Starting a General Partnership in South Dakota 2024: A Comprehensive Guide

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How to Start a General Partnership in South Dakota

One crucial decision you will need to make when starting a general partnership in South Dakota is choosing the right legal structure. A general partnership is popular for many entrepreneurs due to its simplicity and flexibility. As a general partnership, you and your partners can share profits and losses, manage the business together, and avoid the costs and regulations associated with other business structures.

However, like starting an LLC in South Dakota, forming a general partnership requires careful planning and attention to legal and regulatory requirements. This guide will provide the information you need to set up a general partnership in South Dakota, including choosing a name, registering with the state, and obtaining necessary permits and licenses. At LLCBase, we understand that forming a general partnership can be an overwhelming experience, so we are here to help you every step of the way.

Start a General Partnership

What is a General Partnership

A general partnership is a business structure where two or more people share ownership and management responsibilities. In a general partnership, each partner contributes to the business and shares profits and losses. Unlike a limited liability company (LLC) or a corporation, a general partnership does not offer limited liability protection to its partners. Each partner can be personally liable for the business’s debts and obligations.

Why Start a General Partnership in South Dakota

Starting a general partnership in South Dakota is a simple and cost-effective way to structure a business, particularly for small enterprises or those with limited resources. General partnerships are relatively easy to set up and maintain, with fewer formalities than other business structures. They also offer more flexibility in management and decision-making, as partners can divide responsibilities and make decisions collectively.

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Start South Dakota General Partnership: Step-by-Step

The following is a thorough guide on the steps to start a general partnership in South Dakota:

Step 1: Choose a Business Name

The first step in starting a general partnership is choosing a business name in South Dakota that reflects your brand. You should search the name through the South Carolina Secretary of State Business Filings Search‘s database to ensure that the name is not already used. Consider factors such as industry relevance, memorability, and potential trademark conflicts. Once you have chosen a name, you can reserve it for up to 120 days by submitting the required form and paying the name reservation fee.

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Step 2: Draft and Sign a Partnership Agreement

A partnership agreement is a crucial document that outlines the terms and conditions of the general partnership, including each partner’s responsibilities, profit-sharing arrangements, and procedures for resolving disputes. While not legally required in South Dakota, it is highly recommended to draft and sign a partnership agreement to avoid potential misunderstandings and conflicts down the line. Consult with an attorney or utilize online legal services to create a comprehensive agreement that covers all aspects of your partnership, such as capital contributions, decision-making processes, and exit strategies.

Step 3: Get an EIN

An EIN, or Employer Identification Number, is a unique nine-digit number the Internal Revenue Service (IRS) assigns for tax purposes. You can obtain an EIN for your South Dakota general partnership by applying online through the IRS website or via mail by submitting Form SS-4. This number will be used when filing taxes, securing licenses and permits, and opening a bank account for your business.

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Step 4: Secure Licenses and Permits

Depending on your specific industry and location, your South Dakota general partnership may require certain licenses and permits to operate legally. These requirements vary greatly and may include professional licenses, zoning permits, and environmental permits. You can consult the South Dakota Secretary of State for information on required licenses and permits for your business or use the U.S. Small Business Administration’s (SBA) guide to find relevant resources. Ensure all necessary documentation before starting operations to avoid penalties and fines.

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Step 5: Register for State and Local Taxes

Your South Dakota general partnership may be subject to various state and local taxes, such as payroll tax,  income tax, and sales tax permit in South Dakota. Register with the South Dakota Department of Revenue to ensure proper tax compliance and reporting. Additionally, consult with a tax professional or accountant to understand your tax obligations and the best strategies for minimizing your tax burden.

Step 6: Open a Bank Account

Finally, you should open a separate bank account for your South Dakota general partnership to separate your personal and business finances. This will make it easier to manage your business’s finances and maintain accurate records for tax purposes. When opening a business bank account, consider factors such as account fees, transaction limits, and access to credit. Research various financial institutions to find the best fit for your partnership’s needs and provide the required documentation to open the account, such as your EIN, partnership agreement, and business licenses.

By following these step-by-step guidelines, you can successfully establish your South Dakota general partnership and set your business on the path to success. Remember to stay compliant with all state and federal regulations and consult with professionals when necessary to ensure the smooth operation of your partnership.

