How to Create a General Partnership in South Dakota | A Complete Guide

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Create a General Partnership in South Dakota

If you would like to create a general partnership in South Dakota, there are a few guidelines that you should understand. A general partnership is one of the things that a businessman considers since it comprises two or more entities to carry on a trade or business. Each partner contributes money, property, labor, or special skills, and each partner shares in the profits and losses from the business. You can start an LLC in South Dakota for your general partnership to personally carry potentially unlimited liability.

Knowing about the general partnerships will benefit you and several partners, making you form your business properly. If you want to know more about the general partnership, follow our steps to Create a General Partnership in South Dakota.

Webinarcare Editorial Team will help you create with thorough research and market study. Before starting a general partnership in South Dakota, you must be guided by all the factors we have gathered in this article.

Steps in Creating a General Partnership in South Dakota

What is General Partnership in South Dakota?

A general partnership in South Dakota is a business structure where two or more individuals come together to establish a business and agree to share the profits, losses, and management responsibilities. Each partner contributes skills, resources, and capital to the business and makes decisions collaboratively. In a general partnership, partners have unlimited personal liability for the debts and obligations of the business, meaning their personal assets can be used to cover any debts or liabilities incurred by the partnership. This type of business structure is relatively simple to form and offers flexibility in decision-making and management but lacks the legal protection of limited liability offered by other structures like South Dakota Corporations or limited liability partnerships.

It is recommended that you consult to South Dakota Business Attorney before beginning the process of forming your general partnership. They will understand what is best for you and your company. To shield your personal assets from corporate debts, you can always Start an LLC in South Dakota rather than a general partnership.

– WEBINARCARE EDITORIAL TEAM

Example of a General Partnership

An example of a general partnership could be a small marketing agency created by two friends, Shane and Jane. Shane has a background in graphic design, while Jane has experience in digital marketing strategies. They decide to join forces and create a marketing agency that offers clients a combination of their expertise.

Shane and Jane contribute their skills, resources, and capital to start the business. They agree to share the profits, losses, and management responsibilities. Both partners actively participate in the agency’s day-to-day operations, making decisions and working with clients collaboratively.

In this general partnership, Shane and Jane have unlimited personal liability for any debts or obligations incurred by their marketing agency. If the agency faced financial difficulties, both partners’ personal assets could be used to cover the debts. However, the simplicity and flexibility of the general partnership structure allow them to manage and grow their business together easily.

Individuals looking to collaborate and numerous service providers have chosen general partnerships as their preferred business entity. That’s frequently because of its simple design, low price, and simplicity of setup. Some general partnership examples include: 

General partnerships are also formed by partners who are spouses or other family members who want to operate a business together.

Steps in Creating a General Partnership in South Dakota

To create a general partnership in South Dakota, you must follow the guidelines below: choosing a business name, making a partnership agreement, requesting an EIN, getting a license and permit, and opening a bank account. 

Step 1: Choose a Business Name

Naming your business is one of the most important activities during the startup phase, especially if you will form an LLC in South Dakota. Your general partnership name serves as the foundation for your brand and is what clients use to connect you to the products or services you offer. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity without being hampered by irrelevant factors. 

For example, let’s assume the general partnership focuses on providing eco-friendly landscaping solutions. A potential name for this partnership could be “GreenScape Innovations.” This name highlights the business’s core values (eco-friendly) while also showcasing the industry (landscaping) and the innovative approach the partners aim to bring to the market.

For your to come up with this business name idea, here are some guidelines to consider when choosing a name for a general partnership:

