Do you own a limited liability company (LLC) created in a state other than South Dakota, but you want to expand your business to the Mount Rushmore State? If so, you’ll need to qualify your foreign LLC in order to transact business in South Dakota.
What is a foreign qualification and how do foreign LLCs function within the state of South Dakota? In this guide, we’ll answer these questions and more.
Guru Tip: If you’d rather hire an online service to handle this process for you, many of the best LLC services can handle it for you.
What Is a Foreign Qualification?
A foreign qualification enables your limited liability company to do business in the state of South Dakota. It doesn’t matter which state you originally formed your business in ― or in other words, the state your domestic LLC is located in ― as the qualification process to register a foreign LLC in South Dakota is the same regardless of where your domestic LLC is based.
The confusion surrounding foreign qualification usually centers on what it means to “do business” in a state outside of your primary state. This gets especially problematic considering some states don’t strictly define what it means to transact business in that state. South Dakota state law does not define “doing business” in the state.
What Qualifies as ‘Doing Business’ in South Dakota
Since there is no set definition of “doing business” in South Dakota, each entity wishing to do business in the state is evaluated on a case-by-case basis. However, in general, you will need to form a foreign LLC in South Dakota if your business pursues any of the following activities in this state:
What Does NOT Qualify as ‘Doing Business’ in South Dakota
Meanwhile, the following activities are not considered to be “doing business” in South Dakota, and you do not need to qualify a foreign LLC to pursue them:
How to Get Foreign Qualification in South Dakota
In South Dakota, any foreign entity can apply for foreign qualification online via the Secretary of State’s website. If you prefer to file by mail, you will need to print off the forms and pay an additional $15 paper processing fee. In either case, the application will require the following information:
Filing Fee: $750, with checks made payable to the “Secretary of State.”
What Is the Penalty for Not Getting Foreign Qualification in South Dakota?
Without a Certificate of Authority, your business will not be able to file a lawsuit against a third party in a South Dakota court. However, your business can still defend against lawsuits in the state. This means that individuals and businesses could fail to honor contracts with your business, and you wouldn’t be able to do anything about it legally.
Should I Hire a Business Service Provider to File My South Dakota Foreign Qualification?
If you don’t want to handle your foreign qualification on your own, you have options. Some entrepreneurs choose to hire a lawyer to prepare and file their Certificate of Authority, which can be a good option if you’re concerned about getting the job done right. However, attorney’s fees can be quite expensive.
The other option is to hire a business service provider like Incfile or ZenBusiness to register your foreign LLC with the state of South Dakota.
These companies can typically get your foreign qualification done for a fraction of the price of an attorney. This is our preferred route if you don’t want to go with the DIY option.
The process for getting a foreign qualification in the state of South Dakota isn’t particularly complicated compared to some other states. Everything can be done online, making the process much more efficient. However, with a $750 filing fee, obtaining foreign qualification in South Dakota is significantly more expensive than the process in most other states. Nonetheless, this isn’t a process that should be overlooked or taken lightly, because the penalties for not qualifying a foreign LLC in South Dakota can be severe ― especially if someone you do business with doesn’t live up to their end of a contract and you’re unable to sue them.
We hope this article managed to answer your questions about obtaining a South Dakota foreign qualification, and we wish you a prosperous business future!