How to Start a Limited Partnership in South Dakota | A Step-by-Step Guide

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Start a Limited Partnership in South Dakota

A limited partnership is an attractive business structure for those who want to start an LLC in South Dakota. It combines the best of both worlds, offering limited liability protection for limited partners and the ability to manage the business for general partners actively. This article will outline the steps on How to Start a Limited Partnership in South Dakota, covering everything from researching and preparing to registering your limited partnership with the South Dakota government and beyond.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your South Dakota Limited Partnership, all the steps in this article must guide you.

Steps in Starting a Limited Partnership in South Dakota

What is a Limited Partnership?

A Limited Partnership (LP) is a business structure comprising two types of partners: general and limited. It is a legal entity distinct from its partners and combines certain features of partnerships and corporations.

General partners are responsible for the day-to-day management of the business, make decisions on behalf of the partnership, and have unlimited liability for the partnership’s debts and obligations. This means their assets can be seized to cover the partnership’s liabilities if necessary.

Limited partners, on the other hand, are passive investors who do not participate in business management. They provide capital to the partnership and receive a share of the profits in return. Their liability is limited to the amount they have invested in the partnership, meaning that their assets are generally not at risk for the partnership’s debts beyond their investment.

It is suggested that you speak with a legal professional before you begin setting up your limited partnership in South Dakota. They’ll understand what’s best for you and your company. To safeguard your personal assets from business debts, you can always start an LLC rather than a limited partnership.

– WEBINARCARE EDITORIAL TEAM

Steps in Starting a Limited Partnership in South Dakota

To form a limited partnership in South Dakota, you must consider following the below guidelines that, include research and preparation, establishing the limited partnership structure, drafting the limited partnership agreement, registering the limited partnership, complying with additional South Dakota requirements, and ongoing management and compliance and reporting requirements. 

Step 1: Research and Preparation

Before starting a limited partnership in South Dakota, you must familiarize yourself with this business structure’s laws and regulations. In the United States, limited partnerships are primarily governed by the Uniform Limited Partnership Act (ULPA). However, each state has its laws and regulations, so it’s essential to know the specific rules that apply in South Dakota.

While researching, consider whether a limited partnership is the most suitable structure for your business needs. Limited partnerships are ideal for businesses with one or more passive investors who want to avoid taking on the business’s day-to-day responsibilities. Consider alternative structures like South Dakota Corporations if a limited partnership doesn’t seem right.

Step 2: Establishing The Limited Partnership Structure

Once you’ve determined that a limited partnership is the right choice for your business, the next step is to establish the structure of your partnership. This involves choosing a name, hiring a Registered Agent, and determining the roles of the partners.

Choose a Name for the Limited Partnership

The name you choose for your limited partnership is essential to your business identity. In South Dakota, there are specific requirements that your limited partnership name must meet, such as including the words “Limited Partnership” or the abbreviation “LP.” Before settling on a name, conduct South Dakota Business Name Search through the South Carolina Secretary of State Business Filings Search to ensure the name you’ve chosen is available and not already used by another business.

Naming requirements for a Limited Partnership in South Dakota may include:

  • The name must be unique and distinguishable from other business entities registered in the state.
  • The name must include the words “Limited Partnership,” “L.P.,” or “LP.”
  • Certain words and phrases may be restricted or require additional approval from South Dakota.

If the limited partnership 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.

Hire a Registered Agent

A Registered Agent is a person or entity responsible for receiving legal documents and official notices on behalf of your LP. In South Dakota, your Registered Agent must:

  • Be a resident of South Dakota or a business entity authorized to do business in the state
  • Have a physical address in South Dakota (P.O. boxes are not acceptable)

Choosing a reliable and responsible Registered Agent is essential, as failure to receive and respond to legal documents can seriously affect your business. 

You can serve as your own Registered Agent or appoint a friend or family member, or hire a professional South Dakota Registered Agent Services. With that, we reviewed some of the best-registered agent services and provided features as an add-on with their formation packages for you to check out.