Fees for Starting a General Partnership in South Dakota

Here are the fees associated when starting a general partnership in South Dakota:

  • Name Reservation Fee: When reserving a business name for your South Dakota general partnership, you may be required to pay a name reservation fee of Not available online or $25 mail. The fee varies by state, so it is essential to check with the South Dakota Secretary of State‘s office for the specific amount.
  • Filing Fees: Although general partnerships are not required to register with the South Dakota Secretary of State, some states may require you to file a statement of partnership authority or similar documentation. A filing fee may be associated with this process, which could be around $165 (by mail and $150 online). Again, consult the Secretary of State’s office for specific details and fees.
  • Licenses and Permits: Depending on the nature of your general partnership’s business, you may need to obtain various South Dakota business licenses and permits to operate legally in South Dakota. These can include professional licenses, zoning permits, and environmental permits. Fees for these licenses and permits vary depending on the requirements and the issuing agency. Contact the South Dakota Department of Revenue for more information about the necessary licenses and permits and their associated fees.
  • Employer Identification Number (EIN): Obtaining an EIN for your South Dakota general partnership is free through the Internal Revenue Service (IRS) website. However, if you use a third-party service to obtain your EIN, they may charge a fee for their assistance.
  • Partnership Agreement: While not legally required, drafting and signing a partnership agreement is highly recommended for South Dakota general partnerships. You may consult an attorney to help draft this agreement, which can result in legal fees. Alternatively, you can use online legal services or templates to create a partnership agreement at a lower cost.
  • Bank Account: Opening a bank account for your South Dakota general partnership may involve fees, such as account maintenance fees or initial deposit requirements. Choose the best bank for your business in South Dakota. Contact your chosen financial institution for information on their specific fees for business accounts.

Types of General Partnerships

Here are the four types of general partnerships in South Dakota that you might want to consider:

  1. Professional General Partnership: A professional general partnership is formed by professionals, such as doctors, lawyers, engineers, or architects, who provide services within their respective fields. This type of partnership is ideal for individuals who want to combine their expertise and resources to offer specialized services to clients. A professional general partnership could be the right choice if your business involves a group of professionals working together.
  2. Family General Partnership: A family general partnership is formed by family members who pool their resources to start and manage a business together. This type of partnership is popular among families who want to keep their business operations within the family unit. A family general partnership may be the best option if you plan to start a business with your relatives.
  3. Investment General Partnership: An investment general partnership involves partners pooling their financial resources to invest in stocks, real estate, or other investment opportunities. This type of partnership suits individuals who want to work together to manage their investments and share profits and losses. If your primary objective is to invest together with others, consider forming an investment general partnership.
  4. Retail or Service General Partnership: Retail or service general partnerships are formed by individuals who want to start a retail store, restaurant, or other service-oriented businesses. In this type of partnership, the partners work together to manage the business’s day-to-day operations, share responsibilities, and split profits and losses. If you want to start a business in the retail or service sector with one or more partners, this type of general partnership could be a good fit.

Choosing the Right General Partnership

To choose the right type of general partnership in South Dakota, consider the following factors:

  • Business objectives: Identify the primary goals of your business and choose a partnership type that aligns with those objectives.
  • Expertise: Assess the skills and expertise of each partner to determine which type of partnership would benefit from their combined knowledge and experience.
  • Liability: Understand the liability implications of each type of general partnership, as partners in a general partnership can be personally liable for the business’s debts and obligations.
  • Tax implications: Consult with a tax professional to understand the tax implications of each type of partnership and choose the one that offers the most favorable tax treatment for your situation.
  • Regulatory requirements: Research the specific regulatory requirements for your chosen partnership type in South Dakota and ensure you comply with all necessary regulations.

Benefits of a General Partnership

South Dakota general partnership offers several benefits, including:

  1. Ease of formation and management: General partnerships are relatively simple compared to corporations or limited liability companies (LLCs). A partnership is often formed automatically when two or more people engage in a business without formal documentation. However, it is recommended that partners create a written partnership agreement to outline the terms and conditions of their relationship and protect their interests in case of disputes.
  2. Flexibility in dividing responsibilities and decision-making among partners: General partnerships allow partners to decide how to manage the business, including dividing responsibilities and making important decisions. Each partner can contribute their unique skills and expertise to the operation.
  3. Pass-through taxation: One of the primary benefits of a general partnership in South Dakota is pass-through taxation. This means that the partnership itself does not pay taxes on its income. Instead, profits and losses are reported on each partner’s tax return, avoiding the double taxation issue corporations face.
  4. Shared financial responsibility and resources: Partners in a general partnership can pool their financial resources to help fund the business’s start-up costs and ongoing expenses. This can be especially beneficial for small businesses that may not have access to other sources of financing, such as loans or investors.

However, consider that general partnerships do not provide the same level of liability protection as corporations or LLCs. Each partner is personally liable for the debts and obligations of the partnership, which means their personal assets could be at risk in case of legal issues or financial difficulties. Therefore, it is essential to weigh the benefits and risks of a general partnership before deciding on this business structure.

