How to Transfer LLC Ownership in South Dakota: 2025 Updates

If you have an LLC in South Dakota and you wish to discontinue it, you don’t always have to dissolve it. You can transfer the ownership, and it will keep running the way it was. Transferring ownership of a Limited Liability Company (LLC) in South Dakota is a relatively simple and straightforward process involving minimal paperwork. It can be partially or fully transferred to another owner.

LLCBuddy editors shared a step-by-step guide on how to transfer ownership of an LLC in South Dakota. The steps might seem easy and doable. However, these are general steps and might need special attention for specific cities or regions in South Dakota. Hence, it is recommended to consult an attorney or legal expert before taking the steps.

How an LLC Ownership Structure Works in South Dakota

By now, you must know that a limited liability company is one of the simplest forms of business structure. The ownership and transferring it to others is even simpler. For an LLC in South Dakota or any other state in the United States, the company is considered an independent entity that is separated from its owners, which means the owners are not personally liable for the company’s debts or legal obligations.

The ownership structure of an LLC in South Dakota is determined by the percentage of ownership interests held by each member. These ownership interests can be distributed however the members see fit and are typically outlined in the Operating Agreement drafted in South Dakota.

There is no maximum limit on the number of members an LLC in South Dakota can have, and the members can be individuals, other LLCs, corporations, or even foreign entities. This flexibility allows for a wide range of business structures, from single-member LLCs in South Dakota to large, multi-member LLCs with complex ownership arrangements.

What is South Dakota LLC Buy-Sell Agreement in Ownership Transfer?

In South Dakota, the buy-sell agreement is a part of your operating agreement. It explains the instructions for buying and selling the LLC ownership. For example, who can be the member of South Dakota LLC, how will buy out and sell of the LLC be determined, whether the members of the LLC in South Dakota will buy the shares of the leaving owner, and how – these are the points you have in the buy-sell agreement.

Buy Out South Dakota LLC or Partial Transfer: In this case, the members of the LLC generally buy the shares of the owner who is leaving. As the LLC buys the owner’s interests, the shares get divided equally among the remaining South Dakota LLC members. LLC members must approve the transfer, and then the Operating Agreement (OA) will be updated to exclude the departed owner.

If your LLC operating agreement does not specify these terms beforehand, you must follow South Dakota state LLC law. In some states, ownership transfer does not simply take place. Instead, they have to dissolve the LLC to continue with the process. So, while you’re forming an South Dakota LLC, make sure to create a buy-sell agreement beforehand.

Sell a South Dakota LLC Or Fully Transfer: Selling an LLC or Fully Transferring the ownership is a bit more complicated than the buy-out process. In this condition, owners have the independent legal right to sell the interest to any third party. They do not need other members’ approval for this. The negotiation between the buyer and the seller involves complexities if there is no operating agreement in the first place. As an owner, you must find a buyer, write the change of ownership letter, set out other formalities, and voila! Your ownership transfer is done. The parties will settle the sale contract, including the LLC price, following South Dakota state laws.

How to Transfer South Dakota LLC Ownership

When an LLC member decides to step down from the owner’s position, they must transfer the ownership to someone else. It can be other existing members of the LLC or a third party. Transferring LLC ownership in South Dakota is a common yet complex deed. LLC owners who want to transfer their ownership must follow some steps to do the task. Here are the following steps-

Step 1: Review Your South Dakota LLC Operating Agreement

An operating agreement is a kind of non-mandatory document in many states. In South Dakota, it is not mandatory to draft one. If you have one at the time of LLC formation in South Dakota, then it would be easier for the owners to transfer the name. If not, then it should be filed at the time of transferring ownership. The operating agreement for the LLC in South Dakota must be reviewed for the ownership transfer conditions and other legal requirements regarding the buy-out and sale of the LLC.

Step 2: Amend the South Dakota Articles of Organization

Changing/transferring ownership might lead to structural change at the managerial level. In that case, the LLCs must comply with the South Dakota Secretary of State. To do so, one must file the South Dakota Articles of Organization amendment. Specifically in Texas, LLCs must submit a Public Information Report annually to the Texas Comptroller of Public Accounts. The managerial changes will be explained there.

As soon as the ownership transfer negotiation is done and the agreement is made with the updated change of ownership, file it with the Secretary of State. For that, you must amend the Articles of Organization and get the Amended Articles of Organization. Make the changes to the existing Articles of Organization, get the amendment form, and submit it to the South Dakota SOS along with other documents and the filing fee. Read how to amend South Dakota Articles of Organization in a simple way.

Step 3: Spread the News

Once the legal formalities are done, and the ownership of your LLC is transferred officially in South Dakota, you must spread the word to the clients, partners, and other concerned people. Also, banks and other financial institutions should be notified about the ownership change. Business entities, vendors, and other officials you work with should also be notified.

Step 4: Obtain a New EIN (optional)

You might need to apply for a new EIN based on the LLC ownership transfer. After officially transferring ownership, you must check with the IRS whether you need a new EIN. There is a formal form to notify the IRS about the LLC ownership transfer. Get the form from their website, enter the details, and submit it. You will get notified whether you need to apply for a new EIN.

Why Transfer LLC Ownership in South Dakota

There can be several reasons why the transfer of LLC ownership in South Dakota takes place in any organization. Some of the most common reasons include the following-

Death of the LLC owner
Separation or Divorce of the LLC Owners
LLC owners do not wish to continue their association with the organization
LLC owners want to appoint a new member (owner)
LLC owners want to sell the business off to someone else

These are some of the common reasons why an LLC ownership gets transferred in South Dakota. Transferring LLC ownership requires a comprehensive LLC operating agreement in South Dakota. This is an internal document every LLC should have at the time of formation.

