Start Your Own Business in South Dakota: Seven Steps You Need to Take

From licenses and permits to taxes and insurance, learn what you need to do to start a business in South Dakota.



Here’s an overview of the key steps you’ll need to take to start your own business in South Dakota.

Step 1. Decide on a Legal Structure

The most common legal structures for a small business are:

  • sole proprietorship
  • partnership
  • limited liability company (LLC), and
  • corporation

There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of  liability protection you want and the best tax, financing, and financial benefits for you and your business.  Check  Choose Your Business Structure  on Nolo’s website for more information on how to choose the best ownership structure for your business.

Step 2. Choose a Name

For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the South Dakota Secretary of State (SOS). You can check for available names by doing a  business name search  on the SOS website. You can reserve an available name for 120 days by filing anApplication for Reservation of Name  form with the South Dakota SOS. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations).See  How to Form an LLC in South Dakota  and  How to Form a Corporation in South Dakota  for more information.

Is your business is a sole proprietorship or partnership that uses a business name that is different from the name of the business owner (for a sole proprietorship) or names of the individual partners (for a partnership)? If so, you must register a  fictitious business name  with the South Dakota Secretary of State.

If you plan on doing business online, you may want to register your business name as a domain name. See  Choose and Register a Domain Name  for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See  How to Do a Trademark Search  for more information.

Step 3. Create Your Business Entity

  • Sole proprietorship:  To establish a sole proprietorship in South Dakota, you don’t need to file any organizational documents with the state. For more information, see  How to Establish a Sole Proprietorship in South Dakota.
  • Partnership:  To create a general partnership in South Dakota, you don’t need to file any organizational documents with the state. Although not legally required, all partnerships should have a written partnership agreement . The partnership agreement can be very helpful if there is ever a dispute among the partners. For more information, see  How to Form a Partnership in South Dakota.  To form a  limited liability partnership  (often used by professionals), you must file a Statement of Qualification with the South Dakota SOS. For more information, see  How to Form a Limited Liability Partnership in South Dakota.
  • LLCs:  To create an LLC in South Dakota, you must file  Articles of Organization  with the South Dakota SOS. You will also need to appoint a  registered agent  in South Dakota for service of process. In addition, while not required by law, you also should prepare an  operating agreement  to establish the basic rules about how your LLC will operate. The operating agreement is not filed with the state. For more information, see  How to Form an LLC in South Dakota  and  How to Form a Professional LLC in South Dakota  (for professionals).
  • Corporations:  To create a corporation in South Dakota, you must file  Articles of Incorporation  with the South Dakota SOS. You will also need to appoint a  registered agent  in South Dakota for service of process. Although not legally required, you also should prepare  bylaws  to establish your corporation’s internal operating rules. Bylaws are not filed with the state.  S Corporations  must also file IRS Form 2553,  Election by a Small Business Corporation,  with the IRS. For more information, see  How to Form a Corporation in South Dakota.

Step 4. Licenses and Permits

Tax Registration.  If you will be selling goods in South Dakota, you must register with the Department of Revenue (DOR) to collect sales tax. You can register online at the DOR’s  South Dakota Tax Application  website.

EIN.  If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.

Regulatory licenses and permits.These cover areas such as:

  • health and safety
  • the environment
  • building and construction; and
  • specific industries or services

The  Governor’s Office of Economic Development  (GOED) has a downloadable document that lists licenses issued by many state agencies, such as the Departments of Agriculture, Environment and Natural Resources, Health, and Labor & Regulation. You can apply for some important state business licenses relating to taxes by completing a South Dakota Tax Application. For information about local licenses and permits, check the websites for any cities or counties where you will do business.

Professional and occupational licenses. These cover people who work in various fields. The  Occupational Licensing Agencies  section of the South Dakota Department of Labor and Regulation website lists many of state agencies and boards that regulate various professions and occupations. Similarly, the South Dakota  Boards and Commissions Portal  provides a searchable list of licensing agencies and boards.

Step 5. Business Location and Zoning

You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking  municode.com.

Step 6. Taxes and Reporting

South Dakota is one of just four states that have no corporate tax and no personal income tax. See  South Dakota State Business Income Tax  for more information on state business taxes in South Dakota.

South Dakota LLCs and corporations must file  annual reports  with the South Dakota SOS. Also, apart from South Dakota taxes, there are federal income and employer taxes. Check IRS Publications 334,  Tax Guide for Small Business, and 583,  Taxpayers Starting a Business, available at irs.gov.

Step 7. Insurance

Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check  Obtaining Business Insurance  for more information.

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