All South Dakota businesses must choose an entity through which they will operate. Choices are sole proprietor, partnership, corporation, and Limited Liability Company (LLC). The latter is a relatively recent structure which combines the flow-through tax benefits of a sole proprietor with the asset protection of a corporation. For this reason, more and more small business owners are choosing to go the LLC route. Whether or not it’s right for you is a question best discussed with your tax and legal professionals. The great part about it is you can almost complete the entire process online.
There are a few factors to take into account when coming up with your LLC’s name. The first is that is must contain some variation of the LLC designation so the public realizes what type of business structure they are dealing with. Options are “Limited Liability Company,” “Limited Company,” “L.C.,” “LC,” “L.L.C.,” or “LLC.” You may choose to abbreviate the word “Limited” as “Ltd.” or the word “Company” as “Co.”
The second naming concern is that your LLC must not have the same name as another business on file with the South Dakota Secretary of State’s office. This means EXACTLY the same. You may be able to create variations of other names but should be aware of possible copyright and trademark infringements.
The paperwork you must file with the Secretary of State to make your LLC official are called Articles of Organization. This form asks for all your basic information: name and address of the LLC, registered agent, and managers’ (if separate). The articles must be filed via snail mail. This is the only part of the whole process that cannot be accomplished online. The filing fee is $150.
Choose an Agent
Every South Dakota LLC must have a registered agent. Even though the company serves as its own business entity, a human being must be designated to receive mail and other legal papers in the event of a lawsuit. The registered agent should either be a state resident or someone registered to do business in the state. A physical address within the state is required also.
An operating agreement is a formal document that spells out the the ownership and operating procedures of your new company. While the state doesn’t require one for an LLC, most tax and legal professionals highly recommend having one. Since it is not required, there’s no need to file it with the Articles of Organization, but consider having one created by an attorney. File this one in the category of stopping-problems-before-they-arise.
Taking Care of Taxes
In South Dakota, you are only required to obtain an Employer Identification Number (EIN) if your LLC has more than one member or you intend to hire employees or you choose to have it taxed as a corporation. Since many LLC’s are one-person businesses, they often don’t go to the trouble of acquiring an EIN, but the previously described situations do mandate it. Licensing requirements are the same as for any other business operating in the state. If you plan to sell goods, be prepared to collect sales tax. For that, obtain a sales tax license from the state. Check your local ordinances for additional business licenses. You might be required to get a state and county version as well, neither of which should cost much.
Finally, don’t forget to file your annual report! The Secretary of State’s office will get bent out of shape and start sending threatening letters. The yearly filing fee is $50. South Dakota requires the first filing to be before the first day of the second month of the year after your LLC was approved and on that same day in subsequent years.
LLC’s formed outside South Dakota (either in another state or country) need to appoint a registered agent and file an Application for Certificate of Authority. The filing fee for this is $750.
That’s it – the entire process required to form an LLC in the great state of South Dakota. While it’s probably not something you’ll accomplish in a day, the steps are straightforward and not difficult. Depending upon your personal situation, an LLC might offer tremendous advantages as a business structure. Keep in mind that there’s no substitute for good professional advice when deciding.