  • Reflect on the Nature of the Business: Choose a name representing your products or services, and communicate your business’s essence to your target audience.
  • Keep it Simple and Memorable: A short, easy-to-pronounce name will be easier for customers to remember and share with others.
  • Make it Unique: Research the names of other businesses in your industry to ensure your chosen name stands out and does not infringe on any existing trademarks or copyrights.
  • Consider the Partners’ Names: Some general partnerships incorporate the partners’ names in the business name (e.g., Smith & Johnson Consulting). However, this approach may only be suitable for some businesses, especially if the names are difficult to pronounce or remember.
  • Test the Name: Share the potential name with friends, family, and potential clients to gather feedback and ensure it resonates with your target audience.
  • Check for Domain Availability: Research the availability of your chosen name as a domain name for your website and on social media platforms to ensure a consistent online presence.
  • Avoid Limiting your Business Scope: Choose a flexible name to accommodate future product or service changes. Avoid using specific locations, product names, or niche markets in the name if you plan to expand or diversify later.
  • Comply with Legal Requirements: Ensure the chosen name complies with any legal requirements or restrictions in your jurisdiction, such as avoiding misleading or offensive terms.
  • Consider Professional Input: Consult with South Dakota Business Attorney or trademark specialist to ensure your chosen name is legally sound and can be registered as a trademark if necessary.

By following these guidelines, you can choose a name for your general partnership that is memorable, unique, and effectively communicates your business’s essence.

In addition, most general partnership businesses use the last name of all of their partners.  For instance, if Jennie Kim and Lalisa Manoban enter business together, the partnership name is “Kim & Manoban” by default. However, if you would like to form a business name under something more appropriate, such as “EJI Design and Build,” then you’ll need to File a DBA in South Dakota with South Dakota Secretary of State.

Filing a DBA in South Dakota has two methods, by mail and in person., which costs around $10. There is five years validity in renewing your DBA. 

In South Dakota, if you do not wish to file your general partnership business right away but want to hold the name that you have decided on, then you can reserve your business name for 120 days. You must file a name reservation application in the South Dakota Secretary of State to keep the name. 

Step 2: Make a Partnership Agreement

After you have chosen a business name for your general partnership, the next step would be making a partnership agreement in South Dakota. A partnership agreement is a crucial document that outlines the terms and conditions governing a partnership. It helps to establish a clear understanding of each partner’s roles, responsibilities, and expectations and prevents disputes and misunderstandings.

Additionally, it discusses business management guidelines and potential contingencies that may arise, such as a partner’s passing or a partner’s decision to leave the partnership.

A partnership agreement should include the following:

  • Business name
  • Description of the business
  • Contact information of the business and its owners

Ownership of all business partners, decision-making, capital contribution, profits and distribution, death and disability, and withdrawal and addition of partners is one of the key factors to consider when forming or creating a partnership agreement. In this way, all business partners will understand what this is all about and how to proceed if the mentioned scenarios happen. 

Without a partnership agreement, your company will often be subject to the general partnership default laws of South Dakota. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in South Dakota

After completing the partnership agreement, you should get or seek an Employer Identification Number (EIN) in South Dakota. An EIN will serve as your general partnership’s tax identification number. The Internal Revenue Service can provide you with an EIN. (IRS). It is a nine-digit number comparable to your Social Security number. EIN, on the other hand, is distinct from SSN. It is exclusively used for business-related operations, such as filing general taxes. The form must be filled out and sent to the IRS website. Obtaining an EIN cost between $30 and $280. 

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-4PDF 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.

You can benefit in various ways once you obtain your EIN number. It will give your general partnership the final advantage to operate at its full potential without legal or court problems.

Step 4: Get a License and a Permit

You must have South Dakota Business License before your general partnership business operates. A business license is a document granted by a government agency that allows you to operate your business in the territory governed by that agency.

To legally operate your partnership, you’ll need a business license. You may need more than one license in South Dakota. Numerous general partnership licenses need to be filed and renewed regularly.

In South Dakota, the business license fee costs about $50 – $300.

You can check out the United States Business License & Licensing Fee Resources for more information about the costs in South Dakota.

Step 5: Open a Bank Account

After filing and receiving your general partnership license, you should open a bank account for yourself, your clients, and your employees.

A US bank account may make your business dealings in South Dakota easier because it increases your company’s authenticity and profitability. Most banks require an EIN for firms other than sole proprietorships to open a business account. Keeping separate finances also prevents you from combining personal and professional finances.

If you would like to open a bank account in South Dakota, check out the Best Bank for South Dakota Small Business.

