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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I am about to open a business in Sioux Falls, South Dakota. Should I just bypass a lawyer and go online for my legal needs?
No. Generic legal documents are all over the Internet. Unfortunately, these documents are probably inadequate for your business and may leave you exposed to future legal problems. Every business document must be tailored to your specific situation.
Relying on online legal advice is also risky. Unfortunately, you may spend a significant amount of time and money trying to "unring the bell" and undo what you've already done based on bad online advice.
I am about to open a business in Sioux Falls, South Dakota. Should I just get my business going and then worry about legal issues later?
No. One of the worst pieces of advice given to South Dakota small business owners is to delay the "legal issues" until your business achieves a certain income.
Delaying the "paperwork hassle" and "legal fees" may sound like good business strategy. However, failing to incorporate could result in your personal liability for injuries or damages. For instance, if your flower shop delivery driver accidentally hits a motorcyclist, there could be serious legal consequences.
Also, avoiding the "legal issues," such as forming a corporation or limited liability company (LLC), can result in expensive litigation to resolve later disputes about company structure, company ownership, and company profit distribution.
What is the advantage of creating a South Dakota Limited Liability Company?
Similar to the shareholders of a corporation, the owner of a South Dakota Limited Liability Company (LLC) is generally protected from personal liability for LLC debts and claims.
What this means is that if the business itself can't pay a creditor -- such as a lender or a landlord -- the creditor cannot come after the LLC owner's personal house, car, or other possessions. In other words, the LLC owner stands to lose only the money that he's invested in the LLC. This advantage is known as "limited liability."
What is the primary difference between a South Dakota Limited Liability Company (LLC) and a South Dakota Partnership?
The primary difference between a South Dakota Limited Liability Company (LLC) and a South Dakota Partnership is that the LLC owners are not personally liable for the company's debts and liabilities. In other words, any creditors of the LLC usually cannot go after the owners' personal assets to pay off LLC debts. However, partners do not usually receive this limited liability protection.
How is a South Dakota Limited Liability Company (LLC) taxed?
Just like sole proprietorships and partnerships, a South Dakota Limited Liability Company (LLC) is usually not considered a separate and distinct entity from its owners for tax purposes. This means that the LLC does not generally pay any income taxes itself. Rather, the LLC owners pay taxes on their share of profits (or deduct their share of business losses) on their personal tax returns.
How do I manage my South Dakota Limited Liability Company (LLC)?
The owners of most South Dakota LLCs participate equally in the management of their business. This particular arrangement is called "member management."
Unlike large corporations, LLCs have a straight-forward organizational structure, without officers or boards of directors. As a result, the LLC form is often chosen by people who want to be directly involved in managing and operating their business.
How Does My Business Form A South Dakota Limited Liability Company (LLC)?
To create a South Dakota LLC, your business must first file "Articles of Organization" with the South Dakota Secretary of State's Office. A filing fee of $150.00 must also accompany the filing of your Articles of Organization.
In addition to filing the Articles of Organization, your business should also create a written LLC "Operating Agreement." The Operating Agreement does not need to be filed with South Dakota Secretary of State's Office. However, the Operating Agreement is an important document because it explains the LLC members' rights and responsibilities, their percentage interests in the business, and their share of the profits.
What is a South Dakota Limited Liability Company?
A Limited Liability Company (LLC) is a business structure allowed by South Dakota law.
Owners of an LLC are called "members." South Dakota also permits “single-member” LLCs - those having only one owner.