How to Start a Business in South Dakota
Everything you need to form your South Dakota LLC, corporation, or sole proprietorship, with exact fees, timelines, and step-by-step instructions.
South Dakota offers advantages for business owners. The state imposes no personal income tax and no corporate income tax. Forming an LLC online costs $150.
This guide covers every step from choosing your business structure to obtaining necessary licenses.
Choosing Your South Dakota Business Structure
This is the first decision and it affects everything: taxes, liability, paperwork. If you are unsure, an LLC is the right default for most South Dakota small businesses.
| Entity Type | Liability Protection | Taxation | South Dakota Filing Fee | Annual Cost | Best For |
|---|---|---|---|---|---|
| LLC | Yes | Pass-through | $150 | $55 Annual Report | Most small businesses |
| Corporation | Yes | Double (C-Corp) or pass-through (S-Corp) | $150 | $55 Annual Report | Raising investment, stock options |
| Sole Proprietorship | No | Pass-through | $0 | $0 | Freelancers, side hustles |
| Partnership | No | Pass-through | $0 | $0 | 2+ owners (consider an LLC instead) |
8 Steps to Start Your South Dakota Business
- 1
Choose your business structure
LLC, corporation, or sole proprietorship. Each has different costs, tax treatment, and liability protection.
- 2
Pick and reserve your business name
Search the South Dakota Secretary of State database. Reserve for $25 (120 days).
- 3
Appoint a registered agent
Must have a physical South Dakota street address. Can be yourself (free) or a service ($100 to $300 per year).
- 4
File your formation documents
Articles of Organization, Domestic Limited Liability Company (SDCL 47-34A-203, 212) ($150) or Articles of Incorporation, Domestic Business Corporation (SDCL 47-1A-120, 129, 202) ($150) with the South Dakota Secretary of State.
- 5
Get your EIN from the IRS
Free, online, takes about 5 minutes. Do not pay anyone for this.
- 6
Register for a sales tax permit if you sell goods
Through the South Dakota Department of Revenue. State sales tax rate: 4.2%.
- 7
Get required licenses and permits
South Dakota has no general statewide business license.
- 8
Register for South Dakota taxes
Personal income tax: none.
How Much Does It Cost to Start a Business in South Dakota?
| Item | Cost | Notes |
|---|---|---|
| LLC filing fee (South Dakota Secretary of State) Required | $150 | Online filings are processed immediately upon payment. Paper filings average 1 to 3 business days. |
| Corporation filing fee Required | $150 | If forming a corporation instead |
| Annual Report Required | $55 | The first day of the anniversary month of the entity's original filing, every year. |
| Name reservation | $25 | 120 days |
| Registered agent service | $0 to $300/yr | Free if you serve as your own |
| EIN (IRS) Required | $0 | Always free |
| Business license | Varies | South Dakota has no general statewide business license. |
| Operating agreement | $0 to $500+ | Free template or attorney-drafted |
| Realistic LLC total (year 1) | $150 to $505 |
Start a Specific Business in South Dakota
South Dakota Business Guides
- How to Start an LLC in South Dakota
- How to Start a Corporation in South Dakota
- Sole Proprietorship in South Dakota: How to Start One
- South Dakota Business License: What You Need and How to Get It
- South Dakota Home-Based Business Laws: Zoning, Permits and Rules
- How to Get an EIN in South Dakota
- South Dakota Business Name Search: How to Check and Reserve a Name
- How to Get a Resale Certificate in South Dakota
- South Dakota Registered Agent: Requirements and How to Choose One
- Best LLC Services in South Dakota
- South Dakota Business Taxes Explained for New Owners
- How Much Does It Cost to Start a Business in South Dakota
Why Start a Business in South Dakota?
- South Dakota levies no personal income tax and no corporate income tax.
- Forming an LLC or a corporation costs $150 filed online, or $165 by paper, which includes a $15 paper filing fee.
- The annual report fee is $55 online and $70 by paper, due the first day of the entity's anniversary month.
- The state sales and use tax rate is 4.2%, and the sales tax license itself has no application fee.
- There is no general statewide business license, so most new businesses need only entity registration plus any industry-specific permit.
- The state population is about 925,000 as of the 2024 estimate, and roughly 52% of residents live in the 14 largest cities.
South Dakota Business Resources
Frequently Asked Questions
- How long does it take to form an LLC in South Dakota?
- Online filings are processed immediately upon payment. Paper filings take an average of 1 to 3 business days.
- What does it cost to start an LLC in South Dakota in the first year?
- Formation costs $150. Beginning in the year after formation, an annual report fee of $55 is due annually on the first day of your anniversary month.
- Can a non-resident form an LLC in South Dakota?
- Yes. South Dakota does not specify residency requirements for forming an LLC, so non-residents can establish a business entity in the state.
- What is the cheapest way to start a business in South Dakota?
- An LLC costs $150 to form in South Dakota. The state has no general statewide business license, so you need only entity registration plus any industry-specific permits.
- Do I need an operating agreement for my LLC?
- Formation requires filing Articles of Organization with the state. The state does not specify operating agreement requirements.