Pros and Cons of a General Partnership in South Dakota

In forming a general partnership in South Dakota, there are pros and cons that you may experience. I will list the pros and cons for you to understand why and how a general partnership is crucial. 

Pros of Forming a General Partnership in South Dakota

  • Easy and Inexpensive to Form: General partnerships are relatively simple to establish, requiring minimal paperwork and registration costs compared to other business structures like corporations or limited liability companies.
  • Decision-Making: Partners can pool their skills, knowledge, and resources, leading to more efficient and effective decision-making and business operations.
  • Flexibility: General partnerships offer flexibility in management structure, profit distribution, and decision-making processes, allowing partners to customize their business relationships to best suit their needs.
  • Tax Benefits: In most jurisdictions, general partnerships are not taxed as separate entities. Instead, profits and losses are passed through to the partners, who report them on their income tax returns. This avoids the issue of double taxation that affects corporations.
  • Greater Access to Capital: With multiple partners, a general partnership may have increased access to capital and resources compared to a sole proprietorship.

Cons of Forming a General Partnership in South Dakota

  • Unlimited Personal Liability: In a general partnership, all partners have unlimited personal liability for the debts and obligations of the business. This means that each partner’s personal assets can be used to cover any debts incurred by the partnership, which can be a significant risk.
  • Potential for Conflicts: As partners share management and decision-making responsibilities, disagreements or conflicts can arise, negatively impacting the business’s operations and success.
  • Limited Lifespan: A general partnership’s existence is often tied to the lives of its partners. The partnership may be dissolved if a partner withdraws, becomes incapacitated, or dies, potentially leading to instability and uncertainty.
  • Difficulty in Raising Capital: While general partnerships may have more access to capital than sole proprietorships, they may still need help raising funds compared to corporations or limited liability companies, as investors may be more hesitant to invest in a business with unlimited personal liability.
  • Lack of Legal Distinction: Unlike corporations or limited liability companies, general partnerships do not have a separate legal identity from their partners, limiting the partnership’s ability to enter into contracts or own property in its name.

When considering a general partnership, weighing the pros and cons and assessing whether this business structure aligns with your goals, risk tolerance, and desired level of management involvement is essential.

Maintain Business License in South Dakota

You must maintain or renew your business license regularly now that you have established your general partnership. Make time at least once a year to check the status of your licenses. Then you will get everything important. You can deal with any problems that arise. In South Dakota, the business license fee ranges from $50 – $300, and varies by jurisdiction and license type.

Pay Your Taxes in South Dakota

Even if you have established your general partnership in South Dakota, pay your taxes and keep everything up to date so you won’t pay any penalty. 

South Dakota taxes information will help you with what to pay before or during the operation of your professional corporation. You can check out the South Dakota Small Business Taxes to further understand why you must pay your taxes on time. 

Can I Convert My General Partnership Into Another Business Entity in South Dakota?

By following the appropriate state procedures, you can convert your general partnership into another business entity, such as South Dakota Corporation converting to an LLC; or Sole Proprietorship to South Dakota LLC. This may involve filing conversion documents with the South Dakota Secretary of State’s office and paying any required fees.

