If you own a business that was created in a state other than South Dakota, you will need to qualify or register that business in South Dakota if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-South Dakota) limited liability company (LLC) to do business in South Dakota.
For South Dakota purposes, if your LLC is formed in another state, then it is known as a foreign LLC in South Dakota. In other words, foreign doesn’t mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in Tennessee is a foreign LLC in Kentucky.
According to South Dakota’s LLC Act, you are required to register your foreign company with the state of South Dakota if you are “doing business” or “transacting business” in South Dakota. (Each of the latter terms is used in different places in the Act.) What does this mean? Well, like most states, South Dakota’s LLC Act does not specifically define either phrase in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state’s residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo’s articles on Internet Sales Tax: A 50-State Guide to State Laws.
Like many states, South Dakota’s LLC Act specifies certain activities that do not constitute transacting business in the state. The items listed include:
If your LLC’s only activity in South Dakota is one or more of the listed items, you should not need to register with the state. For the actual legal description of each of these items, check Section 147-34A-1003 of the South Dakota Codified Laws.
To register your foreign business in South Dakota, you must file an Application for Certificate of Authority: Foreign Limited Liability Company. You can download a copy of the form from the South Dakota Secretary of State website.
To complete the form, you must provide more or less the same information that you need to create an LLC in your home state. However, since every state is a little different, there may be items that South Dakota asks for that you did not need to provide when you first organized your LLC. More specifically, for a South Dakota Certificate of Authority, you need to provide:
You must submit one original and one copy of the application. The basic filing fee is $750.
If your LLC transacts business in South Dakota without a Certificate of Authority, it cannot bring a lawsuit in the state. However, not having a Certificate of Authority does not invalidate any of your LLC’s contracts or stop your LLC from defending a lawsuit in the state.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in South Dakota are similar. You will, however, have to use a different application form, Application for Certificate of Authority, Foreign Business Corporation. See the South Dakota Secretary of State website for forms, information, and filing instructions.