How to Dissolve a Business in South Dakota | Essential Steps

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Dissolve South Dakota LLC

Deciding to dissolve a Limited Liability Company can be difficult for business owners. Still, it is sometimes necessary due to changes in the business landscape, financial challenges, or personal reasons. Dissolving a business requires specific steps and regulations to complete the process correctly and legally. This comprehensive guide will teach you how to dissolve a business in South Dakota.

Webinarcare Editorial Team will help you easily dissolve your business. You must be guided by all the factors gathered in this article.

How to Dissolve a Business in South Dakota

If you are starting an LLC in South Dakota, having an operating agreement is one of the key requirements in dissolving a business. Before starting the legal paperwork, there are a few things to remember. Initially, confirm that all LLC members agree with closing the business. Once everyone is ready, voting should be used to document everyone’s assent. They must vote in favor of the dissolution before the legal procedure may begin. The procedures for the dissolution are listed below.

How to Dissolve a Business in South Dakota

Dissolving a business in South Dakota requires following specific steps to ensure a smooth and legally compliant process. The process usually includes the following steps:

Step 1: Make the Decision

Before dissolving your business, ensure this decision is right for your South Dakota business. Consider discussing the decision with your business partners, members, or legal counsel to weigh the pros and cons and determine if dissolving the business is best.

Step 2: Hold a Formal Vote

Once you’ve decided to dissolve your South Dakota business, you’ll need to hold a formal vote among the members to approve the dissolution. This step is important because it ensures that all members know and agree to the decision to dissolve the business.

To hold a formal vote:

  • Review your South Dakota Operating Agreement to determine the required voting procedures, such as the percentage of affirmative votes needed for approval.
  • Notify all South Dakota members of the upcoming vote and give them sufficient time to review the matter and make an informed decision.
  • Conduct the vote according to the procedures outlined in your operating agreement.
  • Record the vote results in your business meeting minutes or a written resolution.

If most members approve the dissolution, you can proceed with the dissolution process.

Get a Professional Service

It’s important to get legal assistance when dissolving an LLC. With that, you must have a Registered Agent. Ensure that the Registered Agent you choose is qualified and legal since they will file the Article of Dissolution for your LLC. We reviewed the Best Registered Agent Services in South Dakota for you to check out.

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Step 3: Settle the Outstanding Debts and Liabilities

You must settle all outstanding debts and liabilities before dissolving your South Dakota business. This includes paying off loans, settling pending lawsuits, paying owed taxes, and fulfilling any remaining contractual obligations. You can inform your South Dakota Business Attorney to ensure it is settled.

To settle your South Dakota business’ debts and liabilities:

  • Review your business’ financial records to identify all outstanding debts and liabilities.
  • Contact creditors, lenders, and other parties to whom your business owes money or obligations, and arrange for payment or settlement.
  • If your business does not have sufficient funds or assets to cover all outstanding debts and liabilities, consult with legal counsel to determine the best course of action for settling these obligations.

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Step 4: Distribute the Remaining Assets to Members

Once all debts and liabilities have been settled, you can distribute any remaining assets to the business members. Your operating agreement should do this or, if no such agreement exists, in proportion to each member’s ownership interest in the business.

To distribute assets:

  • Determine the fair market value of the remaining assets, such as real estate, equipment, or inventory. 
  • Calculate each member’s ownership interest in the business based on the operating agreement or their initial capital contribution.
  • Distribute the assets to each member according to their ownership interest.
  • Keep detailed records of all asset distributions for tax and legal purposes.

Step 5: File the Articles of Dissolution

After settling debts and distributing assets, you’ll need to file the Articles of Dissolution with the South Dakota Secretary of State to dissolve your South Dakota business officially. This document provides the state with notice that your business is ceasing operations and will no longer conduct business.

To file the Articles of Dissolution:

  1. Obtain the appropriate form from the South Dakota Secretary of State‘s website. Access the South Dakota Secretary of State’s website and navigate to the Business Services section for the required documents.
  2. Fill out the Articles of Dissolution Form with the required information, including your South Dakota business name, the date of dissolution, and any other necessary details.
  3. Pay the filing fee of $10 in the South Dakota Secretary of State’s office.
  4. Submit the completed form and payment to the South Dakota Secretary of State’s office, either by mail or online, depending on your South Dakota’s filing options.

Once your Articles of Dissolution have been processed and approved, your South Dakota business will officially be dissolved.

Mail to: 
South Dakota Secretary of State
Secretary of State Office, 500 E Capitol Ave, Pierre, SD 57501

Filling Fee:
$10

Step 6: Notify the IRS and Government Agencies

After dissolving your business with the South Dakota Secretary of State, you’ll need to notify the Internal Revenue Service (IRS) and other South Dakota government agencies of the dissolution. This is important to ensure your business complies with tax laws and other regulations.