FAQs

What is a general partnership?
A general partnership is a type of business structure in which two or more individuals own and manage a business together.
How do I register a general partnership in South Dakota?
To register a general partnership in South Dakota, you need to file a Certificate of Partnership with the Secretary of State’s Office.
What information do I need to provide when filing a Certificate of Partnership in South Dakota?
You will need to provide the names and addresses of all partners, the name of the partnership, and the address of the partnership’s principal place of business.
Is there a fee to file a Certificate of Partnership in South Dakota?
Yes, there is a $25 filing fee to register a general partnership in South Dakota.
How long does it take to process a Certificate of Partnership in South Dakota?
It typically takes about 3-5 business days to process a Certificate of Partnership in South Dakota.
What taxes do general partnerships in South Dakota need to pay?
In South Dakota, general partnerships do not have to pay state income tax or state sales tax. However, partners will need to report their share of partnership income on their personal income tax returns.
Is there a minimum or maximum number of partners required to form a general partnership in South Dakota?
No, there is no minimum or maximum number of partners required to form a general partnership in South Dakota.
Do general partnerships in South Dakota need to have a partnership agreement?
While not required by law, it is highly recommended that general partnerships in South Dakota have a written partnership agreement that outlines the rights and responsibilities of each partner.
Can I add partners to an existing general partnership in South Dakota?
Yes, you can add partners to an existing general partnership in South Dakota by consent of all existing partners and amending the Certificate of Partnership.
What happens if a partner leaves the partnership in South Dakota?
If a partner leaves the partnership in South Dakota, the remaining partners will need to re-evaluate the partnership and may need to restructure the business accordingly.
How are profits and losses allocated among partners in a general partnership in South Dakota?
Profits and losses are typically allocated among partners according to their percentage ownership in the partnership.
Can a general partnership file for bankruptcy in South Dakota?
No, a general partnership itself cannot file for bankruptcy in South Dakota. Instead, individual partners may need to file for bankruptcy if they are personally liable for the debts of the partnership.
Can a general partnership be dissolved in South Dakota?
Yes, a general partnership can be dissolved in South Dakota by following the dissolution provisions outlined in the partnership agreement or state law.
Are partners in a general partnership personally liable for the debts and obligations of the partnership in South Dakota?
Yes, partners in a general partnership in South Dakota are personally liable for the debts and obligations of the partnership.
Can I use a DBA for my general partnership in South Dakota?
Yes, you can use a DBA (doing business as) for your general partnership in South Dakota as long as it is registered with the Secretary of State.
Do I need to renew my Certificate of Partnership in South Dakota?
No, there is no need to renew your Certificate of Partnership in South Dakota once it has been filed.
Can I change the name or address of the partnership after filing the Certificate of Partnership in South Dakota?
Yes, you can change the name or address of the partnership in South Dakota by filing an amendment to the Certificate of Partnership with the Secretary of State’s Office.
Are there any specific requirements for registering a general partnership if one of the partners is located outside of South Dakota?
No, there are no specific requirements for registering a general partnership in South Dakota if one of the partners is located outside of the state.
Can a general partnership in South Dakota hire employees?
Yes, a general partnership can hire employees in South Dakota, but it must register with the South Dakota Department of Labor and Regulation and pay state and federal employment taxes.
What is a registered agent and do I need one for my general partnership in South Dakota?
A registered agent is an individual or company that is designated to receive legal notices on behalf of a business. In South Dakota, a general partnership is not required to have a registered agent, but it is recommended.
Can a foreign general partnership do business in South Dakota?
Yes, a foreign general partnership can do business in South Dakota by registering with the Secretary of State’s Office and appointing a registered agent in the state.
What is the South Dakota Secretary of State’s Office?
The South Dakota Secretary of State’s Office is a government agency responsible for overseeing business registrations, elections, and other official state functions.
Can I operate a general partnership under a different business name than the names of the partners in South Dakota?
Yes, you can operate a general partnership under a different business name (DBA) in South Dakota as long as it is registered with the Secretary of State’s Office.
Is there a time limit to file a Certificate of Partnership in South Dakota after starting the business?
There is no time limit to file a Certificate of Partnership in South Dakota, but it is recommended to file as soon as possible after starting the business.
Can a general partnership in South Dakota own assets, such as property or equipment?
Yes, a general partnership in South Dakota can own assets, but it is important to keep in mind that the partners are personally liable for the debts and obligations of the partnership.
Can a parent and child form a general partnership in South Dakota?
Yes, a parent and child can form a general partnership in South Dakota as long as they meet the same requirements as any other general partnership.
Do I need to provide a social security number or tax identification number when registering a general partnership in South Dakota?
Yes, you will need to provide a social security number or tax identification number when registering a general partnership in South Dakota.
Can a general partnership in South Dakota be run out of the partners’ homes?
Yes, a general partnership in South Dakota can be run out of the partners’ homes, but it is important to check local zoning ordinances and homeowners’ association rules.
