Get a Tax ID / EIN Number and Form Your New Business in South Dakota
If you’re interested in starting a business in South Dakota, there are a few formalities you’ll need to take care of first. South Dakota is largely rural, making it a relatively low-population state in the country. However, it’s still home to 85,252 small businesses, which represent 99 percent of all businesses in the state. South Dakota’s small businesses are responsible for adding 4,956 net new jobs in 2018 and helping to keep the unemployment rate lower than the national average. Similar to the process of obtaining a tax ID number in Tennessee, South Dakota offers an online Tax ID Obtainment process, you can start this process with the South Dakota online Tax ID number application.
Steps to Obtaining a Tax ID (EIN) Number and Registering a South Dakota Business
- Forming a Business in South Dakota
- Federal Tax ID (EIN) Number Obtainment
- South Dakota State Tax ID Number
- Localized Licenses and Permits in South Dakota
1. Forming a Business in South Dakota
If you’re not sure what type of business you want to form, you should spend some time considering the most important factors for your business’s success. Think about your model for expansion and choose the business type that makes the most sense for you. There are several types to choose from, including sole proprietorships, partnerships, limited liability companies, and corporations. Some of these businesses have built-in perks, but are more complex to deal with. For example, corporations are tougher than most business types to create and manage, and they’re subject to more laws, rules, and regulations, but they can also issue public shares to raise funds, which makes them a necessity for most businesses that plan to expand nationally.
There are several factors you could use to make your decision. For example, you could consider how each business pays taxes. In sole proprietorships and partnerships, taxes are simple; you’ll pay taxes on whatever income you generate in the business, but as an individual. LLCs work a little differently, since they function as separate legal entities. For tax purposes, they’re considered pass-through entities, which means they won’t pay taxes directly on the income they generate, but you’ll pay taxes as an individual on any salaries or profits you take from the business. In South Dakota, LLCs are required to file an annual report. Corporations are required to pay taxes on eligible income, in addition to you paying individual taxes on salary, profits, or dividends you make from the business, resulting in double taxation. However, South Dakota is one of just a few states that doesn’t have a corporate income tax, making it one of the most tax-friendly states in the nation. Some businesses may be required to pay a special bank franchise tax.
You’ll also want to consider the liability you may face in each business type. In sole proprietorships and partnerships, there’s no liability protection. You’ll be legally responsible for business actions you take, and will take on all debts as an individual. LLCs are separate legal entities that can take on debts of their own and can shield you from many liability issues. Corporations provide even more liability protection, serving as separate legal entities as well.
You may be able to change your business structure at some point in the future, but it’s better to choose the ideal type for your business early on. Put some serious thought into this decision.
2. Federal Tax ID (EIN) Number Obtainment
The majority of South Dakota businesses will need a federal tax ID number, or can at least benefit from having one. This 9-digit number is given to businesses when they register with the federal government, and is sometimes called an employer identification number (EIN). It’s a requirement for any business with multiple members or those that plan on hiring employees. You’ll need one to apply for a business bank account or business loan, and you’ll typically need one to apply for business licenses and permits.
It’s wise to get an EIN even if you believe you don’t need one. You may end up needing one in the future, and you can get use out of it by using it in place of a personal SSN on many applications.
Getting this tax ID number can be simple with the right approach. Use our federal tax ID number obtainment services and all you’ll need to do is answer a few simple questions about your business. When you’ve completed the questionnaire, you’ll receive your tax ID via email in less than an hour.
3. South Dakota State Tax ID Number
Some businesses will also be required to get a South Dakota state tax ID number. This, too, is a unique identifier for your business, but it functions at the state level. You’ll need one if you’re hiring employees in the state of South Dakota, if you’re selling taxable goods and services in the state, or if you’ll owe excise taxes, which apply to some regulated goods.
To get your South Dakota state tax ID number, make sure you have your federal tax ID number in place. Then, make use of our South Dakota state tax ID number obtainment services. Just fill out our online questionnaire, and you’ll receive your South Dakota state tax ID number in 4 to 6 weeks.
4. Localized Licenses and Permits in South Dakota
South Dakota doesn’t have a general business license required by all businesses in the state. However, many South Dakota businesses will be required to have a license, a permit, or some other form of certification. These tend to be regulated by industry, and the rules and restrictions may change depending on which city or county you’re operating in. This can get somewhat complicated, so it may be best for you to contact your local Chamber of Commerce to find out which licenses and permits your business may specifically require.
Starting a business doesn’t have to be complicated. Use our federal tax ID number and South Dakota state tax ID number obtainment services today, and get your tax ID numbers faster so you can get your business off the ground and start generating revenue.