To notify the IRS of the dissolution:

  1. File your final federal tax return using Form 1065 and check the box indicating that it is the final return for your business.
  2. Cancel your Employer Identification Number (EIN) in South Dakota by mailing a letter to the IRS at the address where you filed your tax return. Include your EIN, business name, and reason for cancellation in the letter.
  3. Update your South Dakota business status with any other relevant government agencies, such as the South Dakota Department of Revenue, Department of Labor, and local licensing and permitting offices.

Step 7: Cancel Licenses, Permits, and Insurance Policies

To fully dissolve your South Dakota business, you’ll need to cancel any business licenses, permits, and insurance policies associated with your business. This may include South Dakota Business Licenses, professional licenses, sales tax permits, and any other permits required for your industry.

You must contact the issuing agency to cancel your licenses and permits and follow their specific cancellation procedures. You should also contact your insurance provider to cancel any remaining business insurance policies. With the cancellation of the mentioned licenses, permits, and Business Insurances in South Dakota, you also need to remove a Registered Agent since he won’t be able to continue filing documents for your business unless you are the Registered Agent of your business. 

Step 8: Maintain Records of the Dissolution Process

For legal and tax purposes, it’s important to maintain detailed records of the steps taken to dissolve your South Dakota business. This includes documentation of the formal vote to dissolve the business, debt settlements, asset distribution records, and copies of filed state and federal tax returns.

Keep these records for at least seven years, as they may be needed in the event of an IRS audit or other legal issues arising from the dissolution.

Cost of Dissolving an LLC in South Dakota

The cost of dissolving an LLC in South Dakota can vary based upon various factors. The South Dakota Articles of the Dissolution filing fee cost $10. Other costs include any outstanding taxes or debts the business owes and potential costs for settling business contracts or selling business assets.

It’s also important to factor in professional fees, such as if you hire an attorney or accountant to assist with the dissolution process. After the LLC is dissolved, the remaining company assets are divided among the members. The exact breakdown of these costs can often be complex and will depend on the specific circumstances of the LLC, so consulting with a legal or financial advisor can be helpful.

Reasons Why an LLC in South Dakota Dissolves

There are numerous reasons why an LLC in South Dakota dissolves, and these reasons could impact other LLCs. It is best to understand the why’s and how to deal with it rather than knowing that your LLC may dissolve sooner or later. Here is the list of possible reasons why an LLC dissolves.

  1. Expired Duration: In South Dakota, an LLC will automatically dissolve if it reaches the end of its defined duration stated in the Articles of Organization.
  2. Member Vote: An LLC may dissolve in South Dakota if the members vote for dissolution. Usually, the LLC Operating Agreement outlines the percentage of member votes required to dissolve the LLC.
  3. Judicial Dissolution: A court in South Dakota may order the dissolution of an LLC if it is in the best interests of the members, especially in cases of fraud, illegal activities, or oppressive behavior.
  4. Bankruptcy: If the LLC becomes insolvent and cannot pay its debts, it may be forced into bankruptcy. This usually leads to the dissolution of the LLC.
  5. Non-compliance: If the LLC does not comply with state laws or fails to meet legal requirements, such as filing annual reports or paying taxes, the state may forcibly dissolve the LLC.
  6. Merger or Consolidation: If the LLC in South Dakota merges or consolidates with another company and the LLC is not the surviving entity, it will be dissolved.
  7. Death or Withdrawal of a Member: Unless specified otherwise in the Operating Agreement, the death, withdrawal, bankruptcy, or incompetence of a member may cause the LLC to dissolve.

Please note that the process for dissolution typically includes settling all business debts, distributing any remaining assets among the members, and filing a formal notice of dissolution with the South Dakota Secretary of State.

After the South Dakota LLC Dissolution

Once your South Dakota business has been dissolved, it typically cannot be reinstated or “taken back” after a few years. Instead, you would need to form a new LLC in South Dakota if you wish to operate a business under a limited liability company structure again.

To create a new South Dakota LLC, you would need to follow the standard formation process, which generally includes the following:

  • Choosing a Unique Business Name: Ensure that another business does not already use the name you choose in South Dakota and complies with state-specific naming requirements.
  • Appointing a Registered Agent: Designate a Registered Agent who will be responsible for receiving legal correspondence on behalf of your LLC.
  • Filing Articles of Organization: Submit the Articles of Organization with the South Dakota Secretary of State’s office, along with the required filing fee.
  • Creating an Operating Agreement: Draft an agreement outlining the rules and regulations governing your new LLC, including member roles, ownership percentages, and management structure.
  • Obtaining Necessary Licenses and Permits: Apply for any required business licenses, permits, and tax registrations with the appropriate state and local authorities.
  • Registering with the Internal Revenue Service (IRS): Obtain an Employer Identification Number (EIN) from the IRS, which will be necessary for tax purposes and other business activities.

