How to Form an LLC in South Dakota

Select a unique business name that complies with South Dakota naming requirements and verify availability through the official state database. Your LLC name must include 'Limited Liability Company,' 'Limited Company,' 'LLC,' 'L.L.C.,' 'LC,' or 'L.C.' and be distinguishable from existing South Dakota businesses. The name cannot be the same as or deceptively similar to existing entities unless written consent is obtained. Avoid restricted terms like 'bank,' 'insurance,' or 'trust' unless your business has proper licenses. Search the South Dakota Secretary of State database thoroughly using the business information search and name availability tools. Consider trademark searches through the USPTO database to avoid future conflicts. Check domain name availability for consistent online branding.

Select a registered agent who will receive legal documents and official correspondence on behalf of your LLC. The registered agent must have a physical South Dakota street address (no P.O. boxes) and be available during normal business hours. You can serve as your own registered agent if you're a South Dakota resident, but this makes your personal address public record and requires consistent availability. Professional registered agent services provide privacy protection, ensure reliable document receipt, and allow geographic flexibility. South Dakota distinguishes between commercial and noncommercial registered agents - commercial agents maintain a state listing but provide the same level of service.

Submit your Articles of Organization to the South Dakota Secretary of State to officially form your LLC. The required state filing fee is $150 for online filing or $165 for paper filing. Online filing provides same-day approval, while paper filing takes several days. Include your LLC name, registered agent information (with CRA# if commercial), principal office address, beneficial owner information, and organizer details. You can specify member-managed or manager-managed structure. If manager-managed, you must list manager names and addresses in the Articles. Expedited service is available for an additional $50 fee. Consider professional formation services if you want assistance with document preparation and submission.

Apply for your federal Employer Identification Number (EIN) through the IRS, which serves as your business's tax identification number. An EIN is required if your LLC has employees, multiple members, or elects corporate tax treatment. Most banks also require an EIN to open business accounts even for single-member LLCs. The IRS provides free online applications available Monday through Friday during business hours with immediate approval. Single-member LLCs without employees can use the owner's Social Security Number for tax purposes, but an EIN provides better privacy and professional credibility. Avoid third-party services that charge fees for this completely free government service.

Draft a comprehensive operating agreement that defines how your LLC will be managed and operated, even though South Dakota law doesn't require this document for filing. The operating agreement should specify member ownership percentages, profit and loss distribution methods, management structure (member-managed vs. manager-managed), voting rights and procedures, member meeting requirements, procedures for adding or removing members, and dissolution procedures. This internal document protects the LLC's limited liability status and prevents disputes between members. Single-member LLCs should still create operating agreements to maintain corporate formality and strengthen liability protection. The agreement remains private and is not filed with the state.

Identify and obtain all necessary business licenses and permits at federal, state, and local levels based on your business type and location. South Dakota doesn't require a general state business license, making it one of the most business-friendly states. However, specific industries need specialized permits. Use the South Dakota Tax Application system for sales tax licenses (4.2% state rate) if selling tangible goods. Professional services may require licensing through appropriate state boards. Contact your local city or county government for municipal licenses and permits. Industries like healthcare, food services, and construction often require special licenses. South Dakota's favorable tax environment (no corporate or personal income tax) simplifies compliance compared to other states.

Open a dedicated business bank account using your EIN, Articles of Organization, and operating agreement to maintain separation between personal and business finances. This separation is crucial for protecting your LLC's limited liability status and simplifying tax preparation. Research business banking options comparing monthly fees, transaction limits, and minimum balance requirements. Take advantage of South Dakota's favorable tax environment - the state has no corporate income tax, no personal income tax, and no business inventory tax. Register for sales tax through the South Dakota Tax Application system if your business will sell tangible goods subject to the 4.2% state sales tax rate (plus potential local taxes up to 2%).

File South Dakota's Annual Report before the first day of the second month following your LLC's formation anniversary month to maintain good standing with the state. The filing fee is $50 for online filing or $65 for paper filing. For example, if your LLC was formed in July, the annual report is due by September 1st of the following year. Keep your registered agent information current and file amendments for any changes using the appropriate forms with a $10 fee. Maintain corporate formality by keeping business and personal finances separate, following your operating agreement provisions, and documenting major business decisions. Late filing can result in penalties and administrative dissolution, though reinstatement is possible for a $150 fee plus all delinquent reports.