The Swier Law Firm Business Litigation 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 a business owner in Sioux Falls and believe I may have been the victim of fraud that took place four years ago. In South Dakota, when does the statute of limitations for a cause of action for fraud start?
Under South Dakota law, in an action for relief on the ground of fraud, the cause of action shall not be deemed to have accrued until the aggrieved party discovers, or has actual or constructive notice of, the facts constituting the fraud.
Who should form a limited liability company in South Dakota?
You should consider forming a limited liability company ("LLC") if you are concerned about personal exposure to lawsuits or debts arising from your business. For example, if you decide to open a business that deals directly with the public, you may worry that your commercial liability insurance won't fully protect your personal assets from potential slip-and-fall lawsuits or claims by your suppliers for unpaid bills. Running your business as an LLC may help you sleep better, because it gives you personal protection against these and other potential claims against your business.
Does my South Dakota limited liability company need an operating agreement?
Although South Dakota's LLC laws don't require a written operating agreement, you should have one. Here's why an operating agreement is necessary:
- It helps to make sure that courts will recognize your personal liability protection by showing that you have been careful about organizing your LLC as a legitimate business.
- It sets out rules that govern how profits will be split up, how major business decisions will be made, and the procedures for handling the departure and addition of members.
- It helps to alleviate misunderstandings among the owners over finances and management.
- It allows you to create your own operating rules rather than being governed by South Dakota's LLC "default" rules, which might not be to your benefit.
What is a member-managed limited liability company in South Dakota?
When you form a South Dakota limited liability company (“LLC”), you will need to decide how your LLC will be managed. The most common form of LLC management is the member-managed LLC where all the members (or owners) participate in running the business.
In South Dakota, A Member-Managed LLC Is The Most Common Choice
Most people who set up an LLC in South Dakota choose member-management, meaning that all the members share responsibility for the day-to-day running of the business. This approach is more common in part because most LLCs are small businesses with limited resources and they don’t require a separate management level to operate. Unlike corporations, LLCs have a streamlined organizational structure, without officers or boards of directors. As such, the LLC form is often chosen by people who want to be directly involved in managing and operating their business.
If you and the other members of your LLC want to run your own business - actually make and sell products, take orders, provide services - then you will probably want a member-management structure for your LLC. For example, if your LLC is a bakery and all your LLC members want to play an active role in the business -- crafting recipes, baking goods, hiring employees, opening and closing the shop -- then you will want to operate the LLC as member-managers.
What is a South Dakota limited liability company?
In South Dakota, a limited liability company, commonly known as an "LLC," is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
Similar to owners of partnerships or sole proprietorships, LLC owners report business profits or losses on their personal income tax returns; the LLC itself is not a separate taxable entity. However, like owners of a corporation, all LLC owners are protected from personal liability for business debts and claims -- a feature known as "limited liability." This means that if the business owes money or faces a lawsuit, only the assets of the business itself are at risk. Creditors usually can't reach the personal assets of the LLC owners, such as a house or car. (Both LLC owners and corporate shareholders can lose this protection by acting illegally, unethically, or irresponsibly.)
For these reasons, many people say the LLC combines the best features of the partnership and corporate business structures.