How to form a South Dakota corporation

Benefits of a corporation

A corporation is a limited liability entity. That means that if a corporation is sued or cannot meet its financial obligations, its owners/shareholders cannot lose more than they have invested in the corporation. Forming a corporation lends credibility to a business and offers numerous other benefits, including potential tax savings and increased appeal to investors.

Requirements for incorporating in South Dakota

Preparing your articles of incorporation

To incorporate a business, articles of incorporation and a filing fee must be submitted to the South Dakota Secretary of State. A corporation’s existence begins when you file the articles. The articles may contain many optional clauses, but the minimum information required is:

• Name of the corporation
• Address of the corporation’s principal office
• Stock structure
• Names and addresses of incorporators
• Registered agent

In regard to stock structure, the articles of incorporation must list the total number of shares the corporation is authorized to issue. If there is more than one class or series of shares, the articles must state the number of shares in each class or series and provide a distinguishing designation. Before any shares of a class or series are issued, the articles must state the terms applicable to that class or series, including preferences, rights and limitations.

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Naming your corporation

Before filing articles of incorporation, you should check to see if the name you want is available, which can be done by telephoning the Secretary of State’s office.

You can reserve a name for 120 days by filing a name reservation application with the Secretary of State.

Your corporation’s name must meet the following requirements:

• It must contain the word “corporation,” “incorporated,” “company,” or “limited,” or an abbreviation for one of those words.
• Your corporation’s name must be distinguishable from any other business entity name registered or reserved with the Secretary of State.

Specifying incorporators

A person who signs and files the articles of incorporation is called an incorporator. You must meet the following requirements when specifying incorporators:

• Incorporators’ names and addresses must be listed in the articles of incorporation.
• At least one incorporator is required.
• An incorporator may be an individual who is at least 18 years old or an entity. An incorporator does not have to live in South Dakota.
• When initial directors are not named in the articles of incorporation, the incorporators must elect the directors who will take over management of the corporation during the first meeting of the shareholders. The incorporators may also adopt bylaws.

Specifying directors

Corporate directors are responsible for the corporation’s overall business goals, policies and strategies. Directors are fiduciaries, which means they must make prudent business decisions and place the corporation’s interests ahead of their own.

When specifying directors for your corporation, you must adhere to the following requirements:

• There may be one or more directors. Although there is no other limit on the number of directors a corporation may have, the number of directors should be stated in either the articles of incorporation or bylaws.
• Directors do not have to be shareholders or residents of South Dakota. Qualifications for directors may be specified in the articles of incorporation or bylaws.

Specifying a registered agent

All corporations must designate a registered agent to receive lawsuits and other legal documents for the corporation. You must meet the following requirements when specifying your corporation’s registered agent:

• The articles of incorporation must list one of the following: the name of the commercial registered agent, the name of the noncommercial registered agent, or the job title of a person at the corporation who will act as registered agent. If the agent is not a commercial registered agent, the articles must also list the street address for the agent’s business office in South Dakota.
• The registered agent may be either an individual who has a business address in South Dakota or a commercial registered agent who is registered with the Secretary of State’s office.

Stating a corporate purpose

All South Dakota corporations have a purpose of engaging in any lawful business. It is not necessary to provide any additional purpose in the articles of incorporation.

Determining incorporation bylaws

Bylaws serve as an internal roadmap of the way a corporation’s business will operate. Although state law does not prescribe the contents of bylaws, they may include any provision for regulating the corporation’s affairs and managing its business. Bylaws typically regulate such matters as the number and terms of officers and directors and the manner in which shareholder meetings will be conducted and votes taken. Bylaws are not filed with the Secretary of State.

In regard to bylaws, your corporation must adhere to the following requirements:

• Either the directors or incorporators must adopt bylaws.
• Bylaws cannot be inconsistent with the articles of incorporation or the law.

Costs of incorporating in South Dakota

The South Dakota Secretary of State requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay federal income taxes. South Dakota does not have a state corporate income tax.

LegalZoom can help you start a corporation in South Dakota. LegalZoom offers online filing services and can find a registered agent for your business in South Dakota.