Starting a Professional Corporation in South Dakota 2024: Ultimate Guide

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How to Start a Professional Corporation in South Dakota

Licensed professional? Level up your business with South Dakota professional corporation! Enjoy unique benefits like South Dakota LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in South Dakota with your professional corporation today!

This guide will review the requirements for starting a professional corporation in South Dakota, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

Start a Professional Corporation

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in South Dakota is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in South Dakota.

The primary purpose of South Dakota Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, South Dakota professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in South Dakota.

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Who Can File Under Professional Corporation Laws

Under South Dakota Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in South Dakota, the following professionals can typically form a professional corporation:

  • Physicians and Surgeons
  • Dentists
  • Chiropractors
  • Optometrists
  • Podiatrists
  • Certified Public Accountants
  • Architects
  • Engineers and Land Surveyors
  • Psychologists
  • Marriage and Family Therapists
  • Clinical Social Workers
  • Professional Clinical Counselors
  • Veterinarians
  • Attorneys
  • Speech-Language Pathologists
  • Pharmacists
  • Registered Nurses
  • Physical Therapists
  • Occupational Therapists
  • Acupuncturists

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

  • Shareholders: South Dakota Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
  • Directors: The directors of a professional corporation in South Dakota are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
  • Officers: The officers of South Dakota Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in South Dakota: A Guide

Here is a detailed guide to starting a professional corporation in South Dakota that you should follow.

Step 1: Appointment of Registered Agent

The first step in forming a Professional Corporation is appointing Registered Agent in South Dakota. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in South Dakota and be available during regular business hours.

We compiled the list of the best registered agent services in South Dakota to help you choose the one you can rely on.

Step 2: Choosing the Name of the Corporation

Selecting a name for your South Dakota Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the South Dakota Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming South Dakota Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

South Dakota professional corporations must file an annual report with the South Dakota Secretary of State. This document includes essential information about the corporation, including its name, address, Registered Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the South Dakota Department of Revenue, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the South Dakota Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in South Dakota

Here are some of the most common fees when starting a professional corporation in South Dakota.

  • State Laws and Regulations: To form a professional corporation in South Dakota, it is crucial to comply with the state laws and regulations governing professional corporations. The South Dakota Codified Laws Title 47 and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
  • Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in South Dakota is to draft and file the Articles of Incorporation with the South Dakota Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $150 for most professions. However, it is essential to check with the South Dakota Secretary of State for the specific fee associated with your profession.
  • Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in South Dakota. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the South Dakota Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of Not available online and $25 mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in South Dakota. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the South Dakota Secretary of State, accompanied by the appropriate filing fee.
  • Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in South Dakota may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the South Dakota Secretary of State every Anniversary month of the corporation of filing the Articles of Incorporation. The filing fee for this form is $50.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Registered Agent Fee: Hiring of Registered Agent service will likely involve an annual fee of $50 – $150, which can vary depending on the service provider.
    • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

  • Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
  • Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
  • Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
  • Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

  • Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
  • Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
  • Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in South Dakota:

Federal income tax

A professional corporation in South Dakota is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

South Dakota Professional Corporation is also subject to state taxes, such as the South Dakota franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in South Dakota.

Tax deductions and exemptions

A professional corporation in South Dakota can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in South Dakota

