When starting a new business in South Dakota, one thing to consider is the type of legal entity you want your company to be. One option is to set up a limited liability company (LLC). Here are some of the advantages:
- Protection: As the name suggests, it limits your liability should things go wrong. If you were a sole partnership, creditors or claimants in a lawsuit could come after you as an individual. By creating an LLC, you make it clear that you and your company are separate. It avoids the risk of losing your home and other assets when the business hits hard times.
- Reduced tax: Tax is paid by the owners, on any profits, rather than paid by the company itself. This is known as pass-through taxation. It avoids the money being taxed twice. If you prefer, you can still have your LLC pay the tax like a corporation. There may be some situations where this is advantageous.
- Ease: LLCs require much less paperwork than a corporation to implement, and their rules are less restrictive. Remember, if you set up a corporation, it is the shareholders who are the owners. They may take some decisions out of your hands.
- Cheaper: Corporations are more expensive to set up and run, precisely due to the additional procedures required. Things like producing an annual shareholder report soon add up in terms of time and money.
When starting a new South Dakota company, it is vital to get guidance from an experienced business attorney. They can help you choose the correct legal entity and continue to help you throughout your company’s life.