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Determine the Roles of the Partners

A limited partnership consists of two types of partners: general and limited. General partners are responsible for the day-to-day management of the business and have unlimited liability for the partnership’s debts and obligations. Limited partners, on the other hand, are passive investors who don’t participate in the management of the business and have limited liability up to the amount they’ve invested in the partnership.

As you structure your partnership, carefully consider who will take on the roles of general and limited partners. Remember that general partners will have more responsibility and potential liability, so choose those individuals wisely.

Step 3: Drafting the Limited Partnership Agreement

With the partnership structure established, the next step is to draft a limited partnership agreement. This document sets forth the partnership’s terms and conditions and should be carefully crafted to ensure it meets all legal requirements in South Dakota.

Include Essential Elements

A well-drafted limited partnership agreement should include the following essential elements:

  •  Name of the limited partnership
  •  Purpose of the limited partnership
  •  Duration of the limited partnership
  •  Names and addresses of general and limited partners
  •  Capital contributions of each partner
  •  Allocation of profits and losses
  •  Management and decision-making structure
  •  Process for admitting new partners

Address Optional Elements

In addition to the essential elements, it’s a good idea to address the following optional elements in your limited partnership agreement:

  •   Transfer of partnership interests
  •   Withdrawal or removal of partners
  •   Dissolution and winding up the process

To ensure your limited partnership agreement is legally sound and compliant with South Dakota laws and regulations, it’s advisable to seek legal advice from a Business Attorney in South Dakota with experience in limited partnerships.

Step 4: Registering the Limited Partnership

Once your limited partnership agreement is in place, the next step is to register your limited partnership with the South Dakota government. This process typically involves filing a Certificate of Limited Partnership with the South Dakota Secretary of State’s office.

Prepare and File the Certificate of Limited Partnership

To file the Certificate of Limited Partnership, complete the required forms, which can typically be found on the South Dakota Secretary of State. Include all necessary information and signatures, and pay the filing fee of $150.

Obtain an Employer Identification Number (EIN) from the IRS

After registering your limited partnership with the South Dakota government, you’ll need to obtain South Dakota Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number is used to identify your partnership for tax purposes and is required for filing federal and state tax returns.

The application of an EIN 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.

After you have your EIN, you can benefit in several ways. It will give your LLP the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Register For South Dakota Taxes

Depending on your business activities and location, you may need to register for certain South Dakota taxes. Check with the South Dakota Department of Revenue or a tax professional to determine which taxes apply to your limited partnership.

Step 5: Complying With Additional South Dakota Requirements

In addition to registering your limited partnership with the South Dakota government, there may be other requirements you need to meet to operate your business legally. These may include obtaining business licenses or permits, filing annual reports with the South Dakota Secretary of State, and maintaining proper records and documentation.

Obtain Any Necessary Business Licenses or Permits.

Depending on the nature of your business, you may need to obtain various licenses or permits from state or local authorities. Check with the South Dakota Department of Business and Industry or a licensing professional to determine which licenses and permits apply to your limited partnership. However, in South Dakota, the costs of South Dakota Business Licenses range from $50 – $300.

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

File Annual Reports 

South Dakota require limited partnerships to file Annual Reports with the South Dakota Secretary of State’s office. These reports typically include updated information about the partnership, such as the names and addresses of partners and any changes to the partnership agreement. 

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Maintain Proper Records and Documentation

As a limited partnership, it’s essential to maintain proper records and documentation, including copies of your limited partnership agreement, tax returns, financial statements, and any other relevant documents. These records should be kept in a safe and accessible location and may be required in the event of an audit or legal dispute.

Step 6: Ongoing Management and Compliance

Starting a limited partnership in South Dakota is the beginning. To ensure the ongoing success of your business, it’s crucial to stay on top of management and compliance tasks. It is better to have regular meetings with your partners to ensure everyone is on the same page regarding the direction and performance of your business. These meetings can also help identify and address issues or concerns before they become more significant problems.

