South Dakota entrepreneurs and small business owners, read on!
Forming a limited liability company (LLC) is usually a smart choice for business leaders in the Mount Rushmore state. LLCs provide you with excellent tax benefits, greater ownership and management flexibility than corporations can offer, and, most importantly, personal liability protection. In other words, your personal assets are safe if something happens to your business.
Unfortunately, while many South Dakotans would benefit from forming an LLC, many of them don’t because of the daunting paperwork and fees required when creating and maintaining one.
Don’t let the extra paperwork and LLC fees stop you from making one of the best business decisions you can make!
In this post, we’ll walk you through the main fees businesses in South Dakota are required to pay when forming an LLC and when they are due. We’ll also suggest additional documents you should consider to make the process easier. We’ll discuss:
Let’s get started:
Business Name Reservation Fees
Did you know that small businesses make up 99% of all businesses in South Dakota? They really are the backbone of the economy.
The only downside to this is that, with so many small businesses out there, there’s a chance that one of them may be using the business name you want. To know for sure, start by conducting a business information search and check if it’s available.
Also, don’t forget that your business needs to include “Limited Liability Company,” “LLC,” “L.L.C.,” “LC,” or “L.C.” somewhere in your organization’s name. Be mindful of other words or terms that can almost misrepresent your company, like “insurance,” “trust,” “bank,” and “agency.” You should also exclude “corporation” and “incorporated” or any abbreviations. Including these words misrepresents your company since you’re forming an LLC, not a corporation.
Once you’ve selected a name that meets the state’s requirements, you can reserve it for $25. This gives you exclusive rights to use it for 120 days, which should be enough time to file your LLC’s formal documentation. After 120 days, you cannot reserve it again.
Although reserving your name is optional, we strongly recommend it. If someone else forms an LLC business using that name while you’re in the process of getting your paperwork together, you’ll have to think of a new name and might even have to start the process all over again.
Registering Your “Doing Business As” (DBA) Name
Your official LLC name has to be on all of your legal and financial documents. However, you’re not required to use it for marketing purposes or in everyday conversation. Instead, you can use a DBA name. Filing a DBA name costs $10.Speaking of marketing, whether you choose to use your official LLC or DBA name when promoting your business, check its availability in the Trademark Electronic Search System (TESS) database. The TESS database will show you if another organization has a trademark on the name you’re looking to use. When conducting this search, consider the name you’ll use for marketing purposes. For example, if your LLC is “Joan’s Gala Apples, LLC,” you can’t market yourself as “Apple” because “Apple” already is. If you do, the iPhone juggernaut may serve you a cease and desist.
Securing Your Registered Agent
A registered agent is a person or business entity that receives your LLC’s financial and legal documents. Your registered agent must have a physical address in South Dakota. Having a P.O. Box does not meet this requirement.
Business owners often prefer to hire a commercial registered agent service for one of two reasons:
If you or someone else in your LLC doesn’t mind having their information made public, you can have an “in-house” registered agent for free. Otherwise, commercial registered agent services, like South Dakota Registered Agent, will cost you $49 or more per year.
How To Form LLC South Dakota
Once you’ve picked your business name and selected your registered agent, you’re ready to file your articles of organization with your Secretary of State. This document sounds difficult and daunting, but it’s actually not. Your articles of organization documents all the important information about your LLC that the government and vendors need to know, including:
Your articles of organization cost a one-time fee of $165 to file. Once it’s approved, you’re officially in business!
What Is An Operating Agreement, And Why Do You Need One?
South Dakota doesn’t require that you have an operating agreement. However, we strongly recommend you create one with terms you and your membership can agree on and sign.
Your operating agreement defines your LLC’s rules and regulations and, in a way, acts as your organization’s constitution. Whether you’re a multi-member startup with hundreds of members or a single-member LLC with no intention of ever having employees, this document is worth having.
Your operating agreement serves as your North Star for when you need to make important business-related decisions or if a member has a financial or legal question about your organization. It also protects your business in the event of a legal and financial dispute. Without an operating agreement, significant decisions may be left up to the courts, and a judge or jury’s ruling may not be in your LLC’s best interest.
Operating agreements typically include:
You can draft an operating agreement for free, but for peace of mind, you should work with an attorney when creating one to ensure it’s done right.
South Dakota Sales And Use Tax Permits
According to the Department of Revenue, any business that has a physical presence in the state is required to be licensed for sales tax collection. Suppose you don’t have a physical presence. In that case, you need a sales and use tax permit if you meet one or both of the following requirements:
Here’s the good news: obtaining a sales and use tax permit is easy, and it won’t cost you anything.
South Dakota Business Licenses
Here’s some more good news: no general business license is required to operate in South Dakota. That said, you may be required to obtain additional permits or licenses with your local, state, and federal government. This all depends on your industry and location.
While these licenses fees and their renewal periods will vary, most of them require the following information:
LLC Annual Fees In South Dakota
In addition to paying taxes and operating lawfully you need to file an annual report. Your annual report comprehensively explains your company’s activities during the preceding year. Its intent is to give shareholders of and other interested parties information regarding your LLC's ongoings and financial performance. It also requires you to keep all of your information up to date so that vendors, creditors, and government officials can find you.
Your annual report costs $50 to file online or $65 by mail.While no one wants to spend an additional $50 each year to remain in good standing, it’s much more affordable than what LLCs in some states have to pay. For example, Delaware LLC fees are $300 annually, Massachusetts LLC fees are $500 every year, and California LLC fees can cost $800 or more!
Total Cost To Start LCC South Dakota
Here’s a recap of all the required LLC fees we’ve covered so far and how often they’re due:
Business name reservation
DBA name designation
Articles of organization filing fee
Registered agent fees
$0, or $49+/yr if with a commercial registered agent service
Operating agreement costs
Sales tax registration fees
Business license fee
$50 online, $65 by mail
Do you still have more questions about LLC fees in South Dakota or about LLCs in general? We’re here to help!
A Certificate of Good Standing is handy for when you want to open a business bank account or take out a loan. A physical copy will cost you $15.
When deciding on your legal or DBA name, check to see if the domain name is available. These days, many of your potential customers are likely to find your business online. When your domain name matches your legal or DBA name, your customers will have an easier time finding you.Check your domain availability on who.is. Who.is will show you multiple versions of your domain (e.g., .com, .net, .org, etc.) and whether or not it’s for sale. Domain names usually cost as low as $8.99 or $9.99, but more competitive domains can cost much more.
Paying yourself from an LLC is really easy. Simply transfer a portion of your LLC’s cash reserves from your business account to your personal account. If you’re allocating funds among other LLC members, review your operating agreement before doing so to ensure you’re doing it right.
Conclusion: How Much Do South Dakota LLC Fees Cost?
By identifying and understanding how much it will cost to start and maintain your LLC, you’re now ready to form an LLC! Are you enjoy to enjoy the fantastic benefits you’ll have as a business owner?Better yet, do you want to capitalize on that success? Check out The Lazy Man’s Guide to Living The Good Life, and discover how to make the most of your thriving business!