There’s no denying the fact that starting a business in South Dakota comes with multiple costs. These costs can make you put off doing vital tasks, such as forming your LLC and turning your sole proprietorship into a formal corporation. Fortunately, the cost of creating an LLC is affordable, and you’ll find that it’s worth paying for as it shields you from liabilities among other benefits.
You have two options when it comes to forming an LLC: do it yourself, or use an LLC formation service like Tailor Brands. Doing it yourself costs nothing, but you have to pay close attention to the details of generating the paperwork that’s required to form an LLC. In contrast, Tailor Brands LLC formation service also costs you nothing, and gives you the tools you need to properly form your LLC and get your business to the next level.
Regardless of your preference for how you file your paperwork to form your South Dakota LLC, you need to know the costs of the process, and when you need to pay fees. Read on to learn more about how much you can expect to spend on creating an LLC in South Dakota.
The overall cost to form your South Dakota LLC is relatively low, as is the fee for the annual report. There are very few steps involved with the filing, and little in the way of associated fees. If you plan to file your paperwork by mail, there is an additional $15 fee added to each filing cost. For example, if you’re reserving your business name, you’ll pay $40 to file it by mail as opposed to $25 to file online.
Here are the steps involved in forming your LLC, and the cost of each step.
The first step towards forming your LLC is to perform a name search on South Dakota’s Secretary of State’s corporate database. This is to ensure that your business name isn’t already in use by another business, and is distinguishable from other businesses. The search itself is free, but you can pay to reserve your business name and file a doing business as (DBA).
Total cost of naming your LLC: $0 to $35
The articles of organization are the papers you submit to the SoS to legally from your LLC. Once the SoS accepts your articles of organization, you can move forward as an LLC and begin operating according to your operating agreement. The total fee for the filing is $165.
Cost of filing the articles of organization: $165
The state of South Dakota requires LLCs to name a registered agent as part of the articles of incorporation. Anyone, including yourself, can be appointed as the registered agent, but they have to be available during business hours to receive communications from the state and notifications of legal actions. The individual you name as a registered agent also has to live in the state to act as an agent for service of process.
In the event you prefer to retain a registered agent service, you can expect to pay an annual fee that ranges from $199 to $400. Utilizing a registered agent service gives you personal privacy and keeps you in compliance with state laws. You’ll have to ask yourself if the cost of the service makes sense, but the benefits can be worth paying for.
Estimated cost for a registered agent: $0 – $400
South Dakota doesn’t require LLCs to have an operating agreement, but it’s highly recommended to create one as you work on forming your LLC. It’s considered an internal document that’s legally binding as to the operation and dissolution of the LLC.
Some of the clauses that go into an operating agreement include:
The cost of creating an operating agreement ranges anywhere from $0 to $1000. How much you pay depends on who does the work of drafting the agreement. You can use a generic operating agreement template and fill it out yourself after reviewing the clauses, you can hire a service, or you can use a lawyer.
Creating the agreement by yourself is the cheapest option, but it may not have the specificity and correct language you need for it to hold up in court. Working with a service results in getting an operating agreement that’s tailored to your specific needs. Fo a complex operating agreement, a lawyer is the best option to ensure that the resulting document is in line with the needs of your LLC.
Estimated cost of an operating agreement: $0 to $1,000
LLCs in South Dakota are only subject to a fee to file the annual report. All other fees are optional, and include a $15 fee to file paper forms by mail, $15 for certified copies of business documents, and expedited fees to file and receive paperwork in less time.
A franchise tax is imposed on certain types of businesses for the privilege of operating within the state. South Dakota implements a franchise tax on banks only. No other business that’s located in the state is subject to franchise taxes. The franchise tax is based on annual revenues as opposed to sales. The tax starts at 6% of net income of $400 million or less, and decreases as the net income increases.
Governments at the local, state, and federal levels may require businesses to obtain licenses and/or permits to operate legally. Some businesses engage in activities that are closely monitored by the relevant agencies, and getting permits and licenses shows that your business is operating in compliance with the law.
Some of the more common permits and licenses needed in South Dakota include:
The costs of these permits and licenses vary from location to location. It’s best to set aside a fund that is more than adequate to cover the costs as they arise. Alternatively, you can look up the cost of the permits and licenses that you need online and estimate how much money you’ll need.
Clerks at the local and county level will help you get permits and licenses that you need for the legal operation of your business. You’ll also need a tax license from the South Dakota Department of Revenue to collect and remit taxes of all types.
The annual report is a document that tells the state that your business is still in operation, and has been in compliance with laws and regulations over the past year. South Dakota LLCs are required to file the annual report in order to stay in good standing with the state and carry on with their business as usual. The annual report is filed every year in the month the LLC was formed. For example, you formed your LLC in May of 2024. Your annual report will be due in May of 2025.
To file your annual report, you need to go to the File an Annual Report page and follow the instructions. Enter the required information into the online forms, pay the $50 fee with a debit or credit card, and submit. You’ll receive a notification that your annual report was accepted and your LLC is in good standing.
The annual report has to be filed in the anniversary month. Any later, and you’ll have to pay a $50 fee for a late filing.
Estimated cost of an annual report: $50 to $100
The costs associated with forming an LLC in South Dakota are tax-deductible at the federal level. You can deduct the $165 filing fee, and the $50 annual report going forward. These are considered business expenses, and as such, can be used to reduce your tax liability.
Some of the fees and costs you can write off include:
Make sure to check with a tax professional about the validity of these deductions. Most of the time, these deductions are allowable, but tax laws change every year. What was once allowed for a deduction may not be allowed for the current tax year. A tax professional can also help you identify other deductions you can take to reduce your tax liability.
Fee/Cost | Amount |
Articles of Organization Fee | $165 |
Annual Report Fee | $50 |
DBA Fee | $10 |
Name reservation fee | $25 |
Filing by mail (fee is added to base cost) | $15 |
Starting an LLC in South Dakota is relatively inexpensive, giving it a low barrier to entry. You may find that you spend more on obtaining permits and licenses for your business than you do to submit your articles of incorporation. The fact you can write the fees off on your federal taxes adds another reason why starting an LLC is a good idea.
Ultimately, an LLC protects your personal assets from legal liability, and gives you a legal division between your business and your personal life. The costs associated with forming a South Dakota LLC are low in comparison to the protection it provides for you and your family. You get the opportunity to start your dream business free from worry that you’ll lose everything to a lawsuit, and can instead focus on making your dreams come true.
You’re not strictly required to file your LLC online, but there is a $15 fee to file physical papers with the Secretary of State. This applies to all filings that are mailed to the office of the SoS. You’ll save money by filing your articles of incorporation online.
You should reserve your business name so you can claim it later. Otherwise, you’re taking a chance that someone else will come up with the same name and take it before you have a chance to file your articles of incorporation. This helps you claim ownership of the name in the event someone tries to dispute it in the future.
If you’re unsure of how to form an LLC, or want to avoid mistakes, you can get help from a business service that can guide you through the process. Oftentimes, these services offer registered agent services and can also maintain a filing calendar for annual reports, permit and license renewals, and more. They take care of these and other administrative tasks so you can focus on running your business.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness. It also does not indicate any affiliation between Tailor Brands and any other brands, services or logos.
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