Starting a Corporation in South Dakota | What You Need to Know

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Start a Corporation in South Dakota

In South Dakota, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in South Dakota, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in South Dakota.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

How to Start a Corporation in South Dakota

What is a Corporation in South Dakota?

A corporation in South Dakota is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in South Dakota are required to have at least Three directors. One of the main advantages of a corporation in South Dakota is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation

C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation

S-Corporation in South Dakota is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.

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How to Start a Corporation in South Dakota

To start a corporation in South Dakota, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Articles of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with South Dakota naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

Here are some guidelines you must follow while naming your corporation in South Dakota-

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

To check the availability of your desired corporate name, you can search the South Dakota Secretary of State‘s business name database and Business Name Search in South Dakota. If the name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of Not available and mail name reservation fee of $25. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by two methods, by mail and in person., which costs around $10. In addition, the DBA’s validity in South Dakota is five years, which you can file in South Dakota Secretary of State.

You can check out How to File a DBA in South Dakota for clearer understanding.

Step 2: Hire a Registered Agent

Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are South Dakota Registered Agent Services to check in forming South Dakota Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in South Dakota are required to have at least Three directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In South Dakota, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Articles of Incorporation

After you appoint the initial board of directors in your South Dakota corporation, the next step is to write and file a Articles of Incorporation. In writing, the South Dakota Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your South Dakota corporation, you must prepare and file Articles of Incorporation with the South Dakota Secretary of State. The Articles of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Articles of Incorporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Articles of Incorporation are complete, please submit them to the South Dakota Secretary of State’s office, along with the required filing fee. Fees vary by state, but in South Dakota, the Articles of Incorporation filing fee costs around $150 for online filing, and $165 for filing by mail.. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Create an account/Log in to the SOS site, get the online form, fill it, and submit online
  • Offline filing: Send the form by mail to Secretary of State Office, 500 E Capitol Ave, Pierre, SD 57501

Step 5: Creating Corporate Bylaws

Now you are done filing Articles of Incorporation in South Dakota, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing South Dakota corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your South Dakota corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in South Dakota are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Articles of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • South Dakota Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required South Dakota licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your South Dakota corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in South Dakota for payroll tax purposes, and filing state income tax and franchise tax returns.

An EIN will serve as the tax ID for your South Dakota corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in South Dakota can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Each state has tax requirements, so consult a tax professional or South Dakota Department of Revenue for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your South Dakota corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the South Dakota Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

Paying Your Taxes in South Dakota

Even if you have established your corporation in South Dakota, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in South Dakota has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in South Dakota are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in South Dakota

In forming a corporation in South Dakota, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in South Dakota, it costs $150 for online filing, and $165 for filing by mail.. The corporation in South Dakota also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.