Availability of the Business Name

When a business is in South Dakota was dissolved, the business name becomes available for other business owners to use after a certain period. However, the specific rules and regulations regarding the availability of a dissolved business name can vary. Keep in mind that even if the name becomes available, other factors, such as trademarks or potential confusion with existing businesses, may still impact the ability of another business owner to use the name.

FAQs

How do I dissolve my South Dakota LLC?
To dissolve a South Dakota LLC, you will need to file Articles of Dissolution with the Secretary of State.
What is the cost of filing Articles of Dissolution in South Dakota?
The filing fee for Articles of Dissolution in South Dakota is $10.
Do I need to notify the state and local government of my LLC’s dissolution in South Dakota?
Yes, you will need to file the appropriate paperwork with state and local agencies to notify them of your LLC’s dissolution in South Dakota.
Are there any tax consequences to dissolving my LLC in South Dakota?
There may be tax consequences to dissolving your LLC in South Dakota, so it’s important to speak with a tax professional before taking any action.
How long does it typically take to dissolve an LLC in South Dakota?
The time it takes to dissolve an LLC in South Dakota varies depending on the complexity of the LLC’s structure and the amount of paperwork required.
Can I dissolve my South Dakota LLC online?
Yes, you can file Articles of Dissolution for your South Dakota LLC online.
What happens to my LLC’s debts and liabilities when it is dissolved in South Dakota?
Your LLC’s debts and liabilities will be paid off using the remaining assets of the LLC or transferred to the LLC’s members.
Does South Dakota have any specific requirements for dissolving an LLC?
Yes, South Dakota requires that all tax obligations be fulfilled before dissolving an LLC.
Can I dissolve my South Dakota LLC without notifying my creditors?
No, under South Dakota law, you are required to notify your creditors of your LLC’s dissolution.
Do I need to file a final tax return for my South Dakota LLC?
Yes, you will need to file a final tax return and pay any outstanding taxes before dissolving your South Dakota LLC.
What is the process for dissolving a foreign LLC in South Dakota?
The process for dissolving a foreign LLC in South Dakota is similar to that of dissolving a domestic LLC, but may involve additional requirements.
Can I dissolve my South Dakota LLC while there is a lawsuit pending against it?
No, you will likely need to resolve any pending lawsuits before dissolving your South Dakota LLC.
What happens to my LLC’s assets when it is dissolved in South Dakota?
Your LLC’s assets will be used to pay off any outstanding debts and liabilities, with any remaining assets being distributed among members.
Will South Dakota refund my LLC’s filing fee if I dissolve it early?
No, South Dakota does not offer refunds for LLC filing fees.
Can I reopen my dissolved LLC in South Dakota?
No, once your LLC has been dissolved in South Dakota, you will need to form a new LLC if you wish to continue doing business.
Can I sell my South Dakota LLC’s assets before dissolving it?
Yes, you can sell your LLC’s assets before dissolving the business.
Do I need to file a certificate of cancellation with the South Dakota Secretary of State?
No, South Dakota does not require LLCs to file a certificate of cancellation.
Can I dissolve my South Dakota LLC by unanimous member consent?
Yes, you can dissolve your South Dakota LLC by unanimous member consent.
Can I dissolve my South Dakota LLC if it still owes back taxes?
No, you will need to pay all outstanding taxes before dissolving your South Dakota LLC.
Can I dissolve my South Dakota LLC without notifying the IRS?
No, you will need to file a final tax return with the IRS before dissolving your South Dakota LLC.
Can I dissolve my South Dakota LLC by revoking its registration with the state?
No, revoking your LLC’s registration is not the same thing as dissolving the business.
Will dissolving my South Dakota LLC affect my personal liability for its debts?
No, you will still be personally liable for any debts and liabilities your LLC incurred before its dissolution.
Can I dissolve my South Dakota LLC without a reason?
Yes, you can dissolve your South Dakota LLC for any reason.
How do I go about dissolving a South Dakota LLC that has no assets or business activity?
Even if your South Dakota LLC has no assets or business activity, you will still need to file Articles of Dissolution with the Secretary of State.
Can I withdraw from my South Dakota LLC before dissolving it?
Yes, you can withdraw from your South Dakota LLC before dissolving the business.
Can I dissolve my South Dakota LLC if it has no operating agreement?
Yes, you can dissolve your South Dakota LLC even if it has no operating agreement in place.
Can I change my LLC’s name when I dissolve it in South Dakota?
No, you cannot change your LLC’s name when dissolving the business in South Dakota.
How much does it cost to dissolve a South Dakota LLC?
The fee to file Articles of Termination for a South Dakota LLC is $10.
Can I dissolve my South Dakota LLC if I have outstanding taxes or fees?
No, all outstanding taxes and fees must be paid before the South Dakota Secretary of State will accept the Articles of Termination.