FAQs

What is a general partnership in South Dakota?
A general partnership in South Dakota is a business entity formed by two or more partners for profit.
How can I form a general partnership in South Dakota?
To form a general partnership in South Dakota, you must file a partnership agreement with the Secretary of State.
How many people can form a general partnership in South Dakota?
Two or more individuals can form a general partnership in South Dakota.
Is there a fee to form a general partnership in South Dakota?
Yes, there is a filing fee of $120 to form a general partnership in South Dakota.
What information is required to form a general partnership in South Dakota?
To form a general partnership in South Dakota, you will need the names and addresses of all partners, the name of the partnership, and a registered agent.
What are the advantages of forming a general partnership in South Dakota?
The advantages of forming a general partnership in South Dakota include a simpler business structure, easy tax preparation and a general understanding of partner roles.
What are the disadvantages of forming a general partnership in South Dakota?
The disadvantages of forming a general partnership in South Dakota include unlimited liability for partners, unlimited responsibility for partners concerning partnership debts and difficult relationship management between partners.
What is a partnership agreement in South Dakota?
A partnership agreement in South Dakota is a legal document detailing the terms and conditions of a partnership between two or more individuals.
Is a partnership agreement required in South Dakota?
A partnership agreement is not required in South Dakota, but it is recommended, best practice and heavily advantageuous either parties are protected by contract.
Where can I find a partnership agreement form for South Dakota?
You can find generic partnership agreement forms online, but it is better to hire a lawyer or use a professional partnership formation company.
Can I change my partnership agreement later on in South Dakota?
Yes, partnership agreement can opt changes in South Dakota.
Do both partners need to sign a partnership agreement in South Dakota?
Yes, all partners in a general partnership in South Dakota must agree to and sign the partnership agreement.
How much does a lawyer charge to draft a partnership agreement in South Dakota?
It depends on many factors, such as complexity and length of partnership agreement, but typically ranges anywhere from $500 to $5,000.
Can I obtain an EIN number for my general partnership in South Dakota?
Yes, you can obtain an EIN number for your general partnership in South Dakota by applying through the Internal Revenue Service website.
How do I elect the tax classification for my general partnership in South Dakota?
You can elect the tax classification for your general partnership in South Dakota on the IRS Form 1065 and its accompanying schedules.
What is a registered agent in South Dakota?
A registered agent in South Dakota is a person or business entity authorized to accept official legal notices on behalf of a general partnership.
Do I need a registered agent to form a general partnership in South Dakota?
Yes, you are required to have a registered agent in South Dakota to form a general partnership.
Can I be my own registered agent in South Dakota?
Yes, you or one of your partners can act as the registered agent for the general partnership in South Dakota.
Can I change my registered agent in South Dakota?
Yes, you can change your registered agent in South Dakota by filing a statement of change of registered agent with the Secretary of State.
Can a general partnership be formed by non-residents of South Dakota?
Yes, non-residents can form a general partnership in South Dakota.
How do I end a general partnership in South Dakota?
You can end a general partnership in South Dakota by filing a dissolution form with the Secretary of State.
What is a dissolution form in South Dakota?
A dissolution form in South Dakota is a form used to legally terminate a partnership.
Does a general partnership in South Dakota expire?
No, a general partnership in South Dakota does not have an expiration date unless agreed upon in the partnership agreement.
Can I form a general partnership with my spouse in South Dakota?
Yes, you can form a general partnership with your spouse in South Dakota.
How are profits and losses distributed in a general partnership in South Dakota?
Profits and losses in a general partnership in South Dakota are distributed according to the terms and conditions agreed upon in the partnership agreement.
Will I be personally liable for partnership debts in South Dakota?
Yes, in a general partnership in South Dakota, all partners are personally liable for partnership debts and obligations.
Is a general partnership in South Dakota required to file taxes?
No, a general partnership in South Dakota is not required to pay federal income tax, but is required to file an information return.
What is an information return in South Dakota?
An information return in South Dakota is a form used to report income and deductible expenses for your general partnership.
How do I create a general partnership in South Dakota?
To create a general partnership in South Dakota, you need to file a partnership agreement with the Secretary of State’s office.
What information do I need to provide to file a partnership agreement in South Dakota?
You will need to provide the names and addresses of the partners, the name and address of the partnership, and the purpose of the partnership.
Is there a fee for filing a partnership agreement in South Dakota?
Yes, there is a fee of $20 to file a partnership agreement.
Do I need a lawyer to create a general partnership in South Dakota?
It is not a requirement, but it may be helpful to consult with a lawyer to help draft a partnership agreement.
What is included in a partnership agreement in South Dakota?
A partnership agreement in South Dakota outlines the roles, responsibilities, and ownership percentages of each partner, as well as other business details such as financial contributions and profits.
