The South Dakota Limited Liability Company as an S-Corporation

You are ready to start a small business. You have a great business plan for a unique new service or special product.

Inevitably, the question of how to structure your business comes up.  Two of the most popular business structures are the limited liability company (LLC) and the S-Corporation.  However, under some circumstances you can have the "best of both worlds" by establishing an LLC and then electing S-Corporation status for tax purposes. 

Requirements

For a South Dakoa LLC to be eligible for "S-Corporation" status, several requirements must be met. In particular, the LLC must
  1. be a United States corporation;
  2. have 100 or fewer eligible shareholders; and
  3. have only one class of stock. 

Advantage of Filing as an S-Corporation

The primary reason for electing 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. 

About Swier Law Firm's Business & Corporate Practice Group

Swier Law Firm's Business & Corporate Practice Group handles the following types of cases:

  • Cyber Law and Cyber Security
  • Limited Liability Companies (LLCs)
  • General Partnerships and Limited Liability Partnerships
  • Joint Ventures and Strategic Alliances
  • C Corporations and S Corporations
  • Trademarks and Copyrights
  • Real Estate
  • Wind Energy Transactions
  • Corporate Governance
  • Corporate Dissolution
  • Conducting Internal Investigations for Boards, Board Committees and General Counsel
  • Preparing, Revising and Updating Governance and Compliance Materials, including Bylaws,
    Committee Charters, and Compliance Policies.

To learn more about business and corporate legal issues in South Dakota, contact Swier Law Firm.