Form a General Partnership in South Dakota

Many companies begin with two or more people coming up with an idea for a business. The quickest way to begin earning money is for the co-owners of the company to start a general partnership.

General partners share in the responsibility of running the company and also share in the profits. This article will explain how to start a South Dakota general partnership.

Step 1: Determine if you should start a general partnership

There are both pros and cons to forming a South Dakota general partnership to administer your business. Whether this type of entity is right for you will depend on your individual circumstances.

Pros

Here are the positives about forming a partnership:

• It’s simple to create
• Good for small companies
• Very little yearly maintenance
• Profits, debts, and losses are easily distributed between the partners
• Taxation only to the owners, not at the partnership level

A general partnership is a good business structure to have, especially if you have a small company. Also, if you want to quickly start your company, a partnership can be done very fast.

Cons

Before you take the leap into creating a business, it’s important to understand the cons of using a business partnership in South Dakota, versus some other form of business structure.

• Shared responsibility also means partners share in each other’s legal and financial issues related to the business
• More complicated when transferring business ownership
• Conflict when partners don’t share the same vision for the company
• Must share decision-making authority

If you can’t make a decision on whether a general partnership is right for you, go over your plans with legal and financial professionals.

Step 2: Choose a business name

Choosing a business name for your partnership is both important and fun. It can be a simple name, such as the names of the partners. It could be more aligned with the nature of your business and used for marketing purposes. Even though general partnerships in South Dakota don’t have to register with the state, if you decide to use a fictitious name, you must file a Partnership Fictitious Name Certificate with the Secretary of State. If you already have a name in mind, check to see if your business name is available.

Step 3: File a DBA Name (if needed)

Not all South Dakota general partnerships will be required to file a “doing business as” name petition. If the partnership is going to merely use the partners’ names as the company name, you don’t need to notify the state. However, if you’re going to use a different name, you must file a Partnership Fictitious Name Certificate with the Secretary of State. Our DBA Service can help you file your Partnership Fictitious Name Certificate in a snap.

Step 4: Draft and sign a South Dakota general partnership agreement

Although a partnership agreement isn’t necessary under the law, it may be a good idea for your company. With a partnership agreement, you and your partners can set some basic rules and expectations that all partners must follow. A South Dakota general partnership agreement doesn’t have to be complicated. Some of the things to include in your agreement could be the following:

• Rules pertaining to admitting new partners
• When should the partnership dissolve
• How the partnership will resolve conflicts
• Any individual partner rights that you want to put in writing

It may take a little extra time and work to write up a partnership agreement, but it could save a lot of time and trouble in the future when issues arise. If you don’t have a partnership agreement, any disputes will be resolved in accordance with the South Dakota Uniform Partnership Act.

Step 5: Obtain licenses, permits, clearances

No matter what kind of business you start, it’s almost always required that you research and obtain certain licenses, permits, and clearances before your business can legally operate. Depending on what type of business you’re creating, it could be difficult to learn every permit or license required. But we have an easy solution for you to save time. We have partnered with Avalara, which will create a Business License Report that identifies your licensing and permitting needs at every level of government. You can have the peace of mind that you’ve completed every requirement for your business to legally operate.

Step 6: Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is like a social security number for your business. You receive your business’s EIN through the IRS so that when you file your tax returns your company can be properly identified. There are other things that need an EIN, such as opening up a business checking account. We offer an Employer ID Number Service so that you can obtain your EIN easily and in no time.

Step 7: Get South Dakota state tax identification numbers

You don’t need a separate South Dakota state tax ID to file your taxes. However, you can create an account to pay your taxes online with the South Dakota Department of Revenue.

Forming a Business Partnership in South Dakota: Next Steps

Once you have all the above completed, make sure to have a business checking account and the appropriate insurance policies in place. If you have any questions, always contact a tax and accounting professional to help get things set. You will also want to keep up with your taxes.

How We Can Help

A South Dakota general partnership is one of the easiest business entities to create. We can help you get on your way to a successful future with our business development and maintenance services, including our Worry-Free Compliance Service so that all you have to worry about is running a profitable company.

We also offer help with forming other types of businesses in South Dakota. Check out our South Dakota LLC and South Dakota Corporation Formation Services.