How to Start a Business in South Dakota
South Dakota Business Facts
South Dakota is widely recognized for non-taxable personal income. It does not also tax corporate income and capital gains. Moreover, the crime rate and energy costs in South Dakota are relatively low.
Major Companies Headquartered in South Dakota
South Dakota is the headquarters of many major companies including The Evangelical Lutheran Good Samaritan Society, Highmark, Avera Health, Sanford Health, and Regional Health.
Startup Environment
South Dakota is an attractive place to start a new venture because of its low cost of living, high per capita personal income, as well as low taxes.
Step 1: Decide on a Business Structure
There are 3 basic options: a Corporation, LLC or DBA. Click here to learn more about business entities.
- A Corporation is a separate entity (provides liability protection to the owners) with a structure that includes shareholders, directors and officers. It’s more complex than a DBA but the entity of choice for large companies and startups that intend to raise funding. Some professions are required to choose what is known as a “Professional Corporation” or PC (doctors, lawyers, architects, etc.)
- An LLC or “Limited Liability Company” is a newer type of business that is both a separate entity and provides very easy management (doesn’t require directors or officers) and taxation. The LLC has largely replaced the DBA and Corporation in popularity recently as it provides liability protection but with much less complexity (and taxation) than a Corporation.
- A DBA or “Doing Business As” (also known as a “Fictitious Business Name” or FBN) is not really a separate structure, but just a different name that an individual or partners use as their business name.
Step 2: Choose a Business Name
Choosing a business name is easier said than done – many legal and business problems can arise from picking the wrong name (you can always change it later but the less times you have to do that the better). In Step 3 we’ll show you how to search for the name in South Dakota, but we highly recommend you do the following before searching South Dakota state databases:
- Make sure you’ve covered the basics: unique, easy to understand/pronounce (practice saying it out loud: “Thanks for calling XYZ”) and can survive over time (“DVD World” is not timely). Here are some of our tips on business identity including logo and trademarks.
- Search the web for your proposed name. Search Google, Bing and DuckDuckGo as a “first sweep” for any potential conflicts, especially in your state or local jurisdiction. NOTE: If you intend to operate nationally or even internationally it will be even more important that your name be unique. This should cover many cases where a company name is being used but not officially trademarked (see next tip).
- Do a trademark search with the US Patent and Trademark Office (USPTO). This will be a very good indicator if your name will have any conflicts. There’s an art to trademark searches (trademark specialists will charge you handsomely to do a thorough search) but in our experience if you can use Google at a fairly advanced level you can reasonably clear a name yourself. Tip: Search misspellings, plurals, variations of spelling, sound-alikes and other versions of your chosen name to be sure it’s not already registered.
- Make sure your company name choice is available by searching the South Dakota Business Entity Database and doing a name search on the State of South Dakota website. NOTE: Make sure to search variations of spelling, plurals and misspellings as the state may reject a name that is too similar (then you have to start all over again, wasting valuable time).
NOTE: Familiarize yourself with the South Dakota naming guidelines. LLC entity names need to contain the words Limited Liability Company or the abbreviation LLC, and certain words are restricted or prohibited.
Restrictions on South Dakota Business Name & Business Purpose
- Business names should be unique.
- South Dakota corporate names may have the following approved designations:
- LC
- L.C.
- LLC (most popular)
- L.L.C.
- Ltd. Liability Co.
- Ltd. Liability Company
- Limited Liability Co.
- Limited Liability Company
- The use of the following words and phrases in corporate names is considered “restricted” in South Dakota:
- Corporation
- Corp.
- Inc.
- Incorporated
- Cooperative
- Limited Partnership
- LP
- L.P.
- Ltd.
- Limited Liability Partnership
- LLP
- L.L.P.
Step 3: Register the Business
Each state has its own requirements for registering a business. Now that you’ve chosen a business structure and selected your business name, here are the requirements to register your business in South Dakota.
How to form an LLC in South Dakota
- File the “Articles of Organization” with the South Dakota Secretary of State LLC Division.
- Once the articles are filed and approved you will then need to properly organize the LLC (this also applies to “1-person LLC’s”) by holding an “Organizational Meeting” which takes contributions from the members, issues Member Certificates, adopts the company Operating Agreement and more.
How to Incorporate in South Dakota
NOTE: When registering a new company the Secretary of State can take several weeks to file the paperwork. You can expedite the process by hand delivering the documents directly to them or one of their field offices and paying an additional fee.
