Forming a Single-Member LLC in South Dakota | A Guide For Business Owners

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Forming a Single-Member LLC in South Dakota

If you would like to start an LLC in South Dakota, also known as The Mount Rushmore State, there are a few things that you should consider. In South Dakota, putting up a single-member limited liability company (LLC) will benefit you and your business since it protects your assets, and maintain good standing. It also combines a corporation’s limited liability protection with a sole proprietorship’s simplicity and flexibility.

In this article, Webinarcare Editorial Team will walk you through the step-by-step process of forming a Single-Member LLC in South Dakota and provide valuable tips to help you succeed in your entrepreneurial journey.

How to Form a Single-Member LLC in South Dakota

Understanding Single-Member LLCs

A single-member LLC in South Dakota is a business entity with only one owner, also known as a member. This business structure offers several advantages, including limited liability protection, pass-through taxation, and ease of management. In South Dakota, single-member LLCs are subject to state-specific regulations and requirements, which may vary from other states. The formation process typically involves choosing a unique business name, registering with the Secretary of State, and completing other required steps to comply with South Dakota laws and regulations.

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It is suggested that you speak with a legal professional before you begin setting up your single-member LLC. 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 for your business.

– WEBINARCARE EDITORIAL TEAM

How to Form a Single-Member LLC in South Dakota

To form a single-member LLC for your business, you must follow the guidelines, including research and planning, registering your single-member LLC, establishing your business operations, and maintaining compliance with South Dakota regulations.

Step 1: Research and Planning

Before you can form your single-member LLC in South Dakota, conducting thorough research and creating a solid business plan is crucial. This stage involves the following steps:

Research State-Specific Requirements

Each state has its own regulations for maintaining and forming an LLC. To ensure you comply with South Dakota law, familiarize yourself with the state’s LLC requirements, such as filing fees, Annual Report requirements, and ongoing compliance obligations.

Choose a Business Name

Selecting a name for your LLC is an essential part of the formation process. Your business name should be unique, memorable, and reflective of your products or services. There is a complete guide on Business Name Search in South Dakota for you to have a proper LLC business name. 

In South Dakota, your single-member LLC name must:

  • Include the words “Limited Liability Company,” “LLC,” or “L.L.C.”
  • Not contain any words or phrases that are prohibited by state law
  • Be distinguishable from the names of other businesses registered in the state

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

You can register your business under a different legal name if your preferred name isn’t available.  Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA in South Dakota, you can file it in two methods, by mail and in person.

However, before filing a DBA, you should know that you need to renew your DBA for up to five years, which costs around $10. You can check the availability of your desired business name by searching the South Carolina Secretary of State Business Filings Search‘s website.

Recommended: Embark on your entrepreneurial journey confidently and affordably with LegalZoom’s DBA service, the beacon that guides businesses to credible branding and comprehensive compliance. Discover how effortless success can truly be!

– LegalZoom – ($99 + Filling Fees)

Determine Licensing and Permit Requirements

Depending on the nature of your business, you may need to obtain certain licenses and permits to operate legally. Research the specific requirements for your industry in South Dakota by consulting the state’s business licensing portal, contacting your local Chamber of Commerce, or seeking advice from South Dakota Business Attorney.

Create a Business Plan

A well-crafted business plan will guide your single-member LLC’s growth and success. Your business plan for your South Dakota single-member LLC should cover key aspects such as:

  • Executive summary
  • Company Description
  • Market Analysis
  • Competitive Analysis
  • Products and Services
  • Marketing and Sales Strategy
  • Organizational Structure
  • Financial Projections

Step 2: Registering Your Single-Member LLC

Once you have completed the initial research and planning, it’s time to register your single-member LLC with the South Dakota Secretary of State. Here are the steps involved:

File the Articles of Organization

To officially form your single-member LLC in South Dakota, you must file the South Dakota Articles of Organization with the South Dakota Secretary of State. This document includes essential information about your LLC, such as:

  • The name of your LLC
  • The address of your LLC’s principal office
  • The name and address of your registered agent
  • The purpose of your LLC (optional in some states)

You can typically file the Articles of Organization online, by mail, or in person. A filing fee is associated with this process, which costs around $150.

Appoint a Registered Agent

A Registered Agent is a person or entity responsible for receiving legal documents and official notices on behalf of your LLC. 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)

It’s essential to choose a reliable and responsible South Dakota Registered Agent, as failure to receive and respond to legal documents can have serious consequences for your business. 

You can serve as your own Registered Agent or appoint a friend, family member, or a professional South Dakota Registered Agent Services.

Obtain an Employer Identification Number (EIN)

An EIN, also known as a Federal Tax Identification Number, is used by the Internal Revenue Service (IRS) to identify your business for tax purposes. You’ll need an EIN to open a business bank account, file taxes, and hire employees (if necessary). 