How do I register a business name for my general partnership in South Dakota?
You will need to register your business name with the South Dakota Secretary of State’s office.
Do I need to obtain a business license for my general partnership in South Dakota?
The licensing requirements for a general partnership may vary by city or county, so it is best to check with your local government.
Are there any tax benefits to filing as a general partnership in South Dakota?
A general partnership in South Dakota is considered pass-through taxation, meaning partners report profits or losses on their individual tax returns and avoid double taxation at the partnership level.
How are profits and losses divided in a general partnership in South Dakota?
Profits and losses in a general partnership in South Dakota are divided according to each partner’s percentage of ownership, as outlined in the partnership agreement.
Can I change the partnership agreement for my general partnership in South Dakota if it no longer meets my needs?
Yes, you can amend the partnership agreement as needed, but all partners must agree to the changes.
Can I dissolve my general partnership in South Dakota?
Yes, a general partnership can be dissolved if all partners agree to it.
Are there any legal protections for partners in a general partnership in South Dakota?
Partners in a general partnership in South Dakota have unlimited liability, so it is important to outline the rights and responsibilities of each partner in the partnership agreement.
Can I add more partners to my general partnership in South Dakota later on?
Yes, you can add additional partners to your general partnership in South Dakota, but the initial partners must agree to it.
Are general partnerships in South Dakota required to have a designated registered agent?
Yes, a general partnership in South Dakota must have a designated registered agent to receive legal notifications and other official documents.
What happens if one partner wants to leave the general partnership in South Dakota?
If one partner wishes to leave the general partnership in South Dakota, the partnership agreement should outline the process for buying out that partner’s ownership percentage.
What legal risks do general partners in South Dakota face?
General partners in South Dakota face unlimited liability for the actions and financial obligations of the partnership, meaning personal assets may be at risk.
Can a partner be held personally responsible for the mistakes or negligence of another partner in a general partnership in South Dakota?
Yes, partners in a general partnership in South Dakota can be held personally responsible for the mistakes or negligence of another partner if it results in legal liabilities.
What are the most common types of business entities in South Dakota?
The most common types of business entities in South Dakota are limited liability companies (LLCs) and corporations.
Can a general partnership in South Dakota be converted into an LLC?
Yes, a general partnership in South Dakota can be converted into an LLC if all partners agree to it.
Can one partner hold a greater share of the business ownership in a general partnership in South Dakota?
Yes, a general partnership in South Dakota can be structured to allow one partner to hold a greater share of ownership or have more authority.
What are the advantages of filing as a general partnership in South Dakota?
The advantages of filing as a general partnership in South Dakota include simpler formation and filing requirements, pass-through taxation, and more flexibility in ownership and management structures.
Can a general partnership in South Dakota do business under a trade name or fictitious name?
Yes, a general partnership in South Dakota can do business under a trade name or fictitious name, but it must be registered with the Secretary of State’s office.
What is the process for dissolving a general partnership in South Dakota?
The process for dissolving a general partnership in South Dakota may involve filing a certificate of dissolution or dissolution agreement with the Secretary of State’s office.
What is the liability protection for a general partnership in South Dakota?
There is no liability protection for partners in a general partnership in South Dakota, so each partner is personally responsible for all aspects of the business.
Can a minor be a partner in a general partnership in South Dakota?
Yes, a minor can be a partner in a general partnership in South Dakota, but their legal rights and responsibilities may be limited.
What are the reporting requirements for a general partnership in South Dakota?
General partnerships in South Dakota are not required to file annual reports, but they must file a Domestic and Foreign Business Corporation Annual Report if gross income exceeds $2,000 during a fiscal year.
How can I find a partner for my general partnership in South Dakota?
The best way to find a partner for your general partnership in South Dakota is to network within your local business community or through online resources.

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Conclusion

A general partnership can be viable for individuals looking to establish a business in South Dakota with shared decision-making, management responsibilities, and profits. This type of business structure is relatively simple to establish and offers flexibility in operations. However, it is essential for potential partners to carefully consider the unlimited personal liability aspect of general partnerships, which means that each partner’s personal assets could be at risk to cover any debts or obligations incurred by the business. Before forming a general partnership, the partners should have a clear and well-drafted partnership agreement that outlines the roles, responsibilities, profit-sharing, and dispute-resolution mechanisms to ensure a smooth working relationship and minimize potential conflicts. Partners should also explore other business structures, like limited liability partnerships or corporations, to determine the best fit for their needs and goals.

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