How to Move an LLC to South Dakota

An out-of-state LLC can change its state of organization to South Dakota through statutory domestication. South Dakota domestication is a legal procedure that allows an LLC formed in another state, also called a foreign LLC or out-of-state LLC, to transfer to South Dakota.

After domestication, the LLC becomes a South Dakota LLC primarily governed by the South Dakota Uniform Limited Liability Company Act. The LLC otherwise continues as the same business entity before and after the domestication process. Whether the domestication can proceed also depends on the laws of the state the LLC is leaving. To find out whether your LLC qualifies and what the process involves, request a free analysis of your LLC move.

Some states use the name conversion for the legal procedure that changes an LLC’s state of organization, also called its domicile.

In many of those states, a business can complete a conversion to change its domicile or to change its entity type.

The same statutory process can accomplish either goal. South Dakota has two distinct procedures for LLCs. A South Dakota LLC domestication changes a company’s domicile only. A conversion changes a business from one entity form to another. For example, a South Dakota corporation might convert to an LLC. This article deals with domestications that change an out-of-state LLC into a South Dakota LLC.

Legal Effects of South Dakota LLC Domestication

A domestication into South Dakota takes effect when the South Dakota Secretary of State issues the certificate of organization. A domesticating LLC may opt for a delayed effective date up to 90 days after filing.

When the domestication officially takes effect, the legal effects of the domestication process under South Dakota law are as follows:

• Same company. An LLC that completes a domestication into South Dakota is for all purposes the same company as the out-of-state LLC that began the process.
• LLC governance. The LLC after domestication is a South Dakota LLC governed by South Dakota law. Its new South Dakota articles of organization and operating agreement govern the company’s affairs and bind the members.
• Company assets. The South Dakota LLC owns all the same property that the out-of-state LLC owned before the domestication. There is no need to sign deeds or transfer assets because ownership stays with the same entity.
• Company liabilities. The out-of-state LLC’s debt, liabilities, and other obligations from before the domestication are now the South Dakota LLC’s debts, liabilities, and obligations.
• Legal matters. Legal actions and proceedings brought by or against the out-of-state LLC move forward in the name of the South Dakota LLC and are not affected by the domestication. If the domestication results in a new entity name, the South Dakota LLC’s name is simply substituted for the out-of-state LLC’s name.
• Ownership interests. The treatment of LLC ownership interests described in the plan of domestication becomes effective when the domestication is complete. Members typically agree in the plan of domestication that membership interests in the out-of-state LLC will become membership interests in the South Dakota LLC, with members keeping the same equity interests and voting rights. Members may also opt to convert interests into money, property, or other consideration (or a combination).
• Dissolution not required. An LLC that domesticates to South Dakota is not dissolved in the former state. There is no need for winding up and asset distributions unless the members decide otherwise in the plan of domestication. The members may provide otherwise in the plan of domestication.

Why Business Owners Move LLCs to South Dakota

South Dakota’s LLC domestication process is often helpful for business owners who move to South Dakota. A South Dakota LLC domestication can also be a good idea for an LLC owner who lives in another state but wants South Dakota law to govern the business. A business owner might opt for a South Dakota LLC domestication for any of the following reasons, among others.

• Domestication to South Dakota may reduce the LLC’s total tax liability. South Dakota’s tax system is one of the nation’s most business-friendly, with no state taxes on business income, individual income, or capital gains. An LLC and its owners may all see substantial tax savings by relocating to South Dakota, especially if the LLC is coming from a state with high rates. Domestication can also reduce a business’s tax liability if there is no longer a sufficient connection, or taxable nexus, between the original state and the business, decreasing the number of states where the business pays taxes.
• South Dakota may have legal advantages. A South Dakota LLC domestication may be a good business move if South Dakota offers legal advantages compared to the business’s current state. South Dakota consistently ranks as a top state for business, highlighted by its pro-business legal system, relaxed regulatory environment, and low energy costs. An out-of-state LLC might also want to take advantage of South Dakota’s LLC laws. For example, owners might prefer South Dakota’s operating agreement flexibility or want to use the series LLC model that South Dakota law authorizes.
• Domestication may reduce an LLC’s reporting requirements. An out-of-state LLC may reduce the time and fees it puts into annual reporting by completing a South Dakota domestication. South Dakota LLCs must file a relatively brief annual report that can be completed online. The $50.00 annual report fee ($65.00 if filed in paper form) is lower than in many other states. The domestication may also ease reporting requirements if it lets the LLC avoid future filings in the original state.
• A South Dakota transfer may be more convenient for the business owner. If a business owner moves to South Dakota and wants to bring the business, a South Dakota LLC domestication is the simplest way to do so. Owners whose business is governed by the state where they live may cut down on legal issues and avoid scenarios in which two states’ laws are at odds. Living in the state where an LLC is domiciled can also make working with state government offices more convenient.
• Hiring professionals may be easier after the domestication. Each state has its own system of business and tax laws and regulations. A business owner searching for an accountant, attorney, or contractor needs to find a professional who is licensed in the right state and is familiar with the right state’s law. An LLC owner who resides in South Dakota can ordinarily hire local professionals for a South Dakota business without much difficulty. Finding South Dakota-based professionals who are familiar with a different state’s rules may be trickier.

