In South Dakota, you may incorporate a S corporation (S corp) by incorporating a limited liability company (LLC) or a corporation, then choosing S corp status from the IRS when you file for your EIN.
An S corporation is a tax categorization, not a company structure, according to the IRS. The S corp classification is used to lower a company’s tax burden.
In our How to Start a S Corp in South Dakota tutorial, we’ll walk you through the steps.
You must examine the following things before founding a S corporation:
S corporations are restricted to one class of stock and 100 stockholders, among other things. For more information, see our What Is a S Corporation? guide.
As entrepreneurs, we feel that incorporating a S corporation via an LLC is the best option since the benefits of founding a corporation are offset by S corp limitations. LLCs are also less difficult to manage than corporations.
You must determine if the S corp tax status is preferable to the default LLC tax status for your company. Read our LLC vs. S corp tutorial to fully grasp the tax benefits of a S corp.
There are two major methods to form a S corporation:
We do not advocate forming a company with the S corp tax status since it undermines all of the advantages of forming a corporation.
Forming an LLC and Choosing S Corp Status in South Dakota
Step 1: Give Your LLC a Name
Step 2: Select a Registered Agent.
Step 3: Submit the Articles of Incorporation.
Create an Operating Agreement in Step 4
Step 5: Obtain an EIN and submit Form 2553 to elect S Corporation tax status.
The first and most significant step in forming an LLC in South Dakota is deciding on a name.
Make sure your name meets South Dakota naming standards and is readily searched by prospective customers.
1. Follow the South Dakota LLC name guidelines:
2. Does the name exist in South Dakota? To determine whether your selected LLC name is available, utilize the company name availability search on the South Dakota Secretary of State website.
3. Is the URL accessible?
We suggest that you check to see whether your company’s name is accessible as a web domain. Even if you don’t intend to construct a company website right away, you may want to purchase the URL to prevent others from gaining it.
Your South Dakota LLC must have a registered agent.
A registered agent for your LLC will accept legal papers and tax notifications on your behalf. When you submit your LLC’s Articles of Organization, you will name your registered agent.
Many company owners opt to use the services of a registered agent. Many of these firms will incorporate your LLC for a modest price and provide free registered agent services for the first year.
To properly register an LLC, the South Dakota Articles of Organization are utilized.
An LLC operating agreement is a legal document that defines your LLC’s ownership and member responsibilities.
An EIN is a number assigned by the US Internal Revenue Service (IRS) to companies in order to identify and tax them. It is basically a business’s Social Security number.
When you apply directly with the IRS, EINs are free.