Starting LLC in South Dakota: Peculiarities & Detailed Manual
Want to start an LLC in South Dakota? It is a profitable decision for a business, as the state has waived corporate tax in favor of gross corporate income tax. So you’ve decided to start an LLC? Not sure how to initiate the process? To start an LLC in South Dakota, you need to get ready for several stages.
We’ve prepared a guide for you with just six steps to form your LLC and to get success! You can also refer to the virtual LLC formation service.
Note: ZenBusiness is the best service to file the LLC. You’ll surely appreciate reasonable prices, company values, and other peculiarities.
An South Dakota LLC: The Notion & Essence
Many South Dakota business owners choose to start an LLC. So, unlike a corporation, they can take advantage of flexible management. We’re talking about the protection of personal assets that sole proprietorships and general partnerships lack.
The state of South Dakota puts forward simplified requirements for registration and maintenance of LLC and invites business owners to choose the type of taxation. Do you still have doubts about the LLC?
6 Stages to Form an LLC Correctly
Stage №1: Choose Your LLC Name
The LLC name is a significant aspect, as it is the name of your company that makes the first and strongest impression on the audience of your potential customers! The name must be different from existing company names and must meet South Dakota’s regulatory requirements. Now get started with the following aspects.
LLC name in terms of jurisdiction
The State of South Dakota obliges business owners to include the abbreviation DDS or the phrase – limited liability company in the name. Please note that the terms corporation or registered are prohibited. In addition, you cannot use the designations of other forms of business: banks or law firms.
Take care of the explanations
You must include in the title an explanation of the nature of your business. For example, if you are engaged in the computers’ repairing, write in the LLC title – computer wizard. If you have any values or principles, also indicate this. For example, if you are farming, use the term natural, nitrate-free, etc.
So, you need to get a little creative and fully comply with South Dakota’s legal requirements.
Stage №2: Hire a Registered Agent
A registered agent is called a statutory agent in South Dakota and will help you to start an LLC. The agent can be an South Dakota resident, natural or legal attorney responsible for sending and receiving legal documentation on behalf of the future company. A company representative can also be an employee of the company or its owner. The State of South Dakota notifies:
The registered agent of South Dakota serves as connecting link for a body corporate incorporated in South Dakota. It is a must for the said agent to be an inhabitant of South Dakota and dispose of both a physical and mailing address in the state.
A registered agent guarantees an excellent reputation for your South Dakota LLC. Also, if your business gets worse, South Dakota can take legal action against it without notifying you. The registered agent will always receive appropriate notification and will be able to take timely measures to protect your interests as an attorney.
You should apply to the online service to get started a business in compliance with all regulations and requirements. So, you will have the opportunity to filter spam and protect your personal and contact information. If you use the ZenBusiness and Northwest Registered Agent to form an LLC, you will receive the free services of a registered agent.
Stage №3: Applying for Registration
To register a business in South Dakota, you must file the Articles of Association with the South Dakota State Secretariat. If you are anxious about your LLC formation, you can submit your documents for pre-processing, which will allow the Secretary of State’s office to advise you of the eligibility. It can be a good option if you get started for the first time in an LLC without consulting an attorney. Be sure to provide:
- The desired name of your business.
- Personal and contact details of the registered agent.
- Business management form.
- Personal and contact details of the manager of your company.
- Signature of the applicant and registered agent.
- Date of application submission.
How much does it cost to found an LLC: the fee for establishing an LLC in South Dakota ranges from $150-$165.
How long does it take to process the submission: if you mail the required documents, it might take from 3 to 5 business days for the state authority to process them and mail the finalized paperwork back to you. In case you file submission online, the documents will be processed in one business day. Be aware of the fact that processing will start only after all documents have been filled correctly.
Stage №4: The Operating Agreement Background
While an operating agreement is not binding in South Dakota, creating one could significantly improve the company’s climate. An operating agreement is a document that describes the structure of a project, the way it works, the rights and obligations of each partner.
This document reflects the consistency of partners and thereby reduces the chance of controversy and disputes. Therefore, it is significant that all members of the future LLC carefully read this document before joining the company.
