South Dakota is a somewhat overlooked state, which comes as a surprise due to its beautiful landscapes, the fact it is one of the most affordable states to live and work in, and its business-friendly tax climate.
Regardless of the state often being passed over, there are still many entrepreneurs and aspiring business owners who choose South Dakota as their home of business, and they are reaping the rewards due to the state’s pro-business support.
South Dakota isn’t only a great place to begin or expand your entrepreneurial journey, but it is also aesthetically one of the most glorious places in North America, boasting some fantastic landscapes, awesome forests, and interesting towns and cities.
If you are considering starting your own company, registering a business in the state of South Dakota is a relatively straightforward process and a big focus has always been on small businesses and more specifically aiding and supporting them to thrive, progress, and develop within their local communities and beyond.
There are many different development centers, administrative offices, forums, advisories, grants and loans, and more, to help your small business fulfill its potential in Mount Rushmore State.
With a low cost of living, low business and personal taxes, solid infrastructure, a good education system, supportive local communities, and comparatively low South Dakota Secretary of State filing fees, it comes as little surprise why many people are diverting their attention to South Dakota as an opportunity for entrepreneurial success by registering a business in the state.
How to Register a Business Name in South Dakota – 7 Easy Steps
The South Dakota Secretary of State makes it reasonably easy to register your business name. There are three ways you can do this:
- 1. Do it yourself directly on their website.
- 2. Pay a document filing company that can register everything online for you – there is a modest fee for this but it saves a lot of time and ensures it is done correctly.
- 3. Hire an attorney or accountant to file and register your new company – there are higher fees associated with this.
Step 1 – Determine your registered name
Firstly, you must determine that your business name is unique and not being used by someone else. A business registration company can do this research on your behalf or alternatively, you can search directly on the South Dakota Secretary of State website.
Once you have established your name is available you can register a business name in South Dakota directly on their website if you are comfortable with the process. Or, if you want a company to do this for you that specializes in this, you can use an online registration service to do it.
These document filing companies usually offer a free registered agent service for one year with most of their packages which is often a necessity for new businesses and those being registered by foreigners with no U.S. address.
Before doing any of this, you must decide on the right structure.
Step 2 – Choose the right entity
You need to choose the right type of business to register and the most common options are a limited liability company (LLC) or an incorporated company (Inc.). If you are keeping things really small and simple (one or two people), then you may consider a sole proprietorship or a general partnership.
Even if you plan to be a solopreneur, it is usually more beneficial for you to register a South Dakota LLC to make sure, as the owner, you have limited liability under this structure, and so you can benefit from the pass-through tax advantages.
Here is a quick rundown of the various options and what they might mean to you:
- Limited Liability Company: A South Dakota LLC is often the best route for most entrepreneurs because the structure comes with personal asset protection, no double taxation, is fairly easy to maintain and does not have high registration or annual renewal costs. Through LLC formation you have better tax flexibility and income can be taxed as a pass-through entity like a sole proprietor or partnership, or as a corporation.
- Incorporated Company: A South Dakota Corporation offers personal asset protection and your company can own property, vehicles, incur liabilities, and is responsible for its own debts and can conduct business without the owners risking their personal assets such as their homes, cars, personal savings, retirement, etc. On the flip side, owners of sole proprietorships or partnerships face unlimited liability for both business and personal assets.
Step 3 – Make sure your name is not being used by another company
This may seem obvious, but if you check the South Dakota Secretary of State website and see that your chosen business name is available, that is all well and good, but that doesn’t mean someone else is not using that same or similar name, particularly in another state.
Many people register an “official business entity name” and trade under a different name. This is called a South Dakota dba, or “doing business as” name or assumed trading name, and needs a separate DBA certificate.
You will want to do a Google search for your official name and your desired trading name (if different) to make sure no one else is using this name. Most importantly, you will want to make sure you can get an easy-to-remember website domain name that is not being used by someone else.
Having an awesome name or trading name for your business can be crucial to your success, so making sure the domain name is available too, and registering it right away, is equally as important.
Finally, if you go to the South Dakota Secretary of State website and discover that someone else has registered the name you would like, you can search for variations of that name by adding a word before it or after it, or using some other variations until you find a name that is available and acceptable for you.
Step 4 – Request an Employer Identification Number (EIN)
Once you have registered your new business in South Dakota you will need to get an EIN for a number of reasons. These include paying taxes for your business, opening a bank account, obtaining credit cards or lines of credit, establishing terms with vendors and suppliers, hiring employees, and more.
