How To Start An LLC in South Dakota: A Step-By-Step Guide

South Dakota has become a go-to state for entrepreneurs looking to form an LLC. With no state income tax, low annual fees, and strong asset protection, it offers one of the most business-friendly environments in the US.

The process to register an LLC in South Dakota is straightforward. It involves choosing a business name, filing the necessary documents with the South Dakota Secretary of State, and fulfilling ongoing compliance requirements.

This guide will walk you through each step of the LLC formation process, from registration to ongoing maintenance, so that you meet all legal requirements while taking advantage of South Dakota’s benefits. You'll also learn about Wise Business, an international account that helps business hold, send, and receive money transfers at low cost in numerous global currencies.

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Benefits of Forming an LLC in South Dakota

South Dakota stands out as one of the most pro-business states for LLC formation, offering significant financial and legal advantages.
Here’s why many entrepreneurs choose to register their LLCs there.

No State Income Tax

South Dakota does not impose personal or corporate income tax, meaning LLC owners can retain more of their earnings.¹ This makes it an attractive choice for businesses looking to maximize profits and reduce tax liability.

Low Annual Fees

Compared to other states, South Dakota keeps costs low. South Dakota LLCs only need to file an annual report with a $50 fee (or $65 for paper filings), making it affordable to maintain compliance year after year.²

Easy Formation Process

The South Dakota Secretary of State offers a streamlined online filing system, allowing business owners to form an LLC quickly and efficiently. Most filings are processed within a few business days, meaning minimal delays.

These benefits make South Dakota an ideal choice for entrepreneurs looking for a cost-effective, tax-friendly, and legally secure place to start their business.

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How to Start an LLC in South Dakota

Forming an LLC in South Dakota is an uncomplicated process, but it’s important to follow each step carefully to stay compliant.
Here’s everything you need to know to successfully register and maintain your South Dakota LLC.

1. Choose a Name for Your South Dakota LLC

The first step is selecting a unique name for your LLC. South Dakota requires that all business names comply with state regulations.
Your LLC name must include one of the following:

• “Limited Liability Company”
• “LLC”
• “L.L.C.”
  It also must be distinguishable from other registered businesses in the state. To check for availability, use the South Dakota Secretary of State’s Business Search tool.
  • Restricted words: Certain words (e.g., “Bank,” “Insurance,” “Attorney”) may require additional paperwork or licensing.
  • Optional: If you’re not ready to file your LLC yet, you can reserve your business name for 120 days by submitting a reservation request to the Secretary of State. The fee is $25.³

2. Appoint a Registered Agent

Every LLC in South Dakota must have a registered agent. This is an individual or business entity responsible for receiving legal and government documents on behalf of your LLC.

Who can be a registered agent:

• Any South Dakota resident with a physical address (P.O. boxes are not allowed).
• A business entity (e.g., a registered agent service) that provides registered agent services in South Dakota.
• You can act as your own registered agent, but this means your address will be publicly listed, and you must be available during business hours to accept legal documents.

Most business owners opt for a professional registered agent service (typically costing $100-$300 per year) for privacy and convenience.⁴

3. File the Articles of Organization

The Articles of Organization is the official document that legally forms your LLC in South Dakota. You’ll file this with the South Dakota Secretary of State.
Information required in the Articles of Organization:⁵

• LLC Name
• Business Address (must be a physical address)
• Registered Agent Name & Address
• Business Purpose (optional)
• Management Structure: Member-managed vs. Manager-managed
• Organizer’s Signature
  • Online Filing: Costs $150 and is processed faster.⁶
  • Paper Filing: Costs $165, and takes longer to process.
    You can submit the form online through the South Dakota Secretary of State’s website. Once approved, your LLC will be officially registered.

4. Create an Operating Agreement

South Dakota does not legally require an operating agreement, but having one is highly recommended. An operating agreement outlines the ownership structure, roles, and rules of your LLC. This helps prevent disputes and provides legal clarity.

What should be included:

• Ownership structure: Who owns how much of the LLC?
• Member roles & responsibilities: Who manages day-to-day operations?
• Profit distribution: How are profits and losses shared?
• Voting rights & decision-making: How are key business decisions made?
• Dissolution process: What happens if the LLC shuts down?

Even single-member LLCs are recommended to create an operating agreement to establish clear business guidelines.

5. Obtain an EIN from the IRS

An EIN (Employer Identification Number) is a unique number issued by the IRS for tax and banking purposes.

You need an EIN if you plan to:

• Open a business bank account
• Hire employees
• File federal taxes
• How to apply for an EIN:
  • Online: Apply for free via the IRS website. (Instant Approval)
  • By Mail: Fill out Form SS-4 and send it to the IRS (processing takes about 4 weeks).⁷

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6. Comply With South Dakota LLC Requirements

Once your LLC is formed, you’ll need to meet ongoing compliance requirements to keep it in good standing.

Annual Report Filing:

• Due Date: The first day of your LLC’s anniversary month.
• Filing Fee: $50 online or $65 by mail⁸
• Where to File: Through the South Dakota Secretary of State’s Business Services.
  Failure to file the annual report can result in penalties or even dissolution of your LLC.
  Business Licenses & Permits:
• No general business license is required at the state level.
• Depending on your industry, you may need local permits (check with your city or country office).
• Sales Tax License: Required for businesses selling goods in South Dakota (apply through the South Dakota Department of Revenue).⁸

7. Open a Business Bank Account

Separating personal and business finances is important for maintaining liability protection and managing taxes efficiently.
Most banks require the following:

• Employer Identification Number
• South Dakota LLC Articles of Organization
• Operating Agreement (if applicable)
  A business bank account allows you to:
• Protect personal assets from business liabilities.
• Accept payments and manage business expenses easily.
• Establish business credit for future financing.

Final Thoughts

South Dakota makes starting an LLC simple and affordable. With no state income tax, low annual fees, and strong liability protection, it’s one of the most business-friendly states for entrepreneurs.

By following this guide, you can register your LLC, stay compliant, and start operating with confidence. Whether you’re launching a small business or expanding, South Dakota’s pro-business environment sets you up for success.

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Sources:

1. Taxes in South Dakota | Tax Foundation
2. File an Annual Report | South Dakota Secretary of State
3. South Dakota LLC Filing Requirements and Fees | Bizee
4. How Much Does It Cost To Have a Registered Agent | Legal Zoom
5. LLC Articles of Organization | Nolo
6. Filing Fees | South Dakota Secretary of State
7. How long does it take to get an EIN? | Stripe
8. File an Annual Report | South Dakota Secretary of State
9. Licensing and Registering Your Business | South Dakota Governor’s Office of Economic Development