LLC in South Dakota: Everything You Need to Know
Forming an LLC in South Dakota is relatively easy and inexpensive.4 min read
Forming an LLC in South Dakota is relatively easy and inexpensive. As with each state, South Dakota has specific requirements when it comes to forming your LLC:
- Register with the Secretary of State.
- Fill out all of the necessary forms to form an LLC.
- Pay necessary filing fees.
- Meet naming requirements set forth by the state.
Is Forming an LLC Worth It?
While some small business may see forming an LLC as an unnecessary hassle, the time and effort are definitely worth it in the event that the business is sued or becomes in default with some of its creditors. This is because being an owner of an LLC will actually limit the exposure of the owner's personal and private assets from a legal or financial action in the event of a lawsuit.
Forming an LLC in the state of South Dakota is similar to most other states. Although some business owners may feel more comfortable when utilizing the assistance of an attorney — especially if the LLC membership is more complicated — most average small businesses will find the procedure easy to do on their own.
Steps to Start an LLC in South Dakota
There are five primary steps to form your LLC in the state of South Dakota:
- Name your LLC.
- Choose a registered agent.
- Create and file your Articles of Organization.
- Create an operating agreement.
- File for an employer identification number (EIN).
Naming Your LLC
The first step in forming your LLC is coming up with your company name. You will want to start by performing some research to make sure that your name will be easily searchable and help provide information on your company's business service and purpose. One of the primary guidelines when it comes to naming your LLC is making sure to identify yourself as a Limited Liability Company, either by adding the verbiage or abbreviation to your name.
If your name indicates you provide a professional service that may require licensing, you may not use those words in your name unless you have the proper licenses. You will also need to avoid any words or language that may lead customers to think you are linked to a federal or state government agency.
The final step in choosing your LLC business name is performing a search to find out if your name is already registered. You can search the state database at https://sosenterprise.sd.gov/BusinessServices/Business/NameAvailability.aspx. When considering your company name, it is also good practice to secure a domain for a website as well as an email address.
Choosing a Registered Agent
One of the steps to forming an LLC in South Dakota is designating a registered agent. A registered agent will need to be able to do business in the state of South Dakota and also have a physical address where they can receive such things as legal process paperwork and other official business paperwork. An owner can act as his own registered agent, but the LLC itself cannot be one.
Filing Your Articles of Organization
You will need to file your Articles of Organization either through an online registry or by mailing it directly to the state. When drafting your Articles of Organization, you will need to determine what type of management structure your company will use. There are two types of management structures for your LLC:
- Member-managed: This type of LLC will be formed when members are extremely active in the management functions, and decision making will be made by all the members of an LLC. This type of management is often referred to as "decentralized management."
- Manager-managed: In this type of LLC, members will designate managers who will be able to run and make decisions regarding the day-to-day functions of the business. This type of management is often referred to as "centralized management."
Your Articles of Organization will need to be sent along with the filing fee to South Dakota's Secretary of State's office.
Creating an Operating Agreement
Though not required in South Dakota, creating an operating agreement can establish set rules when it comes to how the business is owned as well as how it is operated. When creating an operating agreement, you will need to include:
- The name and address of the company
- The registered agent's name and address
- The name and address of each organizer
- Whether the LLC is member or manager-managed
- Whether one or more members have the liability of debt
- The signature, name, title, and date of the executing organizer
Filing for an EIN
The final step in forming your LLC is establishing an Employer Identification Number, which will identify your business for tax and often banking purposes.
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