As a limited partnership, you must file annual tax returns and pay any required taxes at the federal and state levels. Consult with a tax professional to ensure you comply with all tax laws and deadlines.

Advantages of Limited Partnerships in South Dakota

Here are some key advantages of forming a limited partnership in South Dakota:

  • Limited Liability for Limited Partners: One of the main benefits of a limited partnership is that limited partners enjoy limited liability protection. This means their assets are generally not at risk for the partnership’s debts and obligations beyond their investment in the partnership. This limited liability can be attractive for investors who want to participate in a business venture without taking on the same level of risk as general partners.
  • Pass-through Taxation: Limited partnerships are typically subject to pass-through taxation, meaning the partnership’s profits and losses flow to the partners’ individual tax returns. This structure avoids double taxation, as the partnership is generally not subject to federal income tax. Instead, each partner is responsible for paying taxes on their share of the partnership’s income at their individual tax rate.
  • Flexibility: A limited partnership allows for flexibility in the management structure. General partners have the authority to make decisions and manage the business, while limited partners can remain passive investors. This division of responsibilities and decision-making power can appeal to both parties. It allows general partners to maintain control over the business operations and limited partners to invest without being involved in day-to-day management.
  • Ease of Formation: A limited partnership is typically less complicated and expensive than a corporation. Limited partnerships generally require filing a Certificate of Limited Partnership with the state and creating a limited partnership agreement, which is less complex than the documentation required for a corporation.
  • Attracting Capital: Limited partnerships can attract capital from investors who want to participate in a business venture without taking on the responsibilities and risks of being a general partner. This structure can help businesses secure funding while allowing limited partners to benefit from the partnership’s profits.
  • Continuity of the Partnership: In South Dakota, limited partnerships can continue to exist even if one of the general partners dies, withdraws, or is replaced, as long as there is at least one remaining general partner. This continuity can provide stability and help ensure the ongoing success of the partnership.

Can a Foreign Limited Partnership Do Business in South Dakota?

Yes, a foreign Limited Partnership can do business in South Dakota by registering as a foreign LP with the South Dakota Secretary of State or appropriate state agency. The foreign LP must provide a certificate of good standing from its home state and pay any required registration fees.

What are the Tax Implications of Forming a Limited Partnership in South Dakota?

Limited Partnerships are generally considered pass-through entities for tax purposes, meaning that the profits and losses of the business are passed through to the individual partners, who report them on their personal income tax returns. However, specific tax implications may vary depending on the state and the nature of your business. It is recommended to consult with a tax professional to determine your specific tax obligations.

