How to Start a Business in South Dakota

Starting a business in South Dakota can be rewarding, thanks to the state's business-friendly tax benefits and supportive resources. In fact, businesses have a 64.03% survival rate after three years, making South Dakota the third-best state in the United States for small business longevity.

So whether you're launching a new venture or expanding an existing one, The Mount Rushmore State offers a thriving, entrepreneurial environment. This comprehensive guide will walk you through every step of the process, so you can get your business off the ground!

Register your business in South Dakota

Registering your business is the first big step to making your new venture official. Here's how to get your business legally recognized in South Dakota:

Decide on a business structure

Choose the right business structure—it impacts your taxes, liability, and how you manage your operations. In South Dakota, your options include:

• Sole Proprietorship. Simple to set up, but you are personally liable for business debts.
• Partnership. Easy formation with others, but personal assets aren't protected.
• Limited Liability Company (LLC). Offers personal liability protection and flexibility in management and taxation. Single-member LLCs are often treated as disregarded entities, which can simplify tax reporting.
• Corporation. More complex with greater regulatory requirements but provides strong liability protection and can attract investors through stock offerings.

If you're unsure which structure is best, consult a legal or financial professional.

Choose a business name

Pick a business name that’s unique, memorable, and truly represents your brand. Then, check the South Dakota Business Entity Database to make sure it’s available. If you're forming an LLC or corporation, don't forget to add "LLC" or "Inc." to seal the deal!

File necessary documents

After selecting your business structure and name, file the necessary documents with the South Dakota Secretary of State:

• For LLCs: File the Articles of Organization.
• For Corporations: File the Articles of Incorporation.

You can file online or by mail. Online filings typically cost $150, and mail filings may be slightly more. Prepare your business details, including its purpose, registered agent information, and management structure.

Meet state registration requirements

Complete these additional steps to finalize your business registration:

• Appoint a Registered Agent. Someone with a physical address in South Dakota who can receive legal documents on your behalf.
• Get an EIN. Apply for an Employer Identification Number (EIN) from the IRS, which is like a Social Security number for your business.
• File a DBA if Needed. If you plan on operating under a different name than your legal business name, file a "Doing Business As" (DBA) with the Secretary of State.
• Stay Compliant. Maintain your business compliance by filing annual reports and renewing any necessary licenses or permits to keep your business in good standing. You might also need to obtain a Certificate of Good Standing to verify your compliance with state regulations.

Once you’ve completed these steps, your business is officially registered in South Dakota and all set to start operating!

Obtain necessary licenses and permits

While South Dakota doesn’t require a general business license, you’ll still need the right licenses and permits for your industry and location to operate legally.

Determine required licenses

Find out what licenses your business needs. The Governor's Office of Economic Development (GOED) offers a helpful guide on state-issued licenses to help you understand the requirements. If you're in a regulated profession, check the South Dakota Department of Labor and Regulation (DLR) to find your licensing board and get details on education, exams, and applications.

Apply for state and local permits

Once you know the licenses you need, it's time to apply! If you're selling goods or services, get your sales tax license through the South Dakota Department of Revenue's online Tax License Application. Don’t forget to check with your city or county for any local licenses or permits you may need.

Comply with industry regulations

Make sure you’re compliant with all industry regulations, which may include additional permits for health, safety, or environmental standards. For example, opening a restaurant requires health department approvals, and construction may need environmental permits. Staying compliant isn’t just about following the law—it’s key to running a trustworthy, legally sound business.

Set up business finances

Properly setting up your business finances is important for managing cash flow, meeting legal obligations, and keeping your company financially healthy. It’s the foundation for smart decisions and long-term success.

Open a business bank account

Open a separate business bank account to manage your company's funds effectively. This separation simplifies accounting and taxes. Many banks in South Dakota offer business accounts suitable for small businesses; select one that fits your needs.

Separate personal and business expenses

Always keep your personal and business expenses separate. This is important for clear financial records and legal protection. Use your business account for all income and expenses related to your company.

Establish accounting systems

Establish an accounting system to track income, expenses, and cash flow. Whether you use accounting software or hire a professional accountant, accurate bookkeeping provides financial insights for informed decisions. Applying effective finance tips for small businesses can streamline your financial management.

Plan for tax obligations

Plan for tax obligations. Although South Dakota doesn't have a corporate income tax, you may still be responsible for sales tax and federal taxes. Register with the South Dakota Department of Revenue for necessary tax licenses.

Understanding tax tips for small businesses can help you minimize liabilities and maximize deductions. Staying up-to-date with small business tax compliance also ensures you avoid penalties and keep your business running smoothly. Consult a tax professional to navigate your obligations and stay compliant.