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

  • Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
  • Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
  • Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
  • S-corporations: Starting an S Corp in South Dakota avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What is a professional corporation in South Dakota?
A professional corporation in South Dakota is a legal entity organized to provide professional services, such as consulting, accounting, and legal services.
Can a professional corporation be owned by just one person in South Dakota?
Yes, a professional corporation in South Dakota can be owned by a single individual.
What steps should I follow to start a professional corporation in South Dakota?
The steps to start a professional corporation in South Dakota include choosing a name, filing articles of incorporation, obtaining a business license, registering with the South Dakota Secretary of State, and obtaining any necessary permits or certifications.
What documents do I need to submit to start a professional corporation in South Dakota?
To start a professional corporation in South Dakota, you will need to file articles of incorporation with the South Dakota Secretary of State.
How much does it cost to start a professional corporation in South Dakota?
The fees for starting a professional corporation in South Dakota vary depending on the type of services offered and the number of shareholders; the total cost typically ranges between $500 and $1000.
Do I need to appoint a registered agent for my professional corporation in South Dakota?
Yes, every professional corporation in South Dakota must appoint a registered agent to receive official business correspondence.
Can I serve as the registered agent for my professional corporation in South Dakota?
Yes, you can serve as the registered agent for your professional corporation in South Dakota.
How long does it take to start a professional corporation in South Dakota?
The time to start a professional corporation in South Dakota varies depending on the processing time for the documents submitted; it can take between seven days to four weeks.
How often do I need to file reports for my professional corporation in South Dakota?
Professionals corporations in South Dakota need to file biennial reports every two years to maintain their legal status.
Are there any special rules or regulations for operating a professional corporation in South Dakota?
Yes, there are special rules and regulations for operating a professional corporation in South Dakota; the business activities must be limited to the specific service provided by the professionals in the corporation.
Can a non-US resident own or operate a professional corporation in South Dakota?
Yes, a non-US resident can own or operate a professional corporation in South Dakota, as long as they are authorized to work in the United States.
What are the advantages of starting a professional corporation in South Dakota?
Advantages of starting a professional corporation in South Dakota include limited liability for shareholders, tax benefits, and access to funding and credit.
Are there any corporate income taxes or franchise taxes for professional corporations in South Dakota?
There are no corporate income taxes or franchise taxes for professional corporations in South Dakota.
What are the limitations for numbering your professional corporation name in South Dakota?
In South Dakota, your professional corporation name must include a unique numerical identifier at the end with a sequence number following the state registration number (i.e. PC, PLLC, P.C., P.L.L.C.).
Can I use abbreviations in my professional corporation name in South Dakota?
Yes, abbreviations can be used in your professional corporation name in South Dakota.
Do I need to have a physical office in South Dakota to start a professional corporation there?
No, it is not necessary to have a physical office in South Dakota to start a professional corporation there.
Can I have multiple professional corporations in South Dakota?
Yes, you can have multiple professional corporations in South Dakota.
How can I file my articles of incorporation for my South Dakota professional corporation online?
You can file your articles of incorporation for your South Dakota professional corporation online via the South Dakota Secretary of State website.
What are the requirements to be an officer or director of a South Dakota professional corporation?
There are no specific requirements to be an officer or director of a South Dakota professional corporation, but it is important to have relevant education, experience, and credibility in the industry.
Can I change the name of my South Dakota professional corporation after it’s been incorporated?
Yes, the name of a South Dakota professional corporation can be changed by following the process outlined by the state.
Do I need to file for a foreign qualification if my South Dakota professional corporation operates in other states?
Yes, if your South Dakota professional corporation operates in other states, you will need to file for a foreign qualification in those states.
What is the annual report requirement for South Dakota professional corporations?
South Dakota professional corporations are required to file an annual report summary consisting of a statement of revenue, total salaries to licensees, and other administrative expenses.
How long does the South Dakota Secretary of State maintain my professional corporation records?
The South Dakota Secretary of State maintains professional corporation records indefinitely, meaning it has permanent archives.
What is the legal duration of a South Dakota professional corporation?
The legal duration of a South Dakota professional corporation is perpetual, meaning it is around to stay with no specific or defined duration.
Do South Dakota professional corporations need to have bylaws?
Yes, a South Dakota professional corporation should have internal bylaws that govern its operations.
What is the best business liability coverage for my South Dakota professional corporation?
Small business owners in South Dakota generally purchase general liability insurance for the most suitable professional coverage to protect their companies in the event of a lawsuit or legal issues.
Can South Dakota professional corporations refer to publicly owned companies?
No, South Dakota professional corporations are not permitted to reference publicly owned companies or illegal postings citing government trademark names.
Can a foreign corporation convert itself to a professional corporation in South Dakota?
No, foreign corporations cannot convert themselves to professional corporations in South Dakota.
What are the benefits of starting a professional corporation in South Dakota?
Some benefits of starting a professional corporation in South Dakota include limited liability protection, separate legal existence, and a more formal business structure that can help attract investors.
Are there any restrictions on who can own shares in a professional corporation in South Dakota?
Yes, in South Dakota, only individuals who are licensed to provide the professional services offered by the corporation can own shares in a professional corporation.
