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Advantages of Incorporating a Business in South Dakota

Whether you are planning to incorporate a startup company South Dakota or expand an existing company, it is important to know that the Mount Rushmore State has much more to offer in terms of advantages and benefits for a variety of businesses. It is home to big corporations and large enterprises including Avera Health, Regional Health, Black Hills, Daktronics, NorthWestern Energy, First PREMIER Bank, and Raven Industries among others. There are several industries and each industry has its own set of regulations and business incentives. Although, agriculture with a $20 billion impact on state economy is the largest industry there are other sectors also doing well. For instance advanced manufacturing, financial services, bioscience, and tourism.

Drivers of Business Growth for Start-ups

If you want to take advantage of the various incentive programs offered in the state, you will need to register a new company in South Dakota. You can form different types of companies although the most common are Limited Liability Companies and Corporations. Let’s take a look at some of the advantages of these two business entities:

Advantage#1: The benefits of Incorporation or LLC formation

C or S Corporation

  • South Dakota Tax Incentives: If you register a new company in South Dakota then you will be able to benefit from the variety of tax incentives available. South Dakota businesses can enjoy a definite competitive edge over businesses based in other states in the nation. You can benefit from the following tax advantages:
    – No corporate income tax
    – No personal property tax
    – No personal income tax
    – No inheritance tax
    – No business inventory tax
    Apart from this, there are several other forms of tax credits and incentives that can ensure your business is able to focus on growth. For instance, motor vehicles will not be subjected to state and local sales tax.
  • Independent life: When you register a new business in South Dakota as an S Corporation, it will enjoy an independent life. This means that the incapacitation or death of a stockholder will not have a negative impact on the business operations.
  • Federal taxation: If you register a new company in South Dakota as an S corporation then the corporation or firm will not pay any income tax. Instead, each shareholder or owners in the company will be liable to pay tax on their personal tax returns.

Limited Liability Company

  • Financing options for New Businesses: It is a known fact that if you register a new business in South Dakota or any other state, financing options play a critical role in ensuring your business is able to sustain itself in the starting phase. Several financial programs have been initiated by the South Dakota Governor’s Office of Economic Development. The programs that you can benefit from include:
    – Revolving Economic Development & Initiative (REDI) Fund
    – SBA 504
    – Economic Development Finance Authority (EDFA)
    – South Dakota WORKS
    – South Dakota Microloan Express
    – South Dakota Jobs Grant Program
    – Reinvestment Payment Program
    – Proof of Concept Fund
    – Dakota Seeds
  • Limited Liability: As an owner of a South Dakota LLC, you will be able to enjoy limited liability protection quite similar to what a corporation enjoys.
  • Flexible Profit Distribution: A start-up company in South Dakota as an LLC has the benefit of being able to select different ways of distribution of profits unlike a partnership where the distribution is 50-50.

Advantage#2: South Dakota Business Incentives

Once you register a new company in South Dakota, there are several business incentives and programs that your business entity can benefit from. Let’s take a look at some of the most popular programs:

  • Reinvestment Payment Program: A start-up company in South Dakota as well as individuals can take advantage of the Reinvestment Payment Program, Which is a program that assists businesses in offsetting their upfront cost or expenses associated with expanding or relocating operations as well as upgrading machinery or equipment. Through this program, businesses can receive a reinvestment payment that should not exceed South Dakota sales and use tax paid on the project cost. Businesses have to apply to the Board of Economic Development to avail of the benefits of this program. Program Information Guide
  • South Dakota Variety Business Benefit Programs: There are several other programs that cater to the needs of both new as well as existing businesses in the state. If you register a new company in South Dakota then you can take advantage of the following programs:
    – New South Dakotans Initiative: This program ensures half the cost of employee recruitment is provided for and it is applicable to specific high-need and high-impact industries.
    – Economic Development Finance Authority (EDFA): This is a program designed for capital-intensive projects. You can benefit from the issuance of tax exempt bonds targeted at a start-up company in South Dakota or small businesses that are planning to purchase new equipment and machinery.
    – South Dakota WORKS: This is a program wherein business or commercial loans are available to businesses that require working capital as a part of their payroll, start-up costs, construction on new buildings, etc.
    More Information

Are there any Disadvantages of Incorporating in South Dakota?

What disadvantages could possibly be there for a start-up company in South Dakota? In reality there is none except a few that are common to different types of businesses. For instance the processing of incorporation can be time consuming and corporations would require more paperwork while LLC formation in South Dakota has the disadvantage of a limited life. These are small disadvantages compared to the many incentives the Mount Rushmore State has to offer.

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