An attorney can help draw up an operating agreement and determine the way income and liabilities will be distributed among the owners of your LLC. You will find more information about the operating agreement here. Prepare to enter the following information:
- Names of all participants.
- The rights and obligations of each of the listed participants.
- Description of procedures for voting or resolving differences between members.
- Regulations on the financial share of participation of LLC members.
- Description of the way you’re going to manage the LLC.
So, do not neglect this stage of LLC formation. It largely guarantees your safety and the observance of your rights by all members of the business project.
Stage №5: Tax Compliance
To conduct a business that you want to register as an LLC successfully, you need to comply with several tax requirements at various levels.
Requirements of Federal Significance
Does your LLC involve multiple owners? Then you need to take care of the EIN! The EIN, or Employer Identification Number, is a unique nine-digit number assigned by the IRS to US corporations. This number must be obtained by all business owners under whose leadership the hired employees work. A business owner can obtain an EIN from the IRS in person or by mail.
Your state’s cess requirements
The state-level taxes attributed to an LLC in South Dakota depend on the type of business. Contrary to other states, South Dakota does not levy a state income tax, but it does charge other taxes typical for your type of business.
Thus business entities concerned with retail sales pay the state’s sales tax. As of now, its rate amounts to 4.5%; you’ll find an elaborate guide on this tax here.
LLC entrepreneurs must pay a couple of taxes dedicated to the employees. LLC in South Dakota must make payments dedicated to unemployment insurance. The payment is not a proper tax per se, but you should refund it regularly, so we list it here. For detailed information on this kind of payment address the South Dakota Department of Labor and Regulation.
Besides general taxes, the state of South Dakota charges fees dedicated to particular business branches. For instance, the state levies additional payment on hotels, LLC dealing with alcohol, and others. The in-depth guide of the business taxes in South Dakota is available here.
Local Tax Business Demands
Local taxes are connected to the legislation of the particular area where you launch your business. Thus, several counties levy additional sales fees apart from those you already have to pay state-wise. We provide the list of the municipal taxes here. In order not to overlook any charges you should get in contact with the local government office.
Stage №6: Getting Business Licenses & Permits
You do not have to obtain a statewide general business permit; nonetheless, you are to acquire some licensees for the federal government in case you branch in agriculture and several other fields. You should check the list made by the Small Business Association, which contains all for federally-regulated industries that warrant special licenses.
Some LLCs attributed to certain fields require industry-specific authorizations and permits. Luckily South Dakota issues hundreds of authorizations, so it wouldn’t be much of a problem for you to get the needed one.
The state has made a simple guide, which determines which permission you have to obtain. You can check it here. Be aware of local government legislation, which as well may demand other licenses from you.
Other Stages for Business Owners After LLC Registration
After completing the six mandatory steps towards starting an LLC, you need to take care of the following.
Opening a business bank account
Separate your personal and LLC accounts. Thus, you will be sure of the safety of your personal and financial data. Besides, you won’t have any hassle when filing your charge returns. Your EIN will help you open a business account quickly, no matter what you choose a bank or credit union.
All owners of companies/corporations, regardless of their form of management that attracts employees, must go through the compensation insurance procedure. All basic and detailed information is available with the South Dakota Bureau of Workers’ Compensation.
This policy aims to protect the rights of workers who are injured at work and unable to work. It will not be superfluous to get a civil liability insurance policy, as well as pay attention to some other types of insurance.
This is a special paper you submit to inform the state of the profit your business ensures. With mandate income reporting, you are obliged to file the document regardless of the amount of the said profit – you report even if your business bears losses. Since South Dakota does not levy the income tax, you are spared that responsibility. Nonetheless, you have to file other reports dedicated to taxes listed here.
Referring to the services of a qualified accountant
It is obligatory in South Dakota for LLCs to submit an annual report. You are free to file the document online or download a pdf version here. You also must pay a reported fee; it amounts to $50 for online documents and $65 for mailed-in ones.
Do not postpone sending the annual report, or you will be charged an additional $50 for the delay. The annual report is meant to update South Dakota government on all essential data regarding the business in question and changes it has undergone during a year.