Another important aspect is to make sure your business is avoiding engaging in any illegal activity, as this will pierce the corporate veil right away.

Using your personal bank account to manage your business finances as well can lead to confusion as it will be difficult to tell which transactions are for which purposes. Having a bank account dedicated to your business finances will allow you to easily track your business funds, available cash flow, and be aware when payments are sent and received. The protections of the corporate veil are great, but an added advantage of a business bank account is being able to easily track the cash flow of your business.

Opening a business bank account is also able to give your business added credibility when you are working with outside partners or vendors. This will be because you will be able to send and receive payments from your business account rather than your personal account, which is more professional especially when working with larger brands. Also, this will be able to signal to these brands that you are an established business and maintain your good standing through having a dedicated business bank account.

Step 7: Maintain Ongoing Good Standing

After you have formed your LLC with the South Dakota Secretary of State and obtained all required documents, all LLCs registered in the state will be required to maintain their good standing to remain in an active status. This will include both filing annual reports each year and registering for any business licenses that are required by the industry you are operating in.

Annual Reports

All LLCs that are registered in South Dakota will need to file annual reports each year to stay active and compliant with the Secretary of State. These reports will be due by the first day of the anniversary month of when your LLC was originally formed. So for example, if you formed your business on July 25th your renewal date will be July 1st. To file your annual reports you will need to go to the South Dakota Secretary of State website, and select file annual report. Each year, your annual report will cost a total of $55 if submitted on your own and online.

Business Licenses

Depending on the industry your business is operating in you may be required to register for certain business licenses to continue to operate legally. These licenses are typically filed on the local level or with the county that your business is operating in. South Dakota does not require statewide business licenses, but does require other specific licensing. Businesses that are operating in regulated industries such as construction, healthcare, law, or insurance will typically need to register for specific licenses to make sure they are operating legally.

FAQs on LLCs in South Dakota

Can I form an LLC in South Dakota if I don't live in the state

Yes, you can still form a South Dakota LLC even if you aren't currently living in the state. However, you will still need to provide a registered agent address that is current and active in the state of South Dakota for your Articles of Organization to be approved.

Do I legally need an operating agreement for my LLC

No, you don't need to legally have an operating agreement for your South Dakota LLC. But, these documents are extremely helpful for detailing the processes and financial structures of your business and how the owners operate.

Where do I go to submit my Articles of Organization and file annual reports for my LLC

To submit both your Articles of Organization and annual reports you will need to go to the South Dakota business website. From here you will be able to submit all business filings needed.

When are annual reports due for LLCs in South Dakota

All LLCs will have an annual report due date of the first day of the original filing month. For example, if you formed your business on July 20th, your renewal date will be July 1st each year.