Secure funding for your business

Securing the right funding is essential for bringing your business idea to life. It gives you the capital needed for key expenses like equipment, inventory, marketing, and operations, while also helping your business thrive and grow in the early stages.

Explore funding options

Consider the funding options available:

• Personal Savings. Using your own money gives you control but comes with personal risk.
• Bank Loans. Traditional loans provide financing to repay over time, with interest. Explore various small business loans to find one that suits your needs.
• SBA Loans. The Small Business Administration (SBA) offers loan programs that can facilitate approval.
• Microloans. Smaller loans ideal for startups or those who might not qualify for bank loans.
• Angel Investors and Venture Capitalists. Investors like Annie Capital, Bluestem Capital, and South Dakota Venture Capital fund businesses in exchange for equity.
• Crowdfunding. Raise small amounts of money from many people online.

Prepare a funding proposal

To secure funding, you'll need a solid business plan that includes:

• Executive Summary. A snapshot of your business idea and goals.
• Market Analysis. Demonstrate understanding of your target market and competitors.
• Financial Projections. Outline expected revenues, expenses, and profitability.
• Funding Needs. Specify how much money you need and how you'll use it.
• Management Team. Highlight the skills and experience you and your team bring.

Assess loan and grant availability

Look into loans and grants available to businesses in South Dakota:

• SBA Loans. Consider programs like the SBA 7(a) Loan for various financing needs.
• State Programs. Check with the South Dakota Governor's Office of Economic Development for state financing options.
• Local Banks and Credit Unions. Institutions like Great Western Bank and BankWest may have small business loans.
• Grants. While rare for for-profits, some industries or projects might qualify for grants.

Choose a business location

Choosing the right location for your business is crucial. The right spot boosts customer access, helps control operating costs, and keeps you in line with local regulations.

Evaluate location options

When scouting locations, consider:

• Costs. Assess rent, utilities, and other expenses.
• Business model. Determine if you'll have a physical store, operate online, or both.
• Home-based options. If starting from home, check zoning laws and any restrictions.

Consider customer accessibility

Ensure your customers can reach you easily:

• Visibility. High-traffic areas increase business visibility.
• Proximity to customers. Being near your target market enhances accessibility and foot traffic.
• Online factors. For online businesses, ensure a reliable internet connection and consider shipping logistics.

Comply with zoning laws

Review zoning laws before committing:

• Zoning rules. Contact local zoning offices to confirm permissible businesses.
• Permits. You might need permits, especially if renovating.
• Home businesses. Be aware of rules if you plan on operating from home since some areas have restrictions.

Get business insurance

Business insurance is a must to protect your company from the unexpected. It safeguards your assets, minimizes financial risks, and gives you peace of mind—so you can focus on running and growing your business.

Identify necessary insurance types

Determine what insurance you need:

• General Liability. Protects you if someone sues your business.
• Professional Liability. Covers claims of mistakes or negligence in your services.
• Product Liability. Protects you if a product you sell causes harm.
• Workers' Compensation. Not required in South Dakota, but it helps employees injured on the job.
• Commercial Property. Protects your business location and equipment.
• Disability Insurance. Provides income if you or your employees can't work due to injury or illness.

Utilize South Dakota business resources

Taking advantage of South Dakota's business resources can significantly ease the process of starting and running your company. With expert guidance, support, and networking opportunities, you’ll easily navigate regulations, secure funding, and connect with fellow entrepreneurs.

Access state support services

Tap into state support services:

• GOED. The Governor's Office of Economic Development offers tools like the Business Start-Up Packet and Resource Directory.
• SBDC. The South Dakota Small Business Development Center provides free consulting and training in business planning, finance, and marketing.
• Labor Laws. Staying informed about South Dakota labor laws is crucial for legal operation and employee relations.

Connect with local business networks

Networking with local entrepreneurs can boost your business. Groups like Startup Sioux Falls and the Zeal Center for Entrepreneurship offer events, mentorship, and coworking spaces.

SCORE chapters in Sioux Falls and Rapid City provide free mentoring from experienced professionals. Connecting with these networks can expand your knowledge and create new opportunities.

Launch your South Dakota business today

Now that you have the roadmap to starting a small business in South Dakota, it's time to take action. Remember, managing your team effectively—from hiring hourly employees to smooth communication—is key to your success.

With Homebase’s comprehensive scheduling, time tracking, and team communication apps, you can streamline your operations and focus on growing your new venture. By leveraging these tools, you'll experience numerous team communication app benefits that can enhance productivity and team cohesion. Empower your business with Homebase today.

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