Business Formation Documents: A Complete Guide for Small Business Owners

Introduction

Key Things to Know

1. 1

   Your choice of business structure (sole proprietorship, partnership, LLC, corporation) determines which formation documents you need and affects taxation, liability, and operational requirements.

2. 2

   MWBEs should prepare additional documentation for certification programs that can provide access to special contracting opportunities and resources.

3. 3

   Formation documents should anticipate future growth and include provisions for adding investors, changing ownership, or expanding operations.

4. 4

   State requirements vary significantly, so research your specific state's filing procedures, fees, and ongoing compliance obligations.

5. 5

   Working with a business attorney to draft or review your formation documents is an investment that can prevent costly legal issues in the future.

6. 6

   Proper formation documents not only establish your business legally but also create the foundation for business relationships, financing opportunities, and eventual business sale or succession.

7. 7

   Keep your formation documents updated as your business grows and changes to ensure they continue to serve your needs and comply with current laws.

South Dakota Requirements for Business Formation Documents

• Business Entity Selection (SDCL § 47-1A (Corporations), SDCL § 47-34A (LLCs), SDCL § 48-7A (Partnerships))

  Selection of appropriate business entity type (corporation, LLC, partnership, etc.) in accordance with South Dakota law, which affects taxation, liability, and operational requirements.

• Articles of Incorporation/Organization (SDCL § 47-1A-202 (Corporations), SDCL § 47-34A-203 (LLCs))

  Filing requirements for formal documents that establish the existence of the business entity with the South Dakota Secretary of State, including required information such as business name, registered agent, and business purpose.

• Business Name Compliance (SDCL § 47-1A-401 (Corporations), SDCL § 47-34A-105 (LLCs))

  Requirements for business name selection, including name availability, distinguishability from existing entities, and proper designators (Inc., LLC, etc.).

• Registered Agent Designation (SDCL § 47-1A-501 (Corporations), SDCL § 47-34A-114 (LLCs))

  Requirement to maintain a registered agent with a physical address in South Dakota who can receive legal documents and service of process on behalf of the business.

• Corporate Bylaws/Operating Agreement (SDCL § 47-1A-206 (Corporations), SDCL § 47-34A-103 (LLCs))

  Internal governance documents that outline management structure, voting rights, profit distribution, and operational procedures for the business entity.

• Federal Tax ID (EIN) Requirements (26 U.S.C. § 6109)

  Obligation to obtain an Employer Identification Number from the IRS for tax filing purposes, banking, and hiring employees.

• Securities Compliance (15 U.S.C. § 77a et seq. (Securities Act); SDCL § 47-31B (SD Securities Act))

  Compliance with federal and state securities laws when issuing ownership interests, including potential exemptions for small businesses and private offerings.

• Business Licensing Requirements (SDCL § 36-1 et seq. (Professional Licensing))

  Compliance with South Dakota business licensing requirements, which vary by industry and locality, including professional licenses and permits.

• Tax Election Provisions (26 U.S.C. § 1361-1363 (S-Corps); SDCL § 10-43 (SD Corporate Income Tax))

  Documentation of tax status elections (S-Corporation, partnership, etc.) that affect how the business is taxed at federal and state levels.

• Employment Law Compliance (29 U.S.C. § 201 et seq. (FLSA); SDCL § 60-11 (SD Employment Laws))

  Provisions ensuring compliance with federal and state employment laws, including classification of workers, minimum wage, and workplace safety requirements.

• Ownership Transfer Restrictions (SDCL § 47-1A-627 (Corporations), SDCL § 47-34A-503 (LLCs))

  Provisions governing the transfer of ownership interests, including rights of first refusal, buy-sell agreements, and restrictions on transfers to maintain business continuity.

• Indemnification Provisions (SDCL § 47-1A-851 (Corporations), SDCL § 47-34A-303 (LLCs))

  Clauses that protect officers, directors, and managers from personal liability for actions taken in good faith on behalf of the business.

• Annual Reporting Requirements (SDCL § 47-1A-1621 (Corporations), SDCL § 47-34A-211 (LLCs))

  Provisions acknowledging ongoing compliance with South Dakota's annual report filing requirements to maintain good standing with the Secretary of State.

• Dissolution Procedures (SDCL § 47-1A-1401 et seq. (Corporations), SDCL § 47-34A-801 et seq. (LLCs))

  Procedures for voluntary dissolution of the business entity, including required filings, asset distribution, and winding up of affairs.

• Foreign Business Registration (SDCL § 47-1A-1501 (Foreign Corporations), SDCL § 47-34A-1002 (Foreign LLCs))

  Requirements for out-of-state businesses operating in South Dakota to register as foreign entities with the Secretary of State.

• Intellectual Property Protection (15 U.S.C. § 1051 et seq. (Trademarks); 17 U.S.C. § 101 et seq. (Copyright); SDCL § 37-29 (Trade Secrets))

  Provisions addressing ownership and protection of business intellectual property, including trademarks, copyrights, and trade secrets.

• Privacy Policy Compliance (15 U.S.C. § 45 (FTC Act); SDCL § 22-40 (Privacy Laws))

  Requirements for businesses that collect customer data to maintain privacy policies in compliance with federal and state data protection laws.

• Minority/Women-Owned Business Certification (15 U.S.C. § 637 (SBA Programs); SDCL § 5-18A-12 (Procurement))

  Provisions related to obtaining and maintaining certification as a minority or women-owned business enterprise for access to certain contracts and opportunities.

• Banking Resolution (12 U.S.C. § 1818 (Banking Regulations); SDCL § 51A (Banking Laws))

  Authorization for designated individuals to open and manage business bank accounts, including signing authority and financial controls.

• Franchise Tax Compliance (SDCL § 10-45 (Sales Tax); SDCL § 10-46 (Use Tax))

  Acknowledgment of South Dakota's tax structure, which does not impose a corporate income tax or franchise tax, but requires compliance with sales tax and other applicable taxes.