What is a general partnership in South Dakota?
A general partnership in South Dakota is a business structure where two or more individuals agree to share profits and losses in a business venture.
How do I start a general partnership in South Dakota?
To start a general partnership in South Dakota, you need to file a statement of partnership authority with the South Dakota Secretary of State.
What are the advantages of a general partnership in South Dakota?
The advantages of a general partnership in South Dakota include easy formation, shared management, and shared profits and losses.
What are the disadvantages of a general partnership in South Dakota?
The disadvantages of a general partnership in South Dakota include unlimited personal liability, shared control, and limited fundraising options.
What is a statement of partnership authority?
A statement of partnership authority in South Dakota is a legal document that provides information about a partnership, its partners, and their authority to act on behalf of the partnership.
What information is required in a statement of partnership authority?
The required information for a statement of partnership authority in South Dakota includes the name and address of each partner, the name of the partnership, and the registered agent’s information.
How do I file a statement of partnership authority in South Dakota?
You can file a statement of partnership authority in South Dakota by mail or online through the South Dakota Secretary of State’s website.
What is a registered agent in South Dakota?
A registered agent in South Dakota is a person or company designated to receive official communications on behalf of a business entity.
Can I be my own registered agent in South Dakota?
Yes, you can be your own registered agent in South Dakota if you have a physical address in the state.
Do I have to pay a fee to file a statement of partnership authority in South Dakota?
Yes, there is a fee to file a statement of partnership authority in South Dakota. The fee varies depending on the method of filing.
What is a partnership agreement in South Dakota?
A partnership agreement in South Dakota is a legal document that outlines the interests, powers, obligations, and responsibilities of each partner in a general partnership.
Do I need a partnership agreement to start a general partnership in South Dakota?
It is not required by law to have a partnership agreement to form a general partnership in South Dakota, but it is highly recommended.
What information should be included in a partnership agreement in South Dakota?
The information to include in a partnership agreement in South Dakota includes the names and contact information of each partner, the purpose and scope of the partnership, and how profits and losses will be shared among the partners.
Can I change the terms of the partnership agreement in South Dakota?
Yes, the partners of a general partnership in South Dakota can modify or amend the terms of the partnership agreement as agreed upon.
Do I need to register my partnership in South Dakota?
No, a general partnership in South Dakota does not need to be registered with the state.
What taxes does a general partnership in South Dakota have to pay?
A general partnership in South Dakota does not owe state or federal income taxes. Instead, each partner reports their share of profits and losses on their individual tax returns.
Does a general partnership in South Dakota need a business license?
It depends on the business activities and location of the partnership in South Dakota. Contact the appropriate local and state agencies for more information.
Can a general partnership in South Dakota have employees?
Yes, a general partnership in South Dakota can have employees. The partners are responsible for paying employment taxes and complying with labor laws.
What if there is a disagreement among the partners in a general partnership in South Dakota?
If the partners in a general partnership in South Dakota cannot resolve a disagreement, they may need to dissolve the partnership or seek legal assistance.
Can I convert my partnership into a corporation in South Dakota?
Yes, a general partnership in South Dakota can convert into a corporation through the use of legal forms and documents.
How do I dissolve a general partnership in South Dakota?
To dissolve a general partnership in South Dakota, the partners must file a statement of dissolution with the South Dakota Secretary of State.
Are there any special requirements for foreign partnerships doing business in South Dakota?
Yes, foreign partnerships doing business in South Dakota must file a registration statement with the South Dakota Secretary of State’s office.
Can I withdraw as a partner in a general partnership in South Dakota?
Usually, yes, but it will depend on the terms outlined in the partnership agreement.
What happens to the partnership if a partner dies or leaves?
The partnership agreement usually outlines the process for dealing with the departure or death of a partner. It may be required that the remaining partners purchase the departing partner’s share of the business.
What happens if a general partnership in South Dakota takes on debt?
Under the legal structure of a general partnership in South Dakota, each partner is personally liable for any debts accrued by the partnership.
Can a partner be sued individually in South Dakota?
Yes, partners of a general partnership in South Dakota can be sued individually in certain situations.
Can a general partnership in South Dakota be sued?
Yes, a general partnership in South Dakota can be sued if it is in violation of any laws and regulations.
Can non-residents of South Dakota be partners in a general partnership in South Dakota?
Yes, non-residents of South Dakota can be partners in a general partnership in the state.
Can I be an individual and corporate partner in a South Dakota general partnership at the same time?
Yes, you can be an individual and a corporate partner in a general partnership in South Dakota at the same time, provided that the partnership agreement allows it.

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Conclusion

Starting a general partnership in South Dakota is a straightforward process that offers numerous benefits for entrepreneurs. By following these steps and staying compliant with all necessary regulations, you can set your business up for success and join the ranks of thriving South Dakota partnerships. Visit LLCBase for more information about starting a general partnership in South Dakota.

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