South Dakota LLC Registration
Recently, South Dakota has been a prime destination for many limited liability companies that are attracted by its business-friendly environment. When registering your company in South Dakota, you get a lot of advantages. For instance, LLC in South Dakota can select from varying form of profit distribution, and there are no meeting minutes required to operate a limited liability company.
All your profits and losses flow through your company to the individual or partners making it easy to run a company. Business owners also avoid double-taxation because they don’t need to pay corporate and individual taxes, separately.
According to CNBC rankings, South Dakota is heaven for new businesses as the state ranks second in the United States for the cost of doing business and business friendliness. With a booming local economy, the state authorities have done everything in their power to attract businesses to the state.
This is a step-by-step guide for new business owners to help them register their company in South Dakota. It will cover the following topics:
- How to register a company in South Dakota?
- A step-by-step guide to registering a company
- The cost of registering a business in South Dakota
- How to create an operating agreement?
- How to acquire EIN?
- How to obtain a business license?
- How to file the South Dakota LLC Registration Annual Report?
How to register a company in South Dakota
To register an LLC in South Dakota, you need to file ‘articles of organization’, which is proof that your company is officially registered. It is easy to file “articles of organization” as you can either fill an online form or send the form through a registered mail. Overall, it will cost $150 to file articles of organization.
While anyone can easily fill information online, there are instances where you would be required to send additional documents. Under the circumstances, it is better to send articles of organization with the related document through registered mail to save time. Additional documents may be necessary if you have more than one owner in a company. Many new businesses also prefer to use a professional company for the purpose as they can streamline the job saving you the time to register a company.
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What are your filing options?
As suggested, potential business owners who want to register the firm have three options. First, they can download articles of organization and pertinent forms from the Internet enabling them to send everything by registered mail. On the other hand, they can also fill such documents online to save time. A third option is to pay a nominal fee to a professional company that can assist them with the paperwork.
A Step-by-Step guide to registering a company
Selecting a Name
Filing articles of organization is an easy task as you need simple information to fill the forms. Once the Secretary of State gets the required document, they will send you a certificate of organization, which you can proudly display at your front desk or the office.
As a first step, you will need to select the name of the company. According to the South Dakota legislature, the name of your company must end with Limited Liability Company. To keep it simple, many businesses write LLC at the end of the name.
Besides writing LLC at the end of the name, you want to make sure that your company name is unique and it doesn’t match another company in the State. If there is another company with the same name in South Dakota, you can’t register your name. To help potential businessmen, the state government provides an online tool to review if your name is available.
You can access the South Dakota LLC search tool at https://sosenterprise.sd.gov/BusinessServices/Business/NameAvailability.aspx
Why a unique name is important?
Remember, your name should be unique in the state where you’re registering your business. It means that if there is another company with the same name as yours in another state outside South Dakota, you can still register that name in South Dakota if it is available in the state of your registration.
Regarding names, it is better to give your company a unique name if you want to expand your business in other U.S. States. In the future, it will be easier for you to register your company in other states with a unique name. Nowadays, many new multi-million dollar corporations have unique names because they don’t want to get into legalities of brand names as they expand their business.
Purpose of Registration
In the articles of organization, there is also an optional field that asks the business to specify the purpose of registering a company. Please note that this is an optional field, which means that you can skip it entirely. Just for your records, you may want to write down the purpose of doing business but it is not required. Most LLC would skip this step because they want to be flexible in describing the nature of their business if the business operations change in the future. It’s up to you to fill it or skip it.
You will also be required to list your street address. The street address is the address of the physical location of your business. If you don’t have the street address, you can also list your home address if you are a sole proprietorship working from home. In most cases, it is better to list the address of a registered agent. We will talk about the registered agent in the following paragraphs. You cannot list a P.O. Box address as the registered address of your company.
There are also separate fields for email and phone numbers. If you put down your email address and phone numbers, it will be a part of the public record. Mostly, LLC do not put the email address and phone numbers because they don’t want to get marketing and advertising calls at their numbers. Indicating your official email and phone number is optional, which you may skip.
