The Swier Law Firm Corporate and Business Law FAQs
Have questions? We have answers! Our South Dakota attorneys answer the questions they hear most often from clients just like you.
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Can a South Dakota business elect to be an S-Corporation?
Yes. A business can become an S-Corporation by complying with South Dakota's incorporation laws and then electing (by completing Form 2553 to the IRS) to pass corporate income, losses, deductions and credits through to its owners (shareholders) for federal tax purposes.
An S-Corporation owner reports the income and losses on his personal tax returns and is assessed tax at his individual income tax rate. Therefore, the S-Corporation avoids double taxation on the corporate income.
What is the advantage of electing S-Corporation status for your South Dakota LLC?
The primary advantage for a South Dakota limited liability company (LLC) to elect S-Corporation status involves the self-employment tax. An S-Corporation's officers/shareholders who provide more than minimal services to the LLC and receive (or are entitled to receive) compensation are subject to the self-employment tax. These payments are considered wages. On the other hand, non-wage compensation (deriving from dividends or distributions) is not subject to the self-employment tax.
In South Dakota, what is a "forum-selection clause"?
In South Dakota, a forum-selection clause is a contract element that allows the parties to agree that any lawsuits resulting from that contract will be initiated in a specific forum.
In South Dakota, who can make a contract?
Under South Dakota law, any person can make a contract except (1) minors; (2) persons of unsound mind; and (3) persons deprived of civil rights.
In South Dakota, what is an "implied contract"?
Under South Dakota law, an "implied contract" is a contract in which the terms are shown by the parties' conduct.
In South Dakota, what is an "express contract"?
Under South Dakota law, an "express contract" is a contract in which the terms are stated in words.
In South Dakota, what is needed for an enforceable contract?
Under South Dakota law, an enforceable contract requires:
- Parties capable of contracting;
- Their consent;
- A lawful object; and
- Sufficient cause or consideration.
In South Dakota, what is a contract?
Under South Dakota law, a contract is an agreement to do or not to do a certain thing.
In South Dakota, what is an independent contractor?
South Dakota law provides that services performed by an individual for wages are considered to be "employment" unless it is shown that:(1) The individual has been and will continue to be free from control or direction over the performance of the service, both under his contract of service and in fact; and
(2) The individual is customarily engaged in an independently established trade, occupation, profession, or business.
If both of these exceptions are met, the person may be considered an "independent contractor."
I am opening a business in Sioux Falls. I've heard that noncompete agreements are not enforceable. Is this true?
Noncompete agreements are worthless."
No, this is not true. Unfortunately, some small business owners often believe that noncompete agreements "are not worth the paper they're written on."
In South Dakota, noncompete agreements can be enforced under certain conditions. For some small businesses, a well-drafted noncompete agreement is often one of its most valuable legal documents.