South Dakota LLC Domestication Requirements

A South Dakota LLC domestication must follow the domestication laws of South Dakota and the current state. South Dakota’s procedure and requirements for LLCs domesticating into South Dakota are described throughout this article.

The current state’s law specifically governs whether the LLC can domesticate to South Dakota from its current state, the approval standard required to approve the domestication, the requirements for documents a domesticating LLC must file when domesticating out of the state, and any additional requirements the state’s domestication law places on domesticating companies.

Whenever both states address an issue, the LLC must follow both states’ rules. For example, South Dakota law lists certain information that must be included within the domesticating LLC’s written plan of domestication. In most cases, the current state will have a similar list. A domesticating LLC’s plan of domestication needs to include all items on either list.

Eligibility for South Dakota LLC Domestication

South Dakota authorizes inbound domestication under S.D.C.L. SS 47-34A-910(a), which permits a foreign limited liability company to become a South Dakota LLC pursuant to a plan of domestication. The foreign LLC must be authorized to domesticate under the law of its current state of organization and must be in good standing. South Dakota does not impose additional eligibility restrictions beyond the two-state authorization requirement and compliance with the plan and filing procedures.

Documents Required for South Dakota LLC Domestication

The South Dakota LLC domestication process involves preparing and adopting several domestication documents that must satisfy both states’ requirements. The domestication documents memorialize the terms of the domestication and control the company when the domestication takes effect.

• Plan of Domestication. A Plan of Domestication designed to comply with the requirements of both South Dakota law and the law of the state that the LLC is moving from.
• South Dakota Articles of Domestication. The South Dakota Articles of Domestication with all information and any related documents needed for filing with the South Dakota Secretary of State’s Business Services Division.
• Domestication Document for Filing in Prior State. Depending on state law, this document may be called articles of domestication, statement of domestication, articles of conversion, certificate of conversion, statement of conversion, or a similar term.
• South Dakota Articles of Organization. The South Dakota Articles of Organization for filing with the South Dakota Secretary of State’s Business Services Division.
• South Dakota Operating Agreement. A state-specific Operating Agreement to properly structure the LLC as a South Dakota LLC, provide rules for profit distributions and decision-making, clarify the federal income tax classification, and help provide maximum liability protection.
• Resolution Authorizing Domestication. A resolution approving the transaction and adopting the South Dakota organizational documents as the LLC’s governing documents.

Processing Time for South Dakota LLC Domestication Filings

The South Dakota Secretary of State processes domestication filings when the certificate of organization takes effect. Standard processing times vary based on the office’s current workload. Contact the South Dakota Secretary of State for current processing estimates.

Filing South Dakota LLC Domestication Documents

An out-of-state LLC that has its domestication documents in their final form officially adopts the documents and completes the domestication by performing several administrative tasks.

• Conduct preliminary name search. Check the official records of the South Dakota Secretary of State’s Business Services Division to determine whether the LLC’s name is available in South Dakota. If the name is unavailable, a slight name change may be required to complete the domestication.
• Obtain signatures on the Articles of Domestication. The Articles of Domestication must be signed by the required parties. The Business Services Division requires a manual (wet) signature on the Articles of Domestication (no e-signing).
• Obtain signatures on the Articles of Organization. The Articles of Organization must be signed by the required parties. The Business Services Division allows the Articles of Organization to be e-signed.
• File the Articles of Domestication. File the Articles of Domestication with the South Dakota Secretary of State’s Business Services Division. The Business Services Division requires the Articles of Domestication to be filed by mail or in person (no e-filing).
• File the Articles of Organization. File the Articles of Organization with the Business Services of the Secretary of State. The Business Services Division ordinarily allows Articles of Organization to be e-filed. However, Articles of Organization filed for a domestication should be submitted with the Articles of Domestication as an attachment.
• File domestication documents with prior state. File the domestication documents with the Secretary of State or equivalent agency for the state that the LLC is moving from.