What happens if I don’t dissolve my South Dakota LLC?
If you don’t dissolve your South Dakota LLC, you may still be responsible for filing annual reports and paying fees even if the business is no longer active.
Do I need to cancel my South Dakota business license if I dissolve my LLC?
Yes, it is recommended that you cancel any business licenses or permits associated with your South Dakota LLC.
Can I dissolve my South Dakota LLC if I have outstanding debts?
Yes, but you should understand that dissolving your LLC does not relieve you of any personal liability for the debts of the business.
How long does it take to dissolve a South Dakota LLC?
Processing times vary, but typically you can expect it to take around two weeks for the South Dakota Secretary of State to process your Articles of Termination.
What happens to the assets of my South Dakota LLC when I dissolve it?
Any assets of the South Dakota LLC must first be used to satisfy any outstanding debts before they can be distributed to the members.
Do I need to notify my creditors when I dissolve my South Dakota LLC?
It is not required, but it is recommended that you notify any creditors of your South Dakota LLC when you dissolve it.
What is the effective date of dissolution for a South Dakota LLC?
The effective date of dissolution for a South Dakota LLC is the date the Articles of Termination are filed with the South Dakota Secretary of State.
Can I reinstate my South Dakota LLC after I have dissolved it?
Yes, but you will need to file Articles of Reinstatement and pay any associated fees and/or outstanding taxes.
Do I need to file a final tax return when I dissolve my South Dakota LLC?
Yes, you will need to file a final tax return for your South Dakota LLC.
What happens to the name of my South Dakota LLC once it is dissolved?
The name of your South Dakota LLC will be available for other businesses to use after it is dissolved.
Can I dissolve my South Dakota LLC if there are multiple members?
Yes, as long as all members agree to the dissolution and follow the proper procedures.
Do I need to notify the South Dakota Department of Revenue when I dissolve my LLC?
Yes, you will need to notify the Department of Revenue that your South Dakota LLC has been dissolved.
What happens if I forget to dissolve my South Dakota LLC and it has been inactive for several years?
You may still be responsible for filing annual reports and paying fees even if the business is no longer active.
Are there any special requirements for dissolving a South Dakota LLC that has been involved in legal proceedings?
You should consult with an attorney if your South Dakota LLC has been involved in legal proceedings before dissolving it.
Do I need to hold a meeting to dissolve my South Dakota LLC?
Generally, it is not required to hold a meeting to dissolve a South Dakota LLC, but the LLC’s operating agreement may have specific requirements.
What if my South Dakota LLC was never used or barely conducted any business?
It’s still important to properly dissolve the South Dakota LLC to prevent any issues from arising in the future.
Do I need to file a notice of dissolution with the South Dakota Secretary of State?
No, filing the Articles of Termination is all that’s required to dissolve a South Dakota LLC.
Can I still be held liable after I dissolve my South Dakota LLC?
Yes, dissolving your LLC does not relieve you of any personal liability for the debts of the business.
Can I dissolve my South Dakota LLC without the knowledge of the other members?
No, all members must agree to dissolve the South Dakota LLC.
What important information do I need to include in the Articles of Termination to dissolve my South Dakota LLC?
You need to include the LLC’s name, the date of dissolution, and all member signatures.
What happens to my South Dakota LLC’s bank accounts when I dissolve the business?
Any remaining funds in your South Dakota LLC’s bank accounts must first be used to satisfy any outstanding debts before they can be distributed to the members.
How do I get a tax clearance certificate in South Dakota?
You can request a tax clearance certificate from the South Dakota Department of Revenue to ensure you don’t owe any outstanding taxes before filing the Articles of Termination.
Can I dissolve my South Dakota LLC if there is pending litigation against it?
It’s best to speak to an attorney before dissolving your South Dakota LLC if there is pending litigation against it.
Can I recover my expenses after I dissolve my South Dakota LLC?
That will depend on any agreements you might have with your members, creditors and third parties.
Can I reinstate my South Dakota LLC after not meeting certain requirements?
Yes. But you need to comply with all the filing and payment requirements.

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Conclusion

Dissolving South Dakota business can be complex and time-consuming, but following the steps outlined in this guide will help ensure a smooth and successful dissolution. By conducting a formal vote, settling debts and liabilities, distributing assets, filing the Articles of Dissolution, notifying government agencies, and canceling business licenses and permits, you can legally dissolve your South Dakota business and move forward with the next chapter of your professional life.

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