How to Move an LLC to South Dakota

There are many reasons why a business owner may want to move an LLC to South Dakota. This article discusses the use of domestication, known in some states as LLC conversion, to transfer an LLC to South Dakota.

What is South Dakota LLC Domestication?

South Dakota domestication is a legal procedure that allows an LLC formed in another state—a foreign LLC or out-of-state LLC—to transfer to South Dakota.¹ An out-of-state LLC that domesticates into South Dakota changes its domicile—the LLC’s state of formation that serves as its legal home state—to South Dakota. After completing the domestication process, the LLC becomes a South Dakota LLC that is primarily governed by the South Dakota Uniform Limited Liability Company Act.²

South Dakota LLC Domestication vs. LLC Conversion

South Dakota law authorizes another procedure for LLCs—called a conversion—that changes a different form of business entity into a South Dakota LLC (or vice versa).³ South Dakota’s domestication and conversion procedures progress similarly, but each has a distinct goal. A South Dakota LLC domestication changes a company’s domicile state, but it continues to be an LLC throughout the process. A South Dakota conversion turns an LLC into a different entity form—such as a partnership or corporation.

There are multiple states with one statutory conversion procedure that can change an LLC’s entity form or its domicile state (or sometimes both). In those states, a conversion procedure that transfers an LLC to a new state satisfies the South Dakota rule that an out-of-state LLC can domesticate to South Dakota only if the current state authorizes domestication.⁴

Why Transfer an LLC 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.⁵
• 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.⁶ 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.

What are the Benefits of South Dakota LLC Domestication?

The LLC domestication process is the best option for most out-of-state business owners who want to transfer an LLC to South Dakota. Advantages of domestication over other approaches to moving a business include:

• The LLC keeps the same identity. A South Dakota LLC that completes a domestication from another state continues to be the same company during and after the domestication process.⁷ It keeps its same tax identity and can keep using the same Employer Identification Number (EIN).
• The business stays open. The South Dakota domestication process does not involve or require a pause in the company’s operations. Offices can stay open, and day-to-day operations can continue as normal. The business’s employees are still employed by the same company—with no break in the employment relationship. So, there’s no need to lay off and re-hire employees.
• The LLC keeps its property and accounts. The South Dakota LLC owns all the property that the out-of-state LLC owned going into the domestication.⁸ It can continue to use the same bank accounts unless the members choose to switch to a South Dakota bank. here is also no need to sign deeds for real estate or asset-transfer documents for other property because ownership is still with the same entity.
• Business agreements are still in force. Contracts involving the out-of-state LLC remain valid and enforceable throughout a domestication to South Dakota. The LLC keeps the same contractual rights and duties, and it can continue its business relationships without negotiating new agreements.
• The out-of-state LLC need not dissolve. Some business-transfer methods require dissolution of the business in its current state—which is a lengthy process that often requires considerable legal fees. An out-of-state LLC that uses the domestication process to move to South Dakota is not dissolved in the original state.⁹ It simply continues its existence as a South Dakota company.
• Registration as a foreign LLC is optional. An LLC that does business in a state that is not its domicile must register in the other state as a foreign LLC. An out-of-state LLC that domesticates to South Dakota need not register as a foreign LLC unless it intends to continue doing business in the original state. The LLC can request authority to transact business as a foreign LLC, but it is only necessary if the members want to keep doing business there.

What LLCs Can Convert to South Dakota LLCs?

Not every out-of-state business is eligible for a South Dakota LLC domestication. Out-of-state business owners considering a South Dakota LLC domestication should weigh the following issues:

Is the Business a Limited Liability Company?

An out-of-state business that completes a South Dakota LLC domestication must be an LLC.¹⁰ An out-of-state corporation or partnership may still be able to become a South Dakota LLC, but it will need to use the South Dakota conversion process.¹¹

Does the LLC’s Current State Authorize LLC Domestications?

An out-of-state LLC cannot domesticate into South Dakota unless its current state authorizes LLC domestications.¹² South Dakota’s domestication law requires an out-of-state LLC to comply with its current state’s law in performing the domestication.¹³ Thus, the current state must have a statutory process—called domestication or conversion in most state—that changes an LLC’s domicile to another state. A majority of states authorize LLC domestications, but there are a sizeable minority that do not.

Can the LLC Meet South Dakota’s Requirements for its Type of Business?

South Dakota law allows LLCs to engage in any lawful business, but LLCs in certain fields must be able to comply with statutes that apply specifically to the field.¹⁴ For example, an LLC involved in corporate farming must comply with South Dakota’s ownership restrictions.¹⁵

A few states—notably including California—restrict LLCs from providing professional services. South Dakota law allows LLCs to perform professional services as long as they meet South Dakota’s laws and regulations that govern the type of professional service.¹⁶ South Dakota has statutes specifically authorizing LLCs to provide professional services in multiple areas—including nursing and other healthcare services, physical therapy, speech pathology, veterinary medicine, law, and professional accounting.¹⁷

Before domesticating, an out-of-state LLC that will offer professional services should ensure that its members and employees have the necessary licenses and that the business can comply with South Dakota’s rules, regulations, and ethics governing the profession.

How Much Does South Dakota LLC Domestication Cost?

An LLC’s cost for a domestication into South Dakota includes the service provider’s labor costs, state office’s filing fees, and commercial registered agent fees (if applicable).

Service-Provider Labor Costs

A domesticating LLC typically hires a service provider to assist with the domestication process. Service providers charge for the labor they put into the project—which includes:

• Information gathering and review;
• Document preparation and revision;
• Communications with the LLC owners about the domestication terms and documents;
• Document filing and communication with state offices about processing.