FAQs

What are the advantages of incorporating in South Dakota?
Personal assets are protected from business creditors, favorable business climate, low tax rates, and low administrative costs.
What is the minimum required number of shareholders to start a corporation in South Dakota?
One shareholder is required to start a corporation in South Dakota.
What is the minimum amount of money needed to start a corporation in South Dakota?
There is no legal requirement for a minimum amount of money to start a corporation in South Dakota.
How long does it take to incorporate in South Dakota?
Incorporation paperwork can be delivered within a day if expedited, or Standard processing can take up to ten business days.
Do I have to live in South Dakota to incorporate my business?
No, you don’t have to live in South Dakota to incorporate your business.
What is a South Dakota S Corporation?
A South Dakota S Corporation is a corporation that files a special tax election with the IRS to allow income to pass through the corporation to its owners like a sole proprietorship or partnership.
Is South Dakota a good state to incorporate in for startups?
Yes, South Dakota is a good state to incorporate in for startups thanks to its business owner protection and incentives.
What is a C Corporation in South Dakota?
A C Corporation in South Dakota is a corporation that pays income tax on its profits independently from its owners.
What is a South Dakota LLC?
A South Dakota LLC is a limited liability company that’s beneficial for businesses owners.
What is the procedure to incorporate a business in South Dakota?
You have to follow The South Dakota Secretary of State’s instructions for incorporating a company.
Is South Dakota a good state to incorporate in for small businesses?
Yes, South Dakota is a good state to incorporate in for small businesses; countless opportunities and resources where small, developing projects find efficient outcomes with its business laws.
What is the residency requirement for incorporating in South Dakota?
There is no residency requirement for incorporating in South Dakota.
What are the name requirements for a corporation in South Dakota?
The name needs to be distinct from others already established within the state as well as of character inclusion regarding corporate, bank, and business entities.
Are there franchise taxes imposed in this state?
No. There are no taxes imposed on out-of-state utilization for starting franchises in the state.
What do I do after registering my South Dakota corporation?
Beginning your business, you’ll want to appoint professional directors before introducing shareholders documentation (such as meeting minutes).
Can a convicted felon start a corporation in South Dakota?
Yes, a convicted felon could start a corporation in South Dakota.
What services does business companies incorporate in Sole Proprietor to corporate practice in South Dakota?
Services such as paperwork such as Articles of Incorporation; secure filing protocols so that clients’ personal information is protected; services for amendment paperwork and conversion from an LLC to a Corporation.
Can my South Dakota corporation own property?
Yes, a South Dakota corporation can own any types of property that is permissible under federal law.
What is the Secretary of State’s role in the procedure of incorporating in South Dakota?
The South Dakota Secretary of State’s role validates filings with Articles of Incorporation through administrative tools.
Is a Board of Directors is required for a South Dakota corporation?
Yes, a board of directors is required for a South Dakota corporate which should range from two to fifteen members.
What is a registered agent in South Dakota?
A registered agent is a person or company authorized to receive legal notices and processes of a corporation.
How much is the filing fee to incorporate in South Dakota?
It costs $150 to file Articles of Incorporation with South Dakota’s Secretary of State. Expedited services are available, costing from $50-$100 additional fees on top of that base filing cost.
What type of paperwork needs to be filed to start a South Dakota corporation?
The startup documents required are Articles of Incorporation and an initial report.
Can I change my corporation’s legal structure in South Dakota if it’s already established?
Yes, utilizing the proper legal forms and making the Secretary of State aware through separation options for corporations like complete administrative conferences.
Is there an age requirement when incorporating a business in South Dakota?
No, there is no age requirement when incorporating a business in South Dakota.
Can a South Dakota LLC taxes on royalty income?
Yes, South Dakota LLC is a pass-through business, and so depending on trademarks, copyright, or other proprietaries can approach royalty incomes for shareholders.
Can a corporation record an DBA in South Dakota?
Yes, a corporation can potentially record a DBA in South Dakota through business filings up until its various transactions become too different or recognized under its legal corporate name.
Does South Dakota law allow a business holder to file Articles of Amendment for necessary changes to the initial Articles of Incorporation paper documentation?
Yes, filing Articles of Amendment of should serve to reflect modifications in the details of the corporate statutes filing.
What is a corporation?
A corporation is a separate legal entity, owned by shareholders, and run by a board of directors.
Why should I consider starting a corporation in South Dakota?
South Dakota offers a favorable business climate, including low costs of starting and operating a business, high speed internet connectivity, no personal income tax, and a friendly regulatory environment.
What are the types of corporations in South Dakota?
The most popular types of corporations in South Dakota are the C-corporation, the S-corporation, and the professional corporation.
What is a C-corporation?
A C-corporation is a traditional corporation structure where profits are taxed at the corporate level and are subject to double taxation.
What is an S-corporation?
An S-corporation is a corporation that forgoes paying income tax at the corporate level, and instead passes all tax liability onto its shareholders.
What is a professional corporation?
A professional corporation is a corporate structure specifically designed for licensed professionals, such as lawyers, doctors, accountants, and architects.
How do I form a corporation in South Dakota?
To form a corporation in South Dakota, you must file Articles of Incorporation with the Secretary of State, pay the filing fee, and fulfill any other state-specific requirements.
Who can form a corporation in South Dakota?
Any individual or group can form a corporation in South Dakota, regardless of residency.
Does South Dakota require a minimum amount of capital to start a corporation?
No, there is no minimum investment amount required to form a corporation in South Dakota.
How long does it take to form a corporation in South Dakota?
It usually takes around 5-10 business days to form a corporation in South Dakota, assuming all required documentation is properly filed.
Do I need a lawyer to form a corporation in South Dakota?
No, you do not need a lawyer to form a corporation in South Dakota, but it may be wise to seek legal advice if you are unfamiliar with the process.
What taxes does a South Dakota corporation need to pay?
Most South Dakota corporations are exempt from state income tax, but still need to pay corporate income taxes and federal taxes.
Is it easy to change the business structure of a South Dakota corporation?
Yes, it is relatively easy to transition a corporation from one business structure to another, like from a C-corporation to an S-corporation.
Do South Dakota corporations need to hold annual meetings?
Yes, South Dakota corporations are required to hold annual meetings of shareholders and directors.
Can individuals act as both the officers and shareholders of a corporation in South Dakota?
Yes, there is no requirement that shareholders, directors, and officers of a corporation be different people.
Can a non-US citizen own a corporation in South Dakota?
Yes, non-US citizens and non-residents can own and run corporations in South Dakota.
Does South Dakota allow for the formation of benefit corporations?
Yes, South Dakota allows for the formation of benefit corporations, which focus on positive social and environmental impact as well as profits.
How do I open a bank account for my South Dakota corporation?
To open a bank account for your South Dakota corporation, you will need to provide documentation like your Articles of Incorporation and EIN.
Do South Dakota corporations need to obtain permits or licenses?
It depends on the business type. South Dakota corporations engaged in specific professions, like legal or medical services, may need to be licensed by the state.
Can I use a PO box as the registered address for my South Dakota corporation?
No, you must provide a physical street address as the registered address for your South Dakota corporation.
Is an operating agreement necessary for a South Dakota corporation?
While it is not legally required for South Dakota corporations, creating an operating agreement is highly recommended to formally outline your company’s rules and policies.
Does South Dakota offer any tax incentives for new corporations?
South Dakota offers several tax incentives for new businesses and corporations, such as tax credits for research and development.
How do I dissolve a South Dakota corporation?
To dissolve a South Dakota corporation, you must file Articles of Termination with the Secretary of State, pay any outstanding taxes or fees, and notify all creditors and shareholders.
Can a South Dakota corporation be revived after being dissolved?
Yes, a South Dakota corporation can be revived within a certain period of time, typically five years after being dissolved.
Is there a minimum or maximum number of directors for a South Dakota corporation?
No, there is no minimum or maximum number of directors required to form or run a South Dakota corporation.
Does South Dakota impose franchise taxes on corporations?
No, South Dakota does not impose franchise taxes on businesses or corporations.
What is the South Dakota Secretary of State responsible for in relation to corporations?
The South Dakota Secretary of State is responsible for maintaining records on all corporations formed or registered to do business within South Dakota.
Can a South Dakota corporation be sold or transferred to new owners?
Yes, South Dakota corporations can be sold or transferred to new owners through the sale of stock or assets.

