South Dakota LLC remove member
In order to remove a member of your South Dakota LLC, you'll need to refer to your operating agreement and follow the procedures accordingly. Read the detail on how to remove a member in South Dakota.
What is an LLC?
Limited Liability Company
LLC is a business entity in the U.S that provides limited liability to its members. It has characteristics from both corporation and sole proprietorship. LLCs are permitted under State statutes of each US state.
Limited liability
Personal assets are protected for people with limited liability when they are sued.
Corporation
A business entity that can issue shares and give limited liability to shareholders.
Members
Owners of an LLC are referred to as members. They own membership interest in the LLC.
Sole proprietorship
Where an individual engages in business activity without formal organization.
Types of LLC
Depends on the number of members and whether it has elected to change its IRS classification.
Single-member LLC
Has only a single member. IRS considers it as a sole proprietorship for tax purposes.
LLC as C-corp
Owners of an LLC are referred to as members. They own membership interest in the LLC.
Multi-member LLC
Has two members. IRS considers it as a partnership for tax purposes.
LLC as S-corp
A special election for a maximum of 100 US shareholders.
Action
Here are step-by-step instructions:
How to remove a South Dakota LLC member?
Follow these 5 steps:
1. Check your operating agreement
If you have an operating agreement, check the procedure for removing a member. Follow that for the voting and transfer procedures.
2. Default South Dakota provisions
If you do not have an operating agreement, you will have to follow South Dakota's default rules as mentioned in South Dakota Codified Laws § 47-34A-601
According to the default provisions, a member can be removed with a unanimous vote of all the other members.
3. File Amended Articles of Organization
To update the Secretary of State with the latest list of members, you can file the amended articles of organization.
4. Inform IRS
If the removed member was the responsible party with the IRS, then you will have to update the IRS with a new responsible party. In that case, you need to file Form 8822-B. You will have to notify IRS about the change in the responsible party within 60 days.
Notify within
60 days
If you are moving from a multi-member LLC to a single-member LLC, the way IRS treats you changes from a partnership to a disregarded entity. You will have to file Form 8832 to inform IRS about the change in classification
5. Update your operating agreement
Amend your operating agreement to update the names and details of the current members.
Articles of Organization
In South Dakota, Articles of Organization is the form you file with the Secretary of State to form an LLC. It contains the articles of formation for the LLC.
Filing Articles of Organization
There are a couple of ways to file
Address
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
Online fee
$150
Online processing time
Instant
Mailing fee
$150
Mail processing time
1 - 2 days
Entity name
Every LLC should have a unique name in South Dakota. South Dakota maintains a list of names of entities in the state. Go through it to check if your chosen name is available.
Search for names
Go to the official website of the South Dakota business information search tool to see if the name you want is available.
Searching fee
Free
Reservation
You can reserve a name for your LLC for a specific duration by paying reservation fees to the South Dakota business services. You will have to file your LLC formation documents within this period to keep the name. Alternatively, you can directly go ahead with the LLC formation without any reservation. That's fine too.
Reservation fee
$40
Reservation period
120 days
LLC naming guidelines
The name you choose for your LLC must the official naming guidelines.
South Dakota Codified Laws §47-34A-105
Visit
Here are some of the guidelines in simple language:
- 1
Must contain, limited liability company, or limited company, or the abbreviation, L.L.C., LLC, L.C., or LC. Limited may be abbreviated as Ltd. and company may be abbreviated as Co.
- 2
Don’t include terms that indicate that you are doing an activity that you are not authorised to do.
- 3
Your name should be ‘distinguishable’ in the Secretary of State records. Adding a punctuation or ‘the’ does not make it distinguishable.
- 4
Don’t use words that makes it seems like you are a governmental entity or has an affiliation.
Operating agreement
Operating agreement is an internal business document that outlines the general rules and policies of the LLC.
Importance
It is not a legally mandatory document. However, it is recommended to have one since many courts, banks and financial institutions use it for verification. It is also nice to clearly outline the duties and relations between multiple members of an LLC—so you avoid any confusion in the future.
Format
There is no ‘required’ format for an operating agreement. You can include anything reasonable in it. In general, it has the following sections:
Basic Business information
Contains name, address, names and details of members, purpose
Member relationship
Contains membership interest, decision making process, powers, duties.
Membership transfer
Contains details on how to add or remove members and managers.
Accounting and tax
Contains details on how company records and distributions are maintained.
Dissolution
How to dissolve, wind up and terminate, due process to follow and exceptions.
Frequently asked questions
Business entities in South Dakota
LLC is a flexible choice for small businesses in South Dakota. However, in order to issue various classes of shares and have more investors, C-corporations are better suited than LLCs.
South Dakota LLC
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