How to Form a South Dakota LLC in 10 Steps
Forming an LLC is quite a simply process, but there are several steps to follow.
LLC stands for Limited Liability Company. LLCs have several unique features. An LLC:
- Reduces exposure to liability for the owner(s).
- Allows one or more people to own part of the company.
- Passes profits to each member.
- Doesn’t have to file its own tax return.
Here is how to form an LLC:
1. Select a Name for Your New Company.
Find a name that is free for you to use, especially in the State of South Dakota.
To find a free name, for a nominal fee, SunDoc can run your name search or reserve your LLC name on your behalf. You can also run your own name search.
Once you have an available name, always check if it has a registered trademark as well.
2. Understand the LLC Organizer Requirement.
You must name an LLC organizer on your Articles of Organization form (see #6). By default, you’re the organizer if you prepare and file your Articles yourself. On the other hand, feel free to choose anyone else to be your LLC organizer — like a member or manager.
SunDoc would be happy to file your Articles of Organization on your behalf and can be your organizer as well. Lastly, some LLCs may choose a lawyer to be their organizer.
3. Designate a Registered Agent.
It’s time to choose a registered agent. Why do you need one? See this article for more information: Registered Agent Service.
In general, you need a registered agent to be listed on your Articles of Organization form. This role can be filled by a firm or a person.
4. Pick an Ownership and Management Structure.
There are three different ways that your LLC can be managed: By all members, by several managers, or by one manager.
5. Create an Operating Agreement.
Your specific entity type may require an operating agreement. An operating agreement is a key document used by LLCs because it outlines the financial and functional decisions of the business, including rules, regulations and provisions. The purpose of the document is to govern the internal operations of the business in a way that suits the specific needs of the business owners.
The Operating Agreement is the legal engine that drives your business, creating its governance, managing its working capital, and paying out its profits. Critical matters of money, voting, liability, and fiduciary constraints are at stake here. You may also wish to consult an attorney for advice.
6. File the Articles of Organization.
Several pieces of information will be required when filing your Articles of Organization, including your LLC name, address, management method, registered agent, organizer, and (possibly) member names. All of these company details are needed by the State of South Dakota.
SunDoc can file the Articles of Organization for you if time is an issue or if you'd prefer to have a filing service take care of your paperwork.
Once the state has accepted your Articles of Organization, your new company will be created!
7. Get an EIN and Make Fiscal Management Arrangements.
If the State of South Dakota has accepted your Articles of Organization, congrats! You have a new LLC.
At this point, it’s time to take care of your finances. Namely, you’ll need an EIN (Employer Identification Number). This can be obtained from the IRS. Feel free to file with the IRS yourself, or alternatively, SunDoc can file for you. You have to have this number if you have more than one member and regardless of whether you employ anyone.
Once you have your EIN, you can open up a bank account for your business. From now on, use this account for all expenses for your business. In the past, you may have used your own account to pay for business expenses. If that was the case, be sure to reimburse yourself by looking at past receipts.
Lastly, consider hiring an accountant to keep on retainer. They can help you with business issues you may encounter in the future.
8. Pay South Dakota State Taxes.
It’s likely that you’ll need to start paying taxes to the State of South Dakota — even in your LLC’s first year. The State of South Dakota’s tax web site has all the information you’ll need on this matter. Don’t forget that you might need to collect sales tax if you’re going to be selling goods in South Dakota as well.
9. Determine Necessary Licenses and Permits.
Most states require companies to have one or more business licenses or permits to operate at the city or county level. Use your state's business website to find the requirements for your business. It’s important to check this website even if you think your business is exempt. You may be surprised to discover what’s required. Operating without the proper license or permit can result in expensive fines.
10. File an Annual Report (Biennial Report or Initial List).
Usually you must file an Annual Report, Biennial Report, or other such document soon after forming an LLC in South Dakota, and thereafter an updated report every year or two years depending on your state’s requirement. The Annual Report is a simple form that keeps the state up to date on your company information. And down the road when you make changes to your company, it will invariably be one of the forms you’ll need to file with the state.
It is very important to file within the required time. It can cost you as much as ten times the normal filing fee if you file late! If you prefer, SunDoc can file your Annual Report/Biennial Report and other routine filings for you, reliably and on time. All LLC forms, including the report form, can be found on the South Dakota business web site.
Important Notice: It is beyond the scope of this article to discuss your potential insurance needs, or matters relating to employees. You should consult an attorney or accountant with any questions about legal or financial matters. Please note that nothing in this article can be construed as legal, tax or accounting advice.
For additional learning, please visit our LLC FAQs.
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