What steps do I need to take to form a professional corporation in South Dakota?
You will need to file Articles of Incorporation with the Secretary of State’s office, and obtain any necessary licenses and permits for your professional services.
What information do I need to include in my Articles of Incorporation for my South Dakota professional corporation?
You will need to include the name of the corporation, the names and addresses of your officers and directors, the nature of your business, and other details about the corporation as required by South Dakota law.
Can I form a professional corporation in South Dakota on my own, or do I need to work with an attorney?
It is possible to form a professional corporation in South Dakota on your own, but many business owners prefer to work with an attorney who is experienced with the process.
How much will it cost to form a professional corporation in South Dakota?
The exact cost will depend on several factors, such as whether you choose to work with an attorney, and whether you need to file for any additional licenses or permits. Generally, you can expect to pay between $150 and $500 to file your Articles of Incorporation with the state.
Will my South Dakota professional corporation be taxed differently than other types of businesses?
Depending on your business structure, your South Dakota professional corporation may be taxed differently than other types of businesses. It is recommended that you consult with an accountant or tax professional for more information.
Do I need to have liability insurance for my South Dakota professional corporation?
Some professional services require you to carry certain types of liability insurance, and it is always a good idea to have insurance to help protect your business. Check with a South Dakota insurance agent for more information.
Can I operate my South Dakota professional corporation under a different name than I registered it with?
Yes, you can register a trade name or “doing business as” (DBA) name with the state if you plan to operate your South Dakota professional corporation under a different name.
Do I need to file an annual report for my South Dakota professional corporation?
Yes, South Dakota requires all corporations to file an annual report with the Secretary of State’s office. Failure to file your annual report can result in penalties or dissolution of the corporation.
Can I change the nature of my South Dakota professional corporation’s business after it is formed?
Yes, you can change your South Dakota professional corporation’s business as long as the change is in compliance with state laws and any necessary licenses or permits are obtained.
What are some potential risks of forming a South Dakota professional corporation?
Some potential risks of forming a professional corporation in South Dakota include issues with licensure of your professional services, liability risks, and tax challenges.
Do I need to have a registered agent for my South Dakota professional corporation?
Yes, South Dakota requires all corporations to have a registered agent who can receive legal documents, such as lawsuits or other official notices, on behalf of the corporation.
Can I form my South Dakota professional corporation as a for-profit or non-profit organization?
Professional corporations in South Dakota are typically formed as for-profit organizations, but it is possible to form a non-profit professional corporation if your professional services qualify for non-profit classification.
Are there any residency or citizenship requirements for owning a South Dakota professional corporation?
There are no residency or citizenship requirements for owning a South Dakota professional corporation, but all officers and directors named in your Articles of Incorporation must provide valid South Dakota addresses.
Can I use my home address as the address for my South Dakota professional corporation?
Yes, you can use your home address as the address for your South Dakota professional corporation, but you will need to ensure that it conforms with state laws and any local zoning regulations.
How soon after filing my Articles of Incorporation can I start operating my South Dakota professional corporation?
You must wait for approval from the Secretary of State’s office and any necessary regulatory agencies before you can start operating your South Dakota professional corporation.
Can I have more than one business under my South Dakota professional corporation?
Yes, as long as the businesses are related to the professional services you provide and comply with state and local business laws and regulations.
How do I dissolve my South Dakota professional corporation?
You will need to follow the proper procedures under South Dakota statutes to dissolve your professional corporation, including filing a certificate of dissolution with the state.
What is the difference between a South Dakota professional corporation and a limited liability company (LLC)?
While both types of business structures offer limited liability protection, they have different tax and organization requirements. Professional services are often prohibited from organization as LLCs, but you should discuss the best structure for your business with an accountant or attorney.
Can I convert my South Dakota professional corporation into another type of business structure?
Yes, you can convert your South Dakota professional corporation into a different type of business structure as long as it complies with state laws and all necessary filings are submitted to the appropriate authorities.
Do I have to live or work exclusively in South Dakota to form a South Dakota professional corporation?
No, you do not have to live or work exclusively in South Dakota to form a professional corporation there, but you will need to comply with South Dakota state laws and regulations for forming a corporation.
Can I form a South Dakota professional corporation myself if I am not a licensed professional?
No, only licensed professionals can form a South Dakota professional corporation to provide services in their licensed field.
How long does it take to form a South Dakota professional corporation?
The amount of time it takes to form a professional corporation in South Dakota will depend on the complexity of your business organization and the timeliness of filings with various regulatory agencies.
Can I provide services outside of South Dakota with my South Dakota professional corporation?
Yes, you can provide professional services outside of South Dakota with your professional corporation, as long as you comply with any additional legal requirements in the other states in which you provide services.
Should I hire a lawyer or use an online service to incorporate my South Dakota professional corporation?
Some business owners find it valuable to work with a lawyer for guidance on state laws and regulations, while others have found value in the efficiency of online legal services. You should explore the options and make the decision that best fits your business needs.
What are the ongoing requirements for maintaining a South Dakota professional corporation?
In addition to filing annual reports, a South Dakota professional corporation will need to comply with all state laws and regulations related to licenses, permits, taxes, and other requirements for doing business.

