How to Dissolve an LLC in South Dakota? (A Complete Guide)

Published by Delina Chantel Yasmeh | Author

Last updated: September 18, 2024

FACT CHECKED by Lou Viveros, Growth & Transition Advisor

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If you have an LLC in South Dakota that you would like to dissolve, there are certain legal steps you need to take to make it happen.

As a business consultant and legal advisor with over a decade of experience, I’ll walk you through the dissolution procedure and help you understand the steps you should take.

I’ll also go over the required paperwork to help you properly dissolve your South Dakota business.

Quick Summary

6 Steps To Dissolving an LLC in South Dakota

Follow the steps to dissolve your business if you no longer intend to operate as a company in South Dakota.

Step 1: Vote to Dissolve the LLC

The first step is to hold a meeting and vote for the dissolution as per your South Dakota LLC operating agreement.

During this step, following the Operating Agreement when dissolving our South Dakota LLC was essential because it helped prevent any disputes between LLC members.

If you do not have an Operating Agreement, you can still dissolve your LLC, but you must follow the requirements set forth by South Dakota state law.

Step 2: Notify Creditors About Your LLC's Dissolution

Notify creditors and settle outstanding debts, including loans, credit cards, or any other obligations.

During our dissolution, we additionally informed loan associations, banks, and other interested parties about our intent to dissolve.

This step was especially significant in light of the broader economic context, where the private sector experienced a 7.8% reduction in employment over the year ending April 2020, as per the U.S. Small Business Economic Profile, impacting many businesses and their financial obligations [1].

You will need to settle any outstanding debts the South Dakota LLC may have.

After providing notice, claimants have 120 days to procure interests and outstanding obligations with the company.

After the deadline, the entity can no longer accept claims [2].

Step 3: File Final Tax Returns and Obtain Tax Clearance

Close all your business tax accounts by filing a final tax return and ensuring that all taxes have been paid.

Similar to our case, if you have any outstanding taxes, you will need to pay them off before you can dissolve your South Dakota LLC.

Once all tax obligations have been met, you can proceed to the next step.

A South Dakota business owner is not required to obtain a tax clearance certificate from the South Dakota Department of Revenue when dissolving your South Dakota LLC.

However, you should check with the Department to ensure that all taxes have been paid and that there are no outstanding liabilities.

"Once you have completed the dissolution of your business with the South Dakota Secretary of State, it's crucial to inform the Internal Revenue Service (IRS) and additional state agencies in South Dakota about the closure. This step is essential for maintaining compliance with tax legislation and other regulatory requirements."

-Jon Morgan, Co-Founder & Chief Editor of Venture Smarter

Step 4: File Articles or Certificate of Dissolution

File Articles of Dissolution with the South Dakota Secretary of State along with a filing fee of $10.

The form can be found on the Secretary of State's official website and must include the following information:

• The name of your South Dakota LLC
• The date of the South Dakota LLC dissolution
• The reason for dissolution (e.g., voluntary, involuntary, etc.)
• The signature of a member or a registered agent

Our South Dakota LLC was officially dissolved once the form was submitted to the South Dakota Secretary of State and the filing fee was processed by our registered agent.

Step 5: Distribute Assets

Before distributing assets to members, the LLC must pay off all its debts. This includes loans, creditor payments, and any other financial obligations.

South Dakota law requires the creditors to be paid first. If the LLC's assets are insufficient to cover all debts, they must be distributed proportionally among creditors.

Interestingly, despite the challenging economic climate, according to Kauffman Indicators of Entrepreneurship, 77.3% of South Dakota startups managed to survive their first year in 2020, slightly below the national survival rate of 78.1% [3].

This resilience is an important consideration for LLC members as they navigate the dissolution process and plan their next steps.

Nevertheless, after settling our LLC debts and tax obligations, the remaining assets were distributed to members as per the terms of the operating agreement.

If the operating agreement doesn't specify, South Dakota state law typically dictates that distributions are made based on the proportion of each member's contribution to the LLC.

Step 6: Close All Accounts and Cancel Licenses and Permits

After dissolving your LLC in South Dakota, you will need to take a few steps to wind down the business.

This includes canceling any licenses or permits that were issued to the South Dakota LLC, as well as closing any bank accounts that are associated with the business.

In our case, we also notified the IRS that our South Dakota LLC had been dissolved.

Once you have taken all of these steps, your South Dakota LLC will be officially dissolved.

FAQs

Reference:

1. https://advocacy.sba.gov/wp-content/uploads/2020/06/2020-Small-Business-Economic-Profile-SD.pdf
2. https://sdlegislature.gov/Statutes/47-1A-1406
3. https://indicators.kauffman.org/wp-content/uploads/sites/2/2021/12/2020_Early-Stage-Entrepreneurship-SD_Snapshot.pdf