South Dakota prides itself on having a tax system that puts businesses first. This is evidenced by the zero tax rate for both individuals and corporations. To take advantage of these benefits, new businesses in this state are required to get a business license. Follow these steps to obtain your South Dakota business license.
What Is a Business License?
Business licenses are government authorizations allowing individuals or businesses to operate or do business within their jurisdiction. A variety of departments or agencies issue them. The requirements vary by country, state and local municipality. Each location requires different licenses to operate legally within its borders.
Business activity and location are important factors in determining whether a license is needed. Some other factors include the number of employees or the type of entity being operated, such as a sole proprietorship, limited liability company (LLC) or corporation. A business license is necessary because there may be fines for failing to obtain a license or your business could be completely shut down.
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Business License vs. Business Permit
A business license and permit are both government-issued documents allowing businesses to engage in specific activities. However, there are some differences between the two.
Business License
A license is an authorization from a government agency allowing individuals or businesses to carry out specific activities. These activities are continuous and are governed by the agencies that issue them. Licenses are often a permanent authorization to operate.
Some examples of licenses include:
- Business operating licenses
- Professional licenses
- Occupational licenses
- Sales tax licenses
In most cases, license applications require thorough verification of qualifications, compliance with industry-specific rules and renewal fees.
Business Permit
Permits are temporary authorizations issued for specific projects, short-term events or activities. Permits have specific requirements to ensure safety, regulation compliance and health.
Permits are often needed for activities such as:
- Zoning
- Building
- Health
- Fire
- Environmental
To apply for a permit, you must provide all the relevant details about an activity and its compliance with applicable regulations. Permits become inactive once an event or activity has ended.
What Forms Do You Need To Get a South Dakota Business License?
Forms required to obtain a South Dakota business license depend on the type of business structure chosen, its location and local regulations. Here are some forms that you may need to submit:
- Business license application
- Doing business as (DBA) certificate
- Employer ID number (EIN)
- Ownership information
- Business structure details
- Zoning classification
- Health department compliance
- Sales and use tax permit
- Professional licenses
This is only a partial list since specific forms depend on your location and business type. Visit the appropriate state-specific government websites to learn about the conditions of obtaining a business license in South Dakota.
State, Local and Federal Licensing
Federal, state and local governments all possess the power to regulate businesses. Each jurisdiction has specific licenses or permits required to operate legally.
- Federal licenses: Federal licenses are issued by federal agencies and are necessary for businesses engaging in interstate commerce or handling certain regulated products or services, such as selling alcohol or tobacco products.
- State licenses: State licenses are issued by individual states. They are required for a variety of reasons, such as selling food, operating in certain industries or professions or providing childcare services.
- Local licenses: Local licenses are issued by city and county governments and required of businesses operating within their boundaries. For instance, restaurants or bars may need one before operating within said region.
Businesses may also need permits from various government agencies in addition to licenses. Companies changing their physical structures may need a building permit from the city or county government, and businesses handling hazardous materials might need an EPA permit.
Steps To Apply for a Business License in South Dakota
While South Dakota does not have a general business license, various business licenses may be necessary depending on your type of business and location. Be mindful that requirements vary significantly from city to city
Step 1. Set Up a Business Entity
Select a business structure. This decision will impact how you are taxed and your liability.
There are five basic business structures:
The specific paperwork required to file to set up your entity varies depending on the business structure you choose. You can find more information on the South Dakota Secretary of State‘s website.
Business Name
South Dakota requires your chosen business name to be unique and different from any existing business. Verify the name availability through South Dakota’s business entity database. Depending on your legal structure, there may be particular naming requirements to adhere to.
If your business operates under a name different from the legal name of your business, registering a Doing Business As (DBA) will be needed. South Dakota makes it simple; you can file online for just $10.
EIN
AN EIN is a unique nine-digit identifier the Internal Revenue Service (IRS) assigns to businesses in the United States. Most companies must get one to open bank accounts, pay taxes and apply for business licenses. You can apply for an EIN online or by mail.
Step 2. Apply for Licenses and Permits
Application procedures vary, but here are a few key steps that you’ll need to follow when applying for a business license:
- Check to determine whether you need one. Not all businesses need a license in South Dakota.
- Establish the requirements for your business license. These include the nature of your operation, location and activities.
- Collect the required paperwork. This may vary depending on your local government but may include your business name, address and tax identification number.
- Fill out an application. Depending on your local government, this will vary but typically includes questions about your business, its owners and activities.
- Apply and provide any supporting documentation. Remember to pay the application fee. These vary based on the location of your business and the agency issuing the license.
- Wait for the approval. The process could take weeks or months. When the business license is approved, a certificate is usually required to be displayed.
Professional Licenses
Professional licenses are legally necessary for certain professions and are usually required to demonstrate that individuals meet specific educational, training and competency standards for providing professional services.
Government agencies may issue professional licenses at either a state or local level. They protect public health, safety and welfare by regulating professions with potential adverse societal impacts. South Dakota has 34 occupational licensing agencies that control some of the following professions:
- Medical
- Financial
- Cosmetology
- Pharmacist
- Social workers
Sales and Use Tax Permits
Sales and Use Tax permits enable businesses to collect and remit sales and use tax to the Department of Revenue. The South Dakota tax rate stands at 4.2%. Businesses physically located within South Dakota must obtain and pay the applicable sales and use tax on the sale of tangible items, electronic transfers and services.
Entities without a physical presence in South Dakota must obtain and submit the appropriate taxes if their gross sales in South Dakota exceed $100,000. Apply for the Sales and Use Tax permit online with the Department of Revenue.
Federal Licenses
Most small businesses do not require federal permits or licenses. However, you may need a federal license if you conduct any business activities regulated at the national level. Federal business licensing is expected in the following industries:
- Agriculture
- Alcoholic beverages
- Firearms and explosives
- Fish and wildlife
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transport
To apply for a federal business license, visit the U.S. Small Business Administration website to find the federal agency responsible for your industry.
Step 3. Maintain Compliance
Maintaining compliance with licenses and permits can take time and effort. A different agency with different requirements regulates each one. Here are some suggestions on how to keep your business license or permit in compliance:
- Be sure to track your expiration date
- Renew on time
- Be sure to meet all requirements
- Keep up with any updates to regulations relating to your license
- Maintain good records
These tips will help you ensure your business licenses are fully compliant and avoid penalties, fines or suspension of operations.
South Dakota’s business licensing requirements are industry-specific. Review all the federal, local and state regulations to ensure you have all the licenses and permits needed. Make sure to comply with ongoing requirements to avoid fines and the closure of your business.
Frequently Asked Questions (FAQs)
How much does it cost to get a South Dakota business license?
The cost of obtaining a South Dakota business license varies. Fees range with additional expenses due to professional licenses or local permitting agencies.
Is a business license required in South Dakota?
A business license is usually necessary in South Dakota. The exact licenses and permits needed vary. Business owners should research and obtain licenses to comply with relevant regulations.
Does South Dakota have a general business license?
South Dakota has no general business license that applies to all businesses. Instead, licensing requirements in South Dakota differ based on industry and location.
Does an LLC need a business license in South Dakota?
An LLC is a legal business entity that is registered with the state. It does not automatically require a business license. However, depending on the industry your LLC is in, you may need one.