FAQs

What is a limited partnership in South Dakota?
A limited partnership is a type of business entity in which at least one partner is a passive investor, while the other partner manages the company’s day-to-day operations.
How much does it cost to start a limited partnership in South Dakota?
The cost to start a limited partnership in South Dakota varies, but there is a $135 fee to file articles of organization with the Secretary of State.
Can a limited partnership be formed by just one person in South Dakota?
No, a limited partnership in South Dakota must have at least two members
In South Dakota, what will we need to include in the articles of organization for a limited partnership?
The articles of organization for a limited partnership in South Dakota must include the name of the partnership, names of the general and limited partners, date of formation, and the address of the business.
How do I choose a name for my limited partnership in South Dakota?
You can search the South Dakota Secretary of State’s Business Services Division website to ensure that your desired name is available and follows their naming guidelines.
Is a registered agent required for a limited partnership in South Dakota?
Yes, every South Dakota limited partnership must maintain a registered agent within the state.
Can a limited partner actively manage a South Dakota limited partnership?
No, a limited partner cannot actively manage a South Dakota limited partnership without losing their limited liability status.
Are limited partners liable for the debts of the South Dakota limited partnership?
No, limited partners having no liability beyond their initial investment in a South Dakota limited partnership.
How are profits and losses distributed in a South Dakota limited partnership?
Profits and losses are usually distributed in the proportion to each partner’s share of ownership, as outlined in the partnership agreement.
Can a South Dakota limited partnership own property, sign contracts and sue or be sued like a corporation?
Yes, just like a corporation, a South Dakota limited partnership is a separate legal entity with the power to own property, sign contracts, and be sued or sue.
How are taxes paid in a South Dakota limited partnership?
A South Dakota limited partnership is not taxed at the entity level, and any income or losses flow through to the individual partners, who report them on their income tax returns.
Can a South Dakota limited partnership be dissolved?
Yes, a South Dakota limited partnership can be dissolved upon the completion of the partnership’s name of formation, or by a vote of the general partners.
How often does a South Dakota limited partnership need to file state taxes?
South Dakota regulations require that all businesses, including limited partnerships, file an annual report each November which includes financial data.
How long does it take to form a limited partnership in South Dakota?
The processing time to form a South Dakota limited partnership is approximately 24 hours after the regulator documents are filed in the appropriate office.
Can LLCs be involved in limited partnerships in South Dakota?
Yes, a limited liability company can be both the general and/or a limited partner in a South Dakota limited partnership.
Are general partners in a South Dakota limited partnership restricted in liability?
Yes, general partners in a South Dakota limited partnership have unlimited liability, as they are actively involved in the day-to-day operations of the company.
How long is the process of setting up a South Dakota limited partnership?
It can range from days to weeks, depending on various factors such as how quickly all documents can be filed and whether the partnership agreement is fully executed.
Can foreign entities operate as a limited partnership in South Dakota?
Yes, a foreign entity can operate a limited partnership in South Dakota but must meet all regulations.
Can the ownership percentages be changed in South Dakota limited partnerships over time?
Yes, partners in a South Dakota limited partnership can change the ownership percentages over time, but the overall structure of the business must be maintained.
Is South Dakota called the Mount Rushmore state because of the national landmark?
Yes, South Dakota’s nickname is the “Mount Rushmore state” because of the iconic sculpture located in the Black Hills.
Can South Dakota limited partnerships receive aid from the state government?
Yes, South Dakota small businesses, including limited partnerships, can receive financial assistance and other forms of support from the state government.
What is the South Dakota Secretary of State’s responsibilities in regards to limited partnerships?
The South Dakota Secretary of State is responsible for regulating and overseeing the formation and registration of limited partnerships.
Can a South Dakota limited partnership sell stock to the general public?
No, a limited partnership in South Dakota cannot sell stock to the public as stock is proffered by corporation.
Are South Dakota limited partnership records kept confidential?
No, partnership records maintained by the South Dakota Secretary of State about limited partnership are available for anyone to access and review.
Can a South Dakota limited partnership sell assets to another limited partnership?
Yes, a South Dakota limited partnership can sell assets to other legal partners and retirement Vehicles.
Does South Dakota require compliance or regulatory follow-up visits?
No, South Dakota typically does not require compliance or regular follow-up visits unless there is suspicion regarding fraudulent actions.
Does South Dakota levy property tax on limited partnership’s assets having a phased out requirement balancing revenue from other tax avenues?
South Dakota generally doesn’t satisfy such requirements, as they are not approved to issue commercial assets taxation.
Why are South Dakota laws especially advantageous to those seeking to form a limited partnership?
South Dakota laws are particularly beneficial due to its business asset protection policies and cost-saving incentives.