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 the 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.

In obtaining South Dakota EIN for your single-member LLC, you should be aware to ensure that your LLC is eligible for an EIN. You need an EIN if you have employees, operate as a corporation or partnership, or meet other specific IRS criteria. Before applying, gather the required information, including your LLC’s name, mailing address, and the responsible party’s Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). Also, you can apply for an EIN through various methods, including online, by fax, mail, or telephone (for international applicants).

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

LegalZoom – ($0 + State Fee for LLC formation)

Register Your Single-Member LLC

If your single-member LLC will collect sales tax, have employees, or be subject to certain state taxes, you may need to register with the South Dakota Secretary of State. Check the department’s website or consult a tax professional for specific registration requirements.

Step 3: Establishing Your Business Operations

With your single-member LLC officially registered in South Dakota, you can now focus on setting up the operational aspects of your business.

Open a Business Bank Account

Opening a separate bank account for your South Dakota single-member LLC is essential for maintaining a clear separation between your personal and business finances. This separation helps preserve the limited liability protection offered by the LLC structure. You can check out the Best Banks in South Dakota, which offer the best fees, services, and convenience for your business needs.

Set Up an Accounting System

Effective financial management is crucial for the success of your single-member LLC. Establish a reliable accounting system to track income, expenses, and tax obligations. You can manage your finances using spreadsheets and accounting software by becoming a CPA in South Dakota.

Create an Operating Agreement

Although not required by South Dakota law, it’s highly recommended that you create an operating agreement for your single-member LLC. This document outlines your LLC’s management structure, decision-making process, and ownership rights. A clear South Dakota Operating Agreement can prevent disputes and provide a framework for managing your business.

The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

Step 4: Maintaining Compliance with South Dakota Regulations

Once your single-member LLC is up and running, staying informed and compliant with state regulations is essential. Here are some key ongoing requirements for LLCs in South Dakota:

File Annual Report

LLCs must file Annual Report with the South Dakota Secretary of State. This report typically includes updated information about your LLC, such as its business address, Registered Agent, and member information. 

In South Dakota, the annual report fee costs around $50 which can be paid every 1 year (first day of the anniversary month).

Pay Required Taxes and Fees

As a single-member LLC, your business income will be subject to pass-through taxation, meaning profits and losses will be reported on your personal tax return. However, you may still be responsible for other state taxes, such as sales tax, payroll tax, or franchise tax which you can pay in South Dakota Department of Revenue.

In terms of franchise tax for your single-member LLC in South Dakota, there is No franchise tax. Consult a tax professional to ensure you meet all your tax obligations.

Maintain Accurate and Up-to-Date Records

Keeping detailed records of your single-member LLC’s transactions, meetings, and decisions is crucial for maintaining compliance with state regulations and protecting your limited liability status. Regularly review and update your records to accurately reflect your business activities.

Cost of Forming a Single-Member LLC in South Dakota

Even if you have a business name and structure in mind, consider whether you can afford the costs of forming an LLC in South Dakota. Articles of Organization costs around $150. The initial filing fee is $165 (by mail and $150 online), and the annual fee is $50. 

If you forget to pay the annual fee for your South Dakota LLC, you will have a penalty of $50. However, you can check the South Dakota LLC Cost for additional information. 

Advantages of Starting a Single-Member LLC

Even though some people decide on what to do with their businesses, some choose to put it in their own individual name, while others still choose to set it up via single-member LLC in South Dakota. These advantages will help establish a single-member LLC in South Dakota. 

  • Limited Liability Protection: One of the primary advantages of a single-member LLC is the limited liability protection it provides to its owner. This means that the owner’s personal assets, such as their home and personal savings, are protected from the debts and liabilities of the business. In the event of a lawsuit or financial loss, only the assets owned by the LLC are at risk.
  • Pass-Through Taxation: Single-member LLCs enjoy pass-through taxation, meaning that the business profits and losses are reported on the owner’s tax return. This avoids the double taxation that traditional corporations face, where the company and the owner are taxed separately on the same income.
  • Simplified Management: Single-member LLCs have a simplified management structure compared to other business structures. The owner has full control over the business’s decision-making process and day-to-day operations without needing a board of directors or complex corporate formalities.
  • Flexibility in Business Operations: Single-member LLCs offer flexibility in terms of operational and management structures. The owner can operate the business as a sole proprietor while benefiting from an LLC’s limited liability protection.
  • Credibility: Forming a single-member LLC can enhance the credibility of your business in the eyes of potential customers, suppliers, and financial institutions. An LLC designation can make your business more professional and established than a sole proprietorship.