Service-provider fees vary by provider and depending on the nature of the domestication. Providers may offer hourly rates or flat fees.

Filing Fees

An LLC that completes a domestication into South Dakota must pay filing fees to the South Dakota Secretary of State’s Business Service Division and to the equivalent filing office in the LLC’s current state. South Dakota charges fees totaling $300.00—made up of $150.00 for the articles of organization and $150.00 for the articles of domestication.¹⁸ 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.

Registered Office Fees

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.¹⁹

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.²⁰ 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.

How Long Does South Dakota LLC Domestication Take?

The South Dakota LLC process consists of multiple steps that together determine the time needed to complete a domestication. The timeframe to complete each step depends in part on the responsible party’s turnaround time—including:

• How long the LLC owners or managers need to decide on domestication terms and provide the information to the document preparer;
• How long the document preparer needs to review the information and draft the domestication documents such as the articles of organization and articles of domestication;
• How long LLC owners or managers need to review the domestication documents and either approve and sign the documents or request revisions;
• How long the service provider (or other responsible person) needs to submit the completed domestication documents to the state offices; and
• How long the South Dakota Secretary of State’s Business Services Division and the current state’s equivalent office need to process the domestication documents.

Expedited processing is available from the South Dakota Secretary of State’s office for an extra $50.00 fee.

What Laws Govern South Dakota LLC Domestication?

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;²¹
• The approval standard required to approve the domestication;²²
• 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.²³ 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.

What is the South Dakota LLC Domestication Process?

The South Dakota LLC domestication process consists of two components: document preparation and administrative tasks.

Document Preparation

Careful preparation of domestication documents is a critical part of the South Dakota LLC domestication process. It is important that all documents satisfy all relevant requirements of either state.

• Plan of Domestication. A Plan of Domestication that is 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, certificate of conversion, or a similar term.²⁴
• 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.

Administrative Tasks

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.

What is the Legal Effect of South Dakota LLC Conversion?

A domestication into South Dakota takes effect when the secretary of state’s office issues the certificate of organization.²⁵ A domesticating LLC may opt for a delayed effective date up to 90 days after filing.²⁶

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.²⁷
• LLC governance. The LLC after domestication is a South Dakota LLC governed by South Dakota law.²⁸ Its new South Dakota articles of organization and operating govern the company’s affairs and bind the members.
• Company Assets. The South Dakota owns all the same property that the out-of-state LLC owned before the domestication.²⁹ 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.³⁰
• 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.³¹ 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.³² 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 to keep the same equity interests and voting rights. Members may also opt to convert interests into money, property, or other consideration (or a combination).³³
• Dissolution not required. An LLC that domesticates to South Dakota is not dissolved in the former state.³⁴ 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.

1. S.D.C.L. § 47-34A-910(a).
2. S.D.C.L. § 47-34A-101, et. seq.
3. S.D.C.L. § 47-34A-906(a).
4. See S.D.C.L. § 47-34A-910(a)(1).
5. See S.D.C.L. §§ 47-34A-114; 701.
6. S.D.C.L. § 47-34A-212.
7. S.D.C.L. § 47-34A-913(a)(1).
8. S.D.C.L. § 47-34A-913(a)(2).
9. S.D.C.L. § 47-34A-913(a)(7).
10. S.D.C.L. § 47-34A-910(a).
11. S.D.C.L. § 47-34A-906(a).
12. S.D.C.L. § 47-34A-910(a)(1).
13. S.D.C.L. § 47-34A-910(a)(3).
14. S.D.C.L. § 47-34A-112(a).
15. S.D.C.L. § 47-34A-112(a). See also S.D.C.L § 47-9A-1, et. seq.
16. S.D.C.L. § 47-34A-112(a).
17. See, e.g. S.D.C.L. §§ 47-11E-1; 11F-1; 11G-2, 13-1, 13A-1; 13B-1.
18. S.D.C.L. §§ 47-34A-212; 47-34A-1206.
19. S.D.C.L. § 59-11-5.
20. S.D.C.L. § 59-11-7.
21. S.D.C.L. § 47-34A-910(a).
22. S.D.C.L. § 47-34A-911(a).
23. S.D.C.L. § 47-34A-910(c).
24. Fourteen states use the term articles of domestication to refer to the document that must be filed with the state to approve the domestication: Iowa, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, North Dakota, South Dakota, Utah, Vermont, Virginia, Wisconsin, Wyoming, and Indiana. The corresponding document may be called a statement of domestication (Alaska, Arizona, Connecticut, Idaho, Illinois, Mississippi, and Pennsylvania); articles of conversion (Florida, Nevada, North Carolina, Oregon, and Washington) or certificate of conversion (California, Delaware, Georgia, Michigan, Ohio, and Texas). It may also be called a statement of conversion (Colorado, Maine), certificate of domestication (Kansas), request for conversion (Louisiana), or statement/plan of domestication (District of Columbia).
25. S.D.C.L. § 47-34A-912(b).
26. S.D.C.L. § 47-34A-206(d).
27. S.D.C.L. § 47-34A-913(a)(1).
28. S.D.C.L. § 47-34A-910(a).
29. S.D.C.L. § 47-34A-913(a)(2).
30. S.D.C.L. § 47-34A-913(a)(3).
31. S.D.C.L. § 47-34A-913(a)(4).
32. S.D.C.L. § 47-34A-913(a)(6).
33. S.D.C.L. § 47-34A-910(c).
34. S.D.C.L. § 47-34A-913(a)(7).