A South Dakota LLC operating agreement is a document that explains how a company will implement procedures to manage its financial situation and conduct its operational activities. It also discusses a company’s ownership situation so the managing members or managers understand the ownership percentages.
Once the company members agree on the terms of an LLC operating agreement, they can each sign it to validate it. Then, instead of submitting it to a government body, they keep their own copies of it.
Is an LLC Operating Agreement Required in South Dakota?
No, South Dakota doesn’t require an LLC operating agreement for any business to initiate its operations. However, having one can help outline member responsibilities and prevent confusion as the company’s operations progress.
By Type
Single-Member LLC Operating Agreement
Formalizes your business's operating procedures as a sole business owner.
Multi-Member LLC Operating Agreement
Establishes your company's functions and operations as an organization with multiple owners.
Laws
The South Dakota Codified Laws contains Chapter 47-34A, the Uniform Limited Liability Company Act. This act outlines laws for operating an LLC as a legal entity.
If you create an operating agreement for your LLC, you can refer to § 47-34A-103, which covers the scope and limitations of operating agreements in South Dakota.
Costs and Fees
You can expect to pay the following fees when forming and organizing an LLC in South Dakota:
- Domestic filing fee: $150
- Foreign filing fee: $750
- Certificate of good standing: $20
- Annual report filing fee: $50
How to Form an LLC in South Dakota
If you’re ready to begin forming an LLC in South Dakota, follow the steps below:
Step 1 – Name Search Your Business for Availability
While you may like your current business name idea, you must check the state’s database to confirm another business isn’t already using it. If you submit an LLC application with a name that’s the same or too similar to an existing name, the Secretary of State will reject it.
Ensure your chosen business name contains the words “Limited Liability Company” or some variation, including “L.L.C.” or “LLC.”
Step 2 – Identify Your Registered Agent
A registered agent agrees to accept any legal documents the state sends to your LLC. These documents could contain tax information, subpoenas, or court summons.
Your LLC’s registered agent can be any person if they’re at least 18 years old and have a physical street address in South Dakota. Alternatively, you can select another registered business entity to act as your registered agent if the business has a physical address in South Dakota and authorization to conduct business in the state.
Step 3 – File Your Articles of Organization
You can file your articles of organization online or fill out a paper form and mail it to the Secretary of State’s office. If you choose the paper method, you can mail your form to this address: Secretary of State Office, 500 E Capitol Ave, Pierre, SD 57501.
As you’re filling out your articles of organization, include the following information:
- Your LLC’s intended duration, if applicable
- Names and addresses of the organizers
- Whether your LLC will be manager-managed or member-managed
- Your LLC’s name and address
- Your registered agent’s information
Step 4 – Create Your LLC Operating Agreement
While an LLC operating agreement is optional in South Dakota, you can still consider creating one. It can give you procedures to follow to improve efficiency and prevent disagreements in the future. Some information to incorporate in your operating agreement includes:
- Voting procedures
- Ownership percentages
- Liabilities
- The process for admitting new members
- The departure process for members who want to leave
- The duties and rights of members
Step 5 – Obtain an EIN
The IRS distributes Employer Identification Numbers (EINs) to LLC owners who apply for them. You are free to apply for this nine-digit number, and can help you keep your personal and business finances separate. You’ll need one to open a business bank account and pay employees’ wages.
Step 6 – File Your Annual Reports
Once your LLC is up and running, you must file a yearly report with the Secretary of State. This report provides the state with the most accurate information regarding your LLC.
Ensure you submit this form before the first day of the second month after you originally formed your LLC.
Sample