FAQs

What is a single-member LLC in South Dakota?
A single-member LLC is a limited liability company with only one owner that is registered in South Dakota.
Is it necessary to form a single-member LLC in South Dakota?
No, it is not necessary, but it can offer certain benefits to the owner.
What are the benefits of forming a single-member LLC in South Dakota?
Some benefits include protection of personal assets, limited liability, tax flexibility, and potential for easier management.
What are the requirements for forming a single-member LLC in South Dakota?
The basic requirements include filing a Certificate of Organization with the Secretary of State and paying the associated fees.
Can I form a single-member LLC in South Dakota if I am not a resident of the state?
Yes, you can form an LLC in South Dakota even if you are not a resident of the state.
What is the Secretary of State’s role in forming a single-member LLC in South Dakota?
The Secretary of State’s office is responsible for registering and overseeing LLCs in South Dakota.
How much does it cost to form a single-member LLC in South Dakota?
The cost to register a South Dakota LLC is $150.00.
How long does it take to form a single-member LLC in South Dakota?
The processing time for registering a single-member LLC in South Dakota varies but can take around 5 –10 business days after the application has been filed.
Do I need a registered agent for my single-member LLC in South Dakota?
Yes, the registered agent must be located in South Dakota and be available at a physical address during business hours.
What is a registered agent for a single-member LLC in South Dakota?
The registered agent is a person or a company designated to receive and forward legal documents and other important correspondence on behalf of the LLC.
Can I be my own registered agent for my South Dakota single-member LLC?
Yes, as long as you have a physical address in South Dakota and you are available during business hours.
Are there any premier registered agent services recommendations in South Dakota?
Yes, there are several registered agent services in South Dakota including Rocket Lawyer, Incfile, and Northwest Registered Agent.
Is it mandatory to have an operating agreement for my single-member LLC in South Dakota?
No, it is not required to have a formal operating agreement if there is only one member of the LLC, but it is strongly recommended by experts.
Do I need to pay state taxes in South Dakota for my single-member LLC?
Generally a South Dakota single-member LLCs operate and pay taxes as a disregarded entity meaning all taxable profits “flow through” to the owner’s personal tax return without paying any minimum tax.
How do I register my South Dakota single-member LLC with the Internal Revenue Service?
Owners of single-member LLCs in South Dakota are required to obtain an EIN or Employer Identification Number from the IRS when hiring employees to legally conduct business.
Does a South Dakota single-member LLC need to file annual reports?
Answer:Yes, an LLC is required to file an annual report annually with the Secretary of State’s office in South Dakota.
Can multiple people join my single-member LLC in South Dakota?
Answer:Once additional class of ownership is added, It is no longer a single member LLC, instead known as a multi-member LLC.
Do I need to file separate taxes for my South Dakota single-member LLC?
First, you won’t need to file a state level tax on your LLC as a single-member. However, you need to report all your percentage of incomes, expenses, and losses when files a tax return.
Can I form an LLC online in South Dakota?
Yes, South Dakota the Secretary of State’s online filing system is available for submitting filing applications via their website.
Can I trademark my LLC name in South Dakota?
To make sure no one registers your LLC name, logo, or design as their own, you may want to file for trademark status by filing for a trademark online with the South Dakota Secretary of State’s office.
Can I use an abbreviation of my LLC name while forming in South Dakota?
Yes, South Dakota LLC names do not typically have to include certain words.
Can I have another company formation after setting up my South Dakota Single-Member LLC?
Yes, two or more LLCs may also create a holding company.
Can I have a subsidiary with my South Dakota single-member LLC?
Answer:Yes, South Dakota has adopted the widely-used internal affairs law which acknowledges that the laws of another state will be recognized by the courts to ensure that the parent LLC member’s interest governs the South Dakota LLC.
Can I withdraw my South Dakota single-member LLC once registered?
Yes, withdrawal doesn’t fight the existence of your LLC but it means that you cannot create any important papers in South Dakota.
Will my name be released in public if I register an LLC in South Dakota?
Yes, once the LLC forming papers are filed with the Secretary of State, the entity is subject to public record searches; hence, the names of the owner(s) and numbers of LLCs are generated and posted whenever someone requests.
Can my South Dakota single-member LLC allow partnership as ownership structure?
If new people join in the business without LLC companies, you could decide to change the ownership structure of South Dakota LLC to let anyone to join in managing control, and decision making processes.
What happens if my South Dakota single-member LLC goes bankrupt?
By separating the business from the owner, it limits the amount of damages to the owner’s personal finances by ceasing to continue in that name to partner each separated assets in LLC businesses, which guarantees flexibility and potential to invest toward future business activities.
Can I sell my South Dakota single-member LLC?
Yes, an LLC permits the owner of the seller to communicate the LLc to the buyer as a legal unit which in result results a direct sale.