Also Read

How to Save Money While Forming Your South Dakota Corporation

One of the first ways to save money when forming a South Dakota corporation is to do your own research and paperwork. While hiring a lawyer or a professional service can be convenient, it can also be costly. By taking the time to educate yourself on the process of forming a corporation and filling out the necessary forms yourself, you can avoid paying unnecessary fees.

Additionally, selecting the right business structure can help save money in the long run. While a corporation offers liability protection, it also comes with additional expenses, such as filing fees and ongoing maintenance costs. Entrepreneurs should carefully consider whether a corporation is the best choice for their business or if a more cost-effective option, such as a limited liability company (LLC), would be a better fit.

Another way to save money when forming a South Dakota corporation is to shop around for the best services and prices. There are many online resources and companies that offer incorporation services at competitive rates. By comparing prices and reading reviews, entrepreneurs can find a reputable service that won’t break the bank.

It’s also important to be mindful of ongoing expenses when forming a South Dakota corporation. In addition to the initial formation costs, there are yearly filing fees and other maintenance expenses to consider. By budgeting for these expenses and staying on top of deadlines, entrepreneurs can avoid costly penalties and keep more money in their pocket.

Finally, taking advantage of available resources and programs can help entrepreneurs save money when forming a South Dakota corporation. The state of South Dakota offers various incentives and programs designed to support small businesses, such as tax credits and grants. Entrepreneurs should research these programs and take advantage of any opportunities to save money and invest in their business.

In conclusion, forming a South Dakota corporation doesn’t have to be a costly process. By doing your own research, selecting the right business structure, shopping around for services, budgeting for ongoing expenses, and taking advantage of available resources, entrepreneurs can save money and set their business up for success. With a little planning and savvy decision-making, forming a corporation in South Dakota can be a cost-effective and rewarding experience.

Conclusion

Starting a corporation in South Dakota involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your South Dakota corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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