What is a limited partnership?
A limited partnership is a type of business structure where there are one or more general partners who manage the company and are personally liable for its obligations, and one or more limited partners who contribute capital and have limited liability.
How do I start a limited partnership in South Dakota?
To start a limited partnership in South Dakota, you need to file a certificate of limited partnership with the South Dakota Secretary of State.
Can I form a limited partnership by myself?
No, you need at least two partners to form a limited partnership in South Dakota.
What are the benefits of forming a limited partnership in South Dakota?
Some of the benefits of forming a limited partnership in South Dakota include limited liability for the limited partners, tax benefits, and flexibility in management structure.
What are the disadvantages of forming a limited partnership in South Dakota?
Some of the disadvantages of forming a limited partnership in South Dakota include the complexity of the formation process, the potential loss of control for general partners, and the requirement to file annual reports.
What is the difference between a general partner and a limited partner?
A general partner has management authority and is personally liable for the partnership’s obligations, while a limited partner provides capital and has limited liability.
What is the minimum number of partners required to form a limited partnership in South Dakota?
To form a limited partnership in South Dakota, you need at least one general partner and one limited partner.
Do I need to hire a lawyer to form a limited partnership in South Dakota?
While it is not necessarily required to hire a lawyer to form a limited partnership in South Dakota, it is recommended for legal and tax advice.
How much does it cost to form a limited partnership in South Dakota?
The filing fee for a certificate of limited partnership in South Dakota is $125.
Is there a residency requirement for partners in a South Dakota limited partnership?
No, there is no residency requirement for partners in a South Dakota limited partnership.
Can a limited partner participate in the management of the company?
No, a limited partner cannot participate in the management of the company without losing their limited liability status.
Are there any annual maintenance requirements for a South Dakota limited partnership?
Yes, South Dakota limited partnerships are required to file annual reports with the South Dakota Secretary of State.
How much is the annual report fee for a South Dakota limited partnership?
The annual report fee for a South Dakota limited partnership is $50.
Can a limited partner be held liable beyond their capital contribution?
No, a limited partner’s liability is limited to their capital contribution.
How is a limited partnership taxed in South Dakota?
A South Dakota limited partnership is not taxed as an entity; instead, the income and losses flow through to the partners and are taxed on their personal income tax returns.
Can a limited partnership be converted into another business type?
Yes, a South Dakota limited partnership can be converted into another business type, such as a limited liability company or corporation.
What is a registered agent and do I need one for my South Dakota limited partnership?
A registered agent is a person or entity that accepts legal documents and notices on behalf of a business. Yes, a South Dakota limited partnership is required to appoint a registered agent.
Can a limited partnership own property in South Dakota?
Yes, a limited partnership can own property in South Dakota.
How do I dissolve a limited partnership in South Dakota?
To dissolve a limited partnership in South Dakota, you need to file a certificate of cancellation with the South Dakota Secretary of State.
Is my partnership agreement required to be filed with the South Dakota Secretary of State?
No, your partnership agreement is not required to be filed with the South Dakota Secretary of State, but it is recommended to have one in place.
Are foreign limited partnerships required to register in South Dakota?
Yes, foreign limited partnerships doing business in South Dakota are required to register with the South Dakota Secretary of State.
How do I withdraw from a South Dakota limited partnership?
To withdraw from a South Dakota limited partnership, you need to follow the procedures outlined in your partnership agreement.
Can a South Dakota limited partnership be sued?
Yes, a South Dakota limited partnership can be sued like any other legal entity.
Can a limited partner be removed from a South Dakota limited partnership?
It depends on the provisions outlined in the partnership agreement.
What happens if a partner dies or becomes incapacitated in a South Dakota limited partnership?
The partnership agreement should address what happens in the event of a partner’s death or incapacity.
Are limited partners entitled to vote?
No, solely general partners are allowed to vote.
Can a South Dakota limited partnership change its name?
Yes, a South Dakota limited partnership can change its name by filing an amendment to the certificate of limited partnership with the South Dakota Secretary of State.
What is a limited partnership agreement?
A limited partnership agreement is a legal document that outlines the terms and conditions of the partnership, including the rights, duties, and responsibilities of the partners.

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Conclusion

Starting a limited partnership in South Dakota can be a rewarding experience, providing you with the benefits of limited liability protection for passive investors and the opportunity to manage your business actively. By following the steps outlined in this article and staying on top of ongoing management and compliance tasks, you can establish a successful limited partnership and enjoy the benefits of this unique business structure.

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