South Dakota boasts the country’s lowest business costs and has the fifth-lowest tax burden. With many fast-developing areas and a great quality of life, the Mount Rushmore State provides an excellent platform for those who want to start a new business there.
How to Start a Business in South Dakota:
1. Determine your business structure.
Choosing the right legal structure for your company is important. Your choice will have an impact on taxes, paperwork, personal liability, and your ability to raise funds.
You can choose from the following legal structures:
A sole proprietorship is the simplest structure and usually involves one individual who is solely responsible for the enterprise while a partnership is suitable for businesses with two or more owners. A corporation is a standalone entity with shareholders while a Limited Liability Company (LLC) is the most popular type because of minimal paperwork, flexibility, tax benefits, and simple implementation process. LLC business owners are not obligated to file a corporate tax return.
Businesses are regulated by South Dakota state laws and must be registered through the South Dakota Department of State website.
2. Write a business plan.
Your business plan is the foundation of your new business and will serve as an invaluable guide for how to structure, run and grow your company. The business plan must meet your needs and can fall into one of two common categories: traditional or lean startup.
The traditional plan is very detailed, takes more time to write, and is quite comprehensive while the lean startup plan is high-level and fast to write.
A strong business plan can help you get funding and makes opening a new business easier. You can consult with the South Dakota Governor’s Office of Economic Development, a free service that offers business planning and consulting for small business owners in South Dakota.
3. Sign up for business banking.
Your business and personal finances must be kept separate to maintain accurate records. With a business bank account, you can easily obtain statements and access products that would not be available to you as an individual.
4. Seek funding.
Opening a new business often requires capital. If you are unable to fund your new business, you will need to take out a loan. There are three common ways to fund your business: commercial loans, business lines of credit and small business loans.
A popular organization that can assist you with small business loans in South Dakota is Grow South Dakota.
5. Decide on a business name.
Make a list of names that you like and perform a Google search to find any conflicts with other South Dakota business names.
Once this is done, you will need to do a trademark search to ensure that the business name that you chose has not already been trademarked. You can perform the trademark search at the U.S. Patent and Trademark Office and the Trademark Electronic Search System. These databases have a comprehensive list of business names that are registered together with their classification.
After you have confirmed that your business name is not trademarked, you need to check the South Dakota Secretary of State website to ensure that your business name is not the same or similar to another corporation registered in South Dakota.
If you are satisfied that your business name is available, you can then register it on the U.S. Patent and Trademark Office website. You can check out our guide on How to Name a Business to assist you with naming your business.
Once you have found a suitable name, make sure to register the matching web domain and social media handles, should you wish to market your business online. You can use our How To Register a Domain Name guide to assist you with the process.
6. Request an Employer Identification Number (EIN).
Every business needs to have an Employer Identification Number (EIN). Registering for an EIN is very easy—all you need to do is go to the IRS website. You can complete the application online, and save your EIN confirmation notice once you receive a number from the IRS.
7. Acquire business licenses and permits.
The state of South Dakota does not require businesses to have a statewide business license. You may, however, require a specific business license depending on the type of business that you start. You can consult with the South Dakota Governor’s Office of Economic Development to check on specific business licenses and permits that you may require. You can also get more information here.
8. Hire employees.
To start hiring you will need to register at the South Dakota Department of Labor & Regulation. Each employee will need to be registered within 20 days of starting work in accordance with the Personal Responsibility and Work Opportunity Act.
The South Dakota Human Relations Act protects employees against discrimination on the basis of age, race, creed, color, sex, sexual orientation, gender identity, national origin, religion, or disability.
With reference to the pre-employment screening process in South Dakota, an employer is entitled to view a job applicant’s criminal history and obtain the relevant records from the criminal justice system.
9. Check your business employer requirements.
Business employer requirements are specific to the type of business that you are starting and include various labor, safety and tax obligations that need to be met. You should consider hiring a tax or business attorney to ensure your business is fully compliant with the laws in South Dakota.
If you are starting a business in South Dakota, you will need to take note of the following important items:
South Dakota’s law requires all employers to provide workers’ compensation coverage to their employees. You can obtain more information at the South Dakota Department of Labor & Regulation website.
Health insurance isn’t a requirement for small businesses in South Dakota.
In South Dakota your small business is required to establish an unemployment insurance account with the South Dakota Department of Labor & Regulation. If your business is required to contribute towards unemployment insurance, you will need to file quarterly reports.
South Dakota Sales Tax
Every business selling taxable tangible personal property in the state of South Dakota is required to obtain a sales tax license and contribute to sales tax. Services rendered are not taxable. You will need to register for a sales tax license with the South Dakota Department of Revenue.
South Dakota Registration and Filing Fees:
Corporation for profit
Corporation for nonprofit
Articles of merger
You'll find a comprehensive list of fees and costs here.
How much does it cost to start an LLC in South Dakota?
South Dakota articles of incorporation for LLCs cost $150.00. Registration and filing fees are different for different business structures.
Do you need a contractor's license in South Dakota?
In South Dakota contractors do not need to be licensed at a state level. Be sure to check the specific county and city regulations and requirements. Plumbing and electrical contractors, however, do need individual South Dakota licenses and asbestos abatement contractors must be certified.
How do I get a tax ID number in South Dakota?
You can apply for a federal tax ID in South Dakota on the IRS website.
How do I become a registered agent in South Dakota?
The form to register as a commercial registered agent is available on the South Dakota Secretary of State website. To become a registered agent in South Dakota you must be at least 18 years old, be a resident of South Dakota, and have a permanent street address in the State. You will also need to be available during business hours.
How do I incorporate in South Dakota?
How do I dissolve an LLC in South Dakota?
You will need to close your business's tax accounts, complete the Articles of Termination form available on the South Dakota Secretary of State website, and submit it in duplicate with the filing fee of $10 either by mail or in person to the South Dakota Secretary of State.
How do I dissolve a corporation in South Dakota?
You will need to close your business's tax accounts, complete the Articles of Dissolution form available on the South Dakota Secretary of State website, and submit it in duplicate with the filing fee of $10 either by mail or in person to the South Dakota Secretary of State.
How much is a sales tax license in South Dakota?
Applying for a sales tax permit in South Dakota is free.
How do I register a business in South Dakota?
You can register your business with the South Dakota Department of State.
What important posters should be at a South Dakota business premises?
- Job Safety and Health Protection.
- Unemployment Insurance.
- Workers Right to Know.
- Workers’ Compensation Law.
- Fair Labor Standards Act.
- Employee Polygraph Protection Act.
How do I start a business in South Dakota with no money?
- Use services to generate cash flow and fund a product-based business.
- Get creative to discover funding sources.
- Grind it out and look for business, even if you don't get paid for it.
- Use your current resources in different ways to generate income.
- Get a credit line to help with the early stages of your business.
- Locate an accelerator if you can hit the market swiftly.
- Crowdfund and allow the public to invest a small percentage of money in return for a future buy-in.
- Use a business incubator to provide funding designed specifically to financially assist a startup company.
What are the best banks for small business in South Dakota?
How can I protect the name and logo of my business in South Dakota?
The easiest way is to register your business name on the U.S. Patent and Trademark Office website. Prior to registration, remember to check on the Trademark Electronic Search System and the South Dakota Secretary of State website to ensure that your business name is not already registered by another company.
Do I need workers’ compensation for my new business in South Dakota?
All employers in South Dakota are required to provide workers’ compensation coverage to their employees.
Does my business in South Dakota need to contribute to health insurance?
Health insurance isn’t a requirement for small businesses in South Dakota.