TIP: Check our order form to see how long South Dakota is currently taking to process regular and expedited orders.
How to File a DBA in South Dakota
- Check the state database of business names.
- Complete the DBA registration form.
- The filing fee is $10.
Optional Considerations when registering a South Dakota business
- Hire a professional Registered Agent. Many people list their home or business address on the Articles of Organization or Incorporation. This can cause issues because it becomes public record (you’ll get lots of junk mail). A professional Registered Agent will provide their address and forward any important documents to you, this is also convenient if you have to move (you don’t have to file forms or pay fees, just update your address with your agent).
Ready to register a business in South Dakota?
- We specialize in registering businesses in South Dakota.
Step 4: Obtain your Federal Employer Identification Number (FEIN or “EIN”)
- Your EIN is like your Social Security Number for your company. It’s required for Corporations and LLC’s and optional for DBA’s (if you don’t have any employees, then it’s required). However, if you are a DBA and don’t obtain an EIN you will be forced to use your Social Security Number on many documents so it’s typically recommended you obtain the EIN to prevent identity theft.
- To obtain an EIN you can apply online with the IRS or via IRS Form SS-4.
- You can read more about corporate tax laws in South Dakota on the South Dakota Department of Revenue Taxation Division site.
Step 5: Open Company Accounts: Bank and Credit Cards
To keep business and personal expenses separate, you should open a separate account for your business. In addition, getting business credit cards is how you begin to build a company credit profile (corporation or LLC required) and can later qualify for larger loans and lines of credit. To open the account simply call your chosen bank and inquire on the steps to open a business bank account. Typically you’ll need a) your filed paperwork, b) your EIN and c) a company resolution authorizing your company to open the account (signed by the owners, members, officers or directors, etc.).
Top 5 Major Banks in South Dakota
- Wells Fargo Bank
- Great Western Bank
- Dacotah Bank
- CorTrust Bank
- First Dakota National Bank
TIP: Our business formation service includes a free banking resolution for your use.
Step 6: Obtain Business Licenses and Permits
Now that you’ve registered your business name you need to obtain a business license for your company – this authorizes your company to do business in your city or county. Typically this also involves registering for state taxes and permits (the city may require them as part of the business licensing process).
TIP: We work with a company that can obtain and prepare business licenses and permits for you. Click here to learn more.
Step 7: Annual and Ongoing Requirements
DBA: Your Fictitious Business Name should be valid for 5 years, with option for renewal.
LLC: South Dakota corporations are required to file a Periodic Report with the South Dakota Secretary of State each year on or before the first day of their anniversary month, in addition to general taxation. Information on your business’ taxes can be found here.
Corporation: Business in South Dakota should file an annual report on or before the first day of their anniversary month to the Division of Corporate and Consumer Services. LLCs and Corporations will pay a filing cost of $50.
Important South Dakota Contacts
South Dakota Secretary of State
Business Services (for Corporation and LLC filings)
Capitol Building
500 East Capitol Avenue Ste 204
Pierre, SD 57501-5070
Phone: 605.773.4845
South Dakota Taxation Departments
South Dakota Labor and Employment Departments
South Dakota Startup Resources
1. Small Business Administration (SBA) South Dakota District Offices
2. SCORE South Dakota
- Sioux Falls SCORE provides free and confidential one-on-one business counseling by phone, email, and in-person in South Dakota.
3. South Dakota Legal Statutes
4. South Dakota Chambers of Commerce
- South Dakota Chamber of Commerce & Industry
- Rapid City Chamber of Commerce
- Winner Area Chamber of Commerce
5. SDGov Information Gateway
- Here you will find general information relative to starting, growing, operating or closing a business in South Dakota.
6. Angel.co South Dakota Startups
- A list of all 60+ South Dakota Startups and 4,700+ South Dakota angel investors registered with Angel.co. Good research resource.
7. South Dakota Business News
8. GOED
9. South Dakota Small Business Development Center
- The South Dakota SBDC is the umbrella organization for several programs that assist small and medium sized businesses to start and grow.
10. South Dakota DENR
- The mission of DENR is to protect public health and the environment by providing environmental monitoring and natural resource assessment, technical and financial assistance for environmental projects, and environmental regulatory services; all done with reduced red tape, expanded e-government functions, and exceptional customer service to promote a prosperous economy while protecting South Dakota’s environment and natural resources for today and tomorrow.