The third step will require you to list your registered agent. Most online businesses, small enterprise, and companies that don’t have a physical space use registered agent’s street address as their own address. A registered agent is an individual or an entity, which is obligated to receive legal documents of the company. It is the sole responsibility of the registered agent to review legal documents and send it to designated company members.
You can also designate one of your members to be a registered agent but it is not a professional method of doing business. It is not professional because registered agent needs to be available to receive legal and other important documents during office hours. If you designate a member of your company to be registered agent, they must be at the official address to receive registered mails. Besides receiving mail, a registered agent has a lot of other responsibilities, which is out of the scope of this topic.
Overall, it is better to assign these responsibilities to a professional company who can become your registered agent at a very nominal cost. They will keep track of your mail and other documents. Depending on the level of service, they can also take your business calls and provide you an online portal to keep on top of everything.
When filing the article of organization, you will also need to authorize someone to be South Dakota LLC Organizer. While the name may sound fancy, it is the individual who signs the article of organization. If you are more than one partner, someone will need to sign the papers that will register your company. It is not a serious matter because the signing is just a basic formality that can be fulfilled by any person in the team.
Duration of Business
You will also need to write the duration of doing business. It means you need to write down the end date of your business. It may sound funny but this is an official requirement that you need to fill. You can write indefinitely or indicate an end date hundred years from the registration. Normally, this section is useful for international companies or franchise that has a certain date when their contract ends.
You cannot skip this section; therefore, write anything that you think makes sense. The state authorities are not going to reject your application based on this section, alone.
In the article of organization, there is a specific section related to naming the LLC management. In this section, you will need to write the name and the address of individuals who will manage the company. In most cases, a company is run by its owner. If there is more than one member, you will need to list down the name and address of each member, individually. Sometimes, companies appoint a manager to keep track of the day-to-day operations of their business. In such a case, you will need to indicate the name and address of your manager who will be in charge of the limited liability company.
At the end of “article of organization” there is a section for member liability. Most LLC will skip this section unless members want to hold someone liable for certain duties. If you think that members should be liable for specific duties, then it’s time to list their duties and role in this section. This section is primarily used in the court of law to prove or disapprove liabilities of a certain individual.
As you may guess, it’s easier to file the article or organization than you would think. Still, if you are not sure that you have all the answers to the questions, it is prudent to let a professional company file your papers. These companies will charge a nominal fee to file the paperwork but you can save plenty of time by letting them do the work that they do every single day.
Another reason to hire a professional is to meet certain deadlines. For instance, a little mistake or a typo can put you a week or two behind the deadline as it often takes more than a week to rectify the situation.
The cost of forming an LLC in South Dakota
The normal cost of registering a limited liability company in South Dakota is only $150. If you’re sending documents through a registered mail, there is a separate handling charge of $15 for sending the article of organization by mail. Sometimes, it is better to check the prices of a professional company because a professional company may be able to register and file your papers on your behalf for a nominal fee.
The fee of a registered agent can vary according to their service but it generally doesn’t exceed a lot than the normal processing price you would pay to register at your own. Considering the fact that you will likely get expert assistance to answer legal questions and the fee will include an official address of a registered agent, you should always consult a professional agent before filing the article of organization yourself.
How long does it take to file the papers and start a business?
If you’re filing online, chances are that your file will be processed within 24 hours. It means that you will be ready to start the business in less than a day if everything is done properly. If you send your article of organization through a registered mail, it may take anywhere from five to seven days to process. The state authorities need to input everything manually, which is why you will incur an additional charge of $15 as a handling expense. Typically, a professional company will be able to take care of the filing within 24 hours.
Do you need a professional registered agent for your LLC?
If you’re going to form a limited liability company, you will require a registered agent. If you can find a reputable professional company to act as your registered agent, it will likely save you a lot of capital in the long run. Whereas you can designate anyone over 18 years as a registered agent, it often gets annoying if the registered agent gets spam emails and phony calls on their official phone. This is why it is highly recommended to use a professional company to ensure they tackle all the emails and phone calls.