Also Read

How to Save Money While Forming South Dakota Professional Corporation

One of the first steps in saving money while forming a professional corporation in South Dakota is to carefully consider the structure of your business. Choosing the right business entity can have a significant impact on your tax liabilities and operational expenses. For many professionals, forming a professional corporation offers a balance of legal protections and tax advantages. By carefully weighing the pros and cons of different business entities, you can ensure that you are making the most financially sound decision for your specific circumstances.

Another key way to save money while forming your professional corporation is to take advantage of available resources and support services. South Dakota offers a variety of programs and incentives designed to help small businesses get off the ground. By utilizing these resources, you can reduce your operating costs and streamline the business formation process. Additionally, working with a business formation service or attorney who specializes in professional corporations can help ensure that you are taking advantage of all available cost-saving options.

When it comes to managing ongoing expenses, it is important to carefully track and monitor your finances. This includes creating a detailed budget that outlines your expected revenue and expenses, as well as identifying areas where you can cut costs or optimize your spending. By staying on top of your finances and making informed decisions about your business operations, you can avoid unnecessary expenditures and make the most of your available resources.

In addition to managing your finances carefully, it is also important to invest in the right tools and technologies to support your professional corporation. This may include investing in accounting software, marketing tools, or other resources that can help streamline your business operations and improve efficiency. While there may be an upfront cost associated with these investments, the long-term savings and benefits can far outweigh the initial investment.

Finally, one of the best ways to save money while forming a professional corporation in South Dakota is to prioritize collaboration and networking. By building relationships with other professionals in your industry, you can tap into valuable resources, share insights and expertise, and potentially find cost-saving opportunities. Networking can also help you identify potential clients or partners, allowing you to grow your business more efficiently and effectively.

In conclusion, forming a professional corporation in South Dakota does not have to break the bank. By carefully considering your business structure, leveraging available resources, managing expenses effectively, investing in the right tools and technologies, and prioritizing collaboration and networking, you can create a successful and financially sustainable professional corporation. With the right approach and mindset, you can save money while still achieving your business goals and building a thriving enterprise in South Dakota.

Conclusion

South Dakota Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in South Dakota.

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