There are only a few instances where you likely won’t need an EIN. More often than not, many business activities are just not possible without having an EIN.
An EIN is the business equivalent of a social security number and is used to track your business dealings. Even if you do not intend to hire employees, you will almost certainly still need an EIN for your South Dakota company and it protects you from having to use your social security number.
For more information on how to get an EIN number in South Dakota use our guide where you will find downloadable forms and links to the online process.
An EIN (also known as a federal tax id) is free to obtain from the IRS, and you can apply online but if you are not comfortable filling in forms you can use a third-party document filing service to do this for you for a small fee. This ensures you are 100% compliant with the law and they handle everything with the IRS.
Step 5 – Obtain the Required Business Licenses and Permits
To operate your business in South Dakota you must comply with federal, state, and local government regulations. South Dakota law does not require a small business owner to have a “general” license to operate.
You will, however, need specific permits for specific businesses. For example, if you open a restaurant or similar food-related business you will most likely need a health permit, sales tax permit, facilities permit, and others. If you plan to sell alcohol, you will need a liquor license, if you want to open an auto mechanic shop, there is a separate license for that. Essentially, it all depends on the type of products and services your business is going to offer.
The business licenses you will need to acquire after you have registered a business in South Dakota will also differ depending on the location of the business too.
You must find out how to obtain the necessary South Dakota business licenses and permits, and this link will allow you to search for your type of business and the county or city you are located in to familiarize yourself with the permits and licenses your business may require to operate in South Dakota. You can also access the relevant forms you will need to complete.
Alternatively, you could hire a professional document filing company to do this for you. It eliminates a lot of time and hassle and ensures you are correctly complying with South Dakota law. After all, South Dakota has no single generic business license that will ensure compliance with all requirements.
Step 6 – Determine Your Business Employer Requirements
There are several things you need to check regarding your responsibilities as an employer in South Dakota because there are requirements you must meet at the federal and state level. These could include various workforce commissions, safety, and state tax obligations, as well as labor law requirements including the minimum wage in South Dakota and employee rights and remedies under the South Dakota minimum wage act.
To learn more about South Dakota employer resources take a look at the South Dakota Department of Labor website.
Step 7 – Open a Business Bank Account for your South Dakota Company
As a new business owner, you should seriously consider separating your personal and business bank accounts to make it easier to track and account for your income and expenses. For certain business types, such as an LLC or a Corporation, it is essential that you open a separate business bank account to maintain your liability protection.
Once you have your EIN and your company registration documents, coupled with your photo ID, you are ready to go to the bank and open your checking account.
Don’t worry, this won’t be expensive or leave you burdened with hefty monthly fees to pay – there are many free business bank accounts out there for you to choose from, even “online-only” ones. Each has its different features and benefits, so you can decide what bank and checking account best suits your needs.
Summarizing Registering a Business in South Dakota
South Dakota is slowly but surely becoming a well-known environment for small businesses to flourish in. In fact, Mount Rushmore State is often being referred to as the state of small business, which has made it an extremely progressive state for doing business.
The main reason we are witnessing small businesses thriving within the state is thanks to the low/non-existent business and personal taxes (0% corporate income tax rate), a constantly improving and developing state economy, affordable and readily available commercial, retail, and office space, a solid college education system (41.6% college-educated), which in return helps produce highly-skilled workers, a low cost of living, an amazingly supportive local community, and proximity to large consumer markets in the form of 6 bordering states.
The state fee for registering a business in South Dakota is $150 for an LLC and $150 for a corporation too. The annual filing fee to maintain your LLC or corporation in South Dakota is $50.
Resources for Small Businesses in South Dakota
Whether you decided to register as an LLC, Corporation, or simply as a Sole Proprietor in South Dakota you are going to need to tap into the resources available to you to drive your small business forward.
The support for entrepreneurs covers everything from crafting business plans to navigating the state’s tax codes. Visit the South Dakota Small Business Development Center website to find out more.
Volunteer members of SCORE are business professionals and expert mentors that are readily available and are free to use for those looking to begin their entrepreneurial journey.
These services are very useful and cost-efficient, and it makes perfect sense to arm yourself with all the help and information you can get.
Here are some additional small business resources in South Dakota:
- South Dakota SCORE: Connect with SCORE to begin or take your entrepreneurial journey to the next level.
- South Dakota SBA: The U.S. Small Business Administration (SBA) helps small business owners and entrepreneurs pursue the American dream. The SBA is dedicated to small businesses and provides counseling, capital, and contracting expertise as the nation’s only go-to resource and voice for small businesses.