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Creating an Operating Agreement
Some companies also send copies of the operating agreement when filing for registration. Just because it is not mandatory to create an operating agreement, it doesn’t mean that you should not prepare an operating agreement. An operating agreement is critical to the success of the business as it highlights who owns the business and what are the duties of each member.
If you have more than one member in a limited liability company, the operating agreement will also indicate the number of shares of each members and the profit distribution. As evident, operating agreement will be the most important document in the court of law if a dispute occurs between members.
In the court of law, the operating agreement will enable lawyers and judges to make the right decision. If you think that your company should be run as a professional entity where each member is responsible for their duty, then it is important to create an operating agreement.
Apart from legal importance, banks and other financial institutions may also ask you to produce an operating agreement before they can initiate any talks with you. As businesses often require loans, it is prudent to create an operating agreement so you don’t have to create it exclusively for the bank. Under specific circumstances, your trade partners and business entities may also ask you to provide them an operating agreement.
If you‘re the only one, you may skip creating an operating agreement. However, professional entrepreneurs still create a copy of the operating agreement in case they need to produce it at a later stage. You can either browse the Internet for a sample of such operating agreements or you can ask your professional company if they have a copy of such agreements.
How to get a Tax ID Number or EIN, Employer Identification Number?
You can run a limited liability company without requiring EIN if you’re the only owner of a business. On the other hand, you will need an employer identification number if you have employees. Similarly, EIN is needed if you want to file federal excise returns, pay common state tax, and pay sales. In fact, getting EIN seems a very important aspect of running a business.
Irrespective of your status, you will also require EIN to open a commercial bank account and apply for a loan. Getting EIN from state authorities is free and you can get one instantly using the official online website.
How to obtain a business license or trade permit?
Depending on the nature of your business, your limited liability company may require a business license or trade permit from the state authorities. For instance, professional businesses such as lawyers and doctors will require a license from the local health department to run a business. If you’re a doctor or a lawyer, registering your business is not enough without a license.
Similarly, certain construction companies and real estate developers will also require trade permits to operate. Often, the business license and trade permit is displayed at front office alongside the certificate of registration that you get after filing your article or organization.
The best source of getting the information about your licenses is small business development agencies and chamber of commerce. These organizations will let you know if you need to get a license or a permit. If you’re using a professional company, it is likely that the company will know about the requirements or they will help you in getting the required information.
Don’t neglect this important duty because you may lose your business and work license if you run a business without proper documents. It’s true that South Dakota offers a very business-friendly environment without strict requirements, which often makes business owners neglect their responsibilities.
After registering your business, it’s your responsibility to get documented.
Do I need to file LLC South Dakota Annual Report?
All limited liability companies registered in South Dakota are required to send an LLC annual report at the end of every year. Instead of sending the report at the end of a calendar year, the report is sent at the end of every month you first registered your business. For instance, if you registered your business in October, you will need to send the LLC annual report by the end of October. Also known as anniversary month, the date is easy to forget; therefore, it is better to set a reminder.
The South Dakota LLC Annual Report is mandatory to file. If you forget it, the state authorities charge a late fee of $50. If you’re punctual, you should be able to do it because the report doesn’t require filing extensive information. In fact, business owners just need to confirm their current contact and the address. If you’ve hired a professional company, they can either send you a reminder or they can file this report every year.
Overall, registering a limited liability company in South Dakota is very simple if you’re aware of the basic steps to follow. Anyone can register a company without any help. Still, it is recommended to get help from a professional company if you have one or more partners. As the structure and size of your company grow larger, there are lots of legalities and paperwork that needs to be taken care of.
If you’re the only one operating a limited liability company, you should also consult a professional as these professionals can help you sort out matter on an urgent basis. Mostly, professional companies charge a nominal fee to register a business, prepare important papers, answer legal questions, and provide you a registered agent service. Overall, it pays off quickly to get your papers done in a professional manner. Check out our Tennessee LLC filing guide.