Costs and Filing Fees for South Dakota LLC Domestication

An LLC’s cost for a domestication into South Dakota depends on the scope of work involved. The documents and filings described above require professional preparation to comply with both states’ requirements, and coordinating submissions with two separate state agencies adds further complexity. To find out what your specific move will cost, request a free analysis of your LLC move.

South Dakota Secretary of State Filing Fees

In addition to professional service costs, the South Dakota Secretary of State charges filing fees totaling $300.00. This consists of $150.00 for the Articles of Organization and $150.00 for the Articles of Domestication. South Dakota charges an extra $15.00 paper-filing fee for documents that are not filed online.

The LLC’s current state will also charge a filing fee for that state’s version of the articles of domestication. The fee amount depends on the state the LLC is domesticating from.

Additional Costs of South Dakota LLC Domestication

An out-of-state LLC that domesticates to South Dakota will also incur labor costs and, if applicable, registered agent fees. Labor costs are the amounts charged by the service provider the LLC retains to manage the South Dakota domestication.

Service providers may charge a flat fee or charge by the hour, with fee amounts varying by provider. Work that goes into a domestication includes obtaining and organizing information, drafting the domestication documents, communicating with the business owners and state agencies (the South Dakota Secretary of State), and filing domestication documents with state agencies.

A South Dakota LLC must have a registered agent on file with the South Dakota Secretary of State’s office. The registered agent’s job is to accept service of process and other important notices for the company. A registered agent can be a member, manager, or other officer of the company, but there must be a street address in South Dakota where the agent can accept service.

A domesticating LLC that lacks an office location or other street address physically in South Dakota can hire a commercial registered agent to satisfy the requirement.

A commercial registered agent charges a fee, typically around $150.00 per year, in return for acting as an LLC’s registered agent and address for service. A commercial registered agent also helps to facilitate a uniform, organized procedure for receiving important communications. South Dakota LLCs that have physical addresses in-state often hire commercial registered agents for the convenience they provide.

Moving an LLC Out of South Dakota

South Dakota also permits outbound domestication under the South Dakota Limited Liability Company Act. An LLC organized in South Dakota can domesticate to another state by filing Articles of Domestication with the South Dakota Secretary of State and paying a $300 filing fee. The outbound filing requires a certificate of surrender and a Plan of Domestication approved by the LLC’s members.

Alternatives to South Dakota LLC Domestication

When domestication is not available because the other state’s law does not allow it, a merger-based reorganization achieves the same result. Reorganization requires forming a new LLC in the destination state and merging the original LLC into it. South Dakota permits LLC mergers, and the South Dakota Secretary of State charges a $60 filing fee. For a detailed explanation of how reorganization works, see our guide to the LLC reorganization process.

South Dakota LLC Laws That Apply After the Move

An LLC that domesticates to South Dakota becomes subject to South Dakota’s ongoing requirements immediately upon effectiveness of the domestication. These requirements are imposed under the South Dakota Uniform Limited Liability Company Act.

South Dakota does not require LLCs to file annual reports. Instead, South Dakota requires domestic LLCs to file a relatively brief annual report on or before the first day of the company’s anniversary month.

The filing fee is $50.00 (or $65.00 if filed in paper form). This reduced reporting requirement is one advantage of domesticating to South Dakota, as it eliminates the burden of annual compliance filings common in other states. An LLC that domesticates to South Dakota and no longer has to file in the original state will avoid the time and expense of annual filings.

South Dakota LLCs must also maintain an Operating Agreement governing the LLC’s internal affairs, including the rights and obligations of members and managers, profit distributions, and management structure. The Operating Agreement is not filed with the state; it is maintained by the LLC as a private document.

South Dakota does not require LLCs to appoint a registered agent with authority to accept service of process on the LLC, as many states do. However, South Dakota requires LLCs to designate a registered agent in South Dakota where service of process on the LLC may be delivered. A business can hire a commercial registered agent to serve as its South Dakota registered agent, which is often a good option for an LLC without a South Dakota location.

Get a Free Analysis of Your LLC Move to South Dakota

Every LLC move depends on the laws of two states. Our free analysis compares the requirements of your current state and South Dakota, confirms whether domestication is available, and provides a step-by-step roadmap with cost estimates.

Understanding the full domestication process, including document preparation and coordination between both states, is covered in detail in our guide to LLC domestication.

For a complete directory of states and the domestication or conversion procedures available in each, see our state-by-state LLC domestication directory.