What is a single-member LLC?
A single-member LLC is a limited liability company with one single owner.
How do I form a single-member LLC in South Dakota?
To form a single-member LLC in South Dakota, you need to file the Formation Articles of Organization with the South Dakota Secretary of State along with the filing fee, which is $150.
Can a non-resident own a single-member LLC in South Dakota?
Yes, a non-resident can own a single-member LLC in South Dakota.
What is the South Dakota Secretary of State?
The South Dakota Secretary of State is the state agency that oversees business filings and registrations.
What are the advantages of a single-member LLC in South Dakota?
The primary advantage of forming a single-member LLC in South Dakota is to limit your personal liability for business debts and obligations.
What are the disadvantages of a single-member LLC in South Dakota?
The main disadvantage of a single-member LLC in South Dakota is that it’s subject to higher taxes than other LLCs.
Do I need an attorney to form a single-member LLC in South Dakota?
No, you don’t need an attorney to form a single-member LLC in South Dakota.
Are there any residency requirements to form a single-member LLC in South Dakota?
No, there are no residency requirements to form a single-member LLC in South Dakota.
Can I be the registered agent for my single-member LLC in South Dakota?
Yes, you can be the registered agent for your single-member LLC in South Dakota.
Is there a minimum capital requirement for starting a single-member LLC in South Dakota?
No, there is no minimum capital requirement for starting a single-member LLC in South Dakota.
Can I change the name of my South Dakota single-member LLC after forming it?
Yes, you can change the name of your South Dakota single-member LLC after forming it.
Can I add more members to my single-member LLC in South Dakota?
Yes, you can add more members to your single-member LLC in South Dakota, but it will no longer be a single-member LLC.
What is a certificate of good standing in South Dakota and do I need it for my single-member LLC?
A certificate of good standing is a document that shows your single-member LLC is up-to-date on all necessary filings with the state. You may need it for certain transactions, such as opening a business bank account.
How often do I need to file an annual report for my South Dakota single-member LLC?
You need to file an annual report for your South Dakota single-member LLC before the first day of the second month following the LLC’s anniversary month.
What is the tax rate for single-member LLCs in South Dakota?
The tax rate for single-member LLCs in South Dakota is the same as individual income tax rates, which range from 0% to 7.9%.
Do I need a business license to operate my South Dakota single-member LLC?
It depends on your business type and location. Some cities and counties require business licenses while others don’t.
Can I convert my South Dakota single-member LLC to a multi-member LLC or corporation?
Yes, you can convert your South Dakota single-member LLC to a multi-member LLC or a corporation.
What happens if I don’t file an annual report for my South Dakota single-member LLC?
If you don’t file an annual report for your South Dakota single-member LLC, your LLC will lose good standing and may be subject to late fees.
Can I change my South Dakota single-member LLC from a disregarded entity to a corporation or S-corporation for tax purposes?
Yes, you can.
What is a business name reservation in South Dakota?
A business name reservation in South Dakota allows you to reserve a specific business name for your single-member LLC for up to 120 days.
What is the filing fee for converting a single-member LLC to a multi-member LLC in South Dakota?
The filing fee for converting a single-member LLC to a multi-member LLC in South Dakota is $100.
Can I dissolve my South Dakota single-member LLC?
Yes, you can dissolve your South Dakota single-member LLC by filing the Certificate of Dissolution with the South Dakota Secretary of State.
Can I change my South Dakota registered agent?
Yes, you can change your South Dakota registered agent by filing the Statement of Change of Registered Office or Registered Agent with the South Dakota Secretary of State.
What is a registered agent in South Dakota?
A South Dakota registered agent is a person or company that accepts legal documents and notices on behalf of your single-member LLC.
Do I need an EIN for my South Dakota single-member LLC?
You only need an EIN for your South Dakota single-member LLC if you have employees or are taxed as a corporation.
Can I operate my South Dakota single-member LLC under a DBA name?
Yes, you can operate your South Dakota single-member LLC under a DBA name if you file the DBA name registration with the South Dakota Secretary of State.
Does the state of South Dakota require any special licenses or permits for my single-member LLC?
Depending on your business type and location, there may be specific licenses or permits required by the state and local governments.
Can I form a single-member LLC in South Dakota for real estate investments?
Yes, you can form a single-member LLC in South Dakota for real estate investments.

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Conclusion

Starting a single-member LLC in South Dakota can be a rewarding experience that offers numerous benefits for entrepreneurs. By following this guide and staying informed about state regulations, you can successfully navigate the formation process and set your new business up for success. Feel free to seek professional assistance from a lawyer or accountant if you have questions or need help. Your journey as a business owner has just begun – embrace the challenges and enjoy the rewards of your hard work and determination.

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