The Role of South Dakota Operating Agreement in LLC Ownership Transfer

Creating an Operating Agreement in South Dakota is one of the major steps in forming a limited liability company (LLC). However, many states do not require an Operating Agreement. California, New York, Delaware, Maine, Nebraska, and Missouri are the states where an LLC operating agreement is mandatory.

Even when your state does not necessarily need you to file the operating agreement, it is recommended that you should have it to avoid any internal disagreements or issues in the future.
LLCBuddy Editorial Team

An operating agreement is an internal document explaining all the procedures, including ownership transfer, dissolution, LLC operation, members, and other LLC-related processes. Operations, such as dissolution and ownership transfer, occur based on those written regulations.

If there is no South Dakota Operating Agreement or it does not have clear ownership transfer or buy-sell agreement provisions, the transfer takes place based on South Dakota state law.

What to Include in South Dakota Operating Agreement

This official document outlines the company’s structure, the members’ details, the dissolution process, and a lot more. Hence, it is always wise to have one to avoid any confusion in the future, whether your state needs it or not. The LLC operating agreement should have the following points-

Whether LLC members are related to each other and what type of relationships they share
Managers’ rights and responsibilities
Operating Agreement Amendment conditions
Members’ profit and loss shares
South Dakota LLC Tax structures
Transfer of ownership rules and procedure
Dissolution of South Dakota LLC

If your operating agreement explains all the above points, you must follow it for the ownership transfer.

Reasons to Transfer South Dakota LLC Ownership

There can be many issues that lead to ownership transfer. One of the most common issues is the death of the owner. There can be other issues where transfer of ownership occurs. Here are some issues to consider,

Divorce Or End of Marriage: In some cases, according to the divorce decree, the ownership transfers to the spouse. If the LLC in South Dakota has an operating agreement and the ownership transfer condition is specified, then the LLC must follow the South Dakota operating agreement to proceed.

Death of a Member: This is the most common issue in LLCs. In South Dakota, if a member dies, the ownership, by default, transfers to the legal heirs of the deceased person. However, in this case, the legal heirs (wife/husband/kids) do not get any managerial power or authority. They continue enjoying the benefits, such as a share of the profit and others. But they won’t get any other power in the company. In such situations, other members of the South Dakota LLC often buy out the deceased’s interests.

Dissolution of South Dakota LLC: If any member/owner plans to leave the company, the LLC gets dissolved and reformed with the new policy and operating agreement. The members and managers make this sort of decision at the time of the creation of the operating agreement.

FAQs

How do I transfer ownership of my South Dakota LLC?

Ownership of a South Dakota LLC can be transferred by selling or gifting membership interests to another individual or entity.

Do I need to notify the state of South Dakota when transferring LLC ownership?

Yes, you need to update the ownership information with the South Dakota Secretary of State by filing an amendment to your LLC’s articles of organization.

Can an LLC operating agreement outline the process for transferring ownership in South Dakota?

Yes, an LLC operating agreement can include provisions detailing the process for transferring ownership interests in a South Dakota LLC.

Are there any taxes or fees associated with transferring LLC ownership in South Dakota?

South Dakota does not impose any state-level transfer taxes or fees on the internal transfer of ownership interests in an LLC.

What steps are involved in transferring ownership of a South Dakota LLC?

The steps typically involved in transferring ownership of a South Dakota LLC include negotiating the transfer, amending the articles of organization, updating the LLC’s operating agreement, and updating internal records.

Do I need the consent of all members to transfer ownership of a South Dakota LLC?

The requirements for obtaining consent from other members before transferring ownership interests should be outlined in the LLC’s operating agreement or articles of organization.

Are there any restrictions on transferring ownership of a South Dakota LLC?

Restrictions on transferring ownership interests in a South Dakota LLC may be outlined in the LLC’s operating agreement or other governing documents.

Can I sell my ownership stake in a South Dakota LLC without the consent of other members?

The ability to sell ownership interests in a South Dakota LLC without the consent of other members may depend on the provisions outlined in the LLC’s operating agreement.

What happens if I transfer ownership of a South Dakota LLC without following the proper procedures?

Failing to follow the proper procedures for transferring ownership of a South Dakota LLC may result in legal complications, conflicts among members, or challenges in enforcing the transfer.

How long does it take to transfer ownership of a South Dakota LLC?

The timeline for transferring ownership of a South Dakota LLC can vary depending on the complexity of the transfer and the time required to update the necessary legal documents and records.

Can I transfer ownership of a South Dakota LLC if there are outstanding debts or liabilities?

Transferring ownership of a South Dakota LLC with outstanding debts or liabilities may require the new owner to assume responsibility for those obligations, subject to any agreements or laws governing the transfer.

Do I need to update the South Dakota LLC’s operating agreement when transferring ownership?

It is advisable to update the South Dakota LLC’s operating agreement when transferring ownership to reflect the change in ownership structure and member rights.

Are there any specific requirements for transferring ownership of a South Dakota LLC to a family member?

Transferring ownership of a South Dakota LLC to a family member may involve additional legal considerations or documentation to ensure the transfer complies with state laws and regulations.

Can I transfer ownership of a South Dakota LLC to a trust or estate?

Ownership of a South Dakota LLC can be transferred to a trust or estate, subject to any provisions outlined in the LLC’s operating agreement or relevant laws.

Do I need to obtain a new tax ID number when transferring ownership of a South Dakota LLC?

It may be necessary to obtain a new tax ID number for the South Dakota LLC if the ownership transfer results in a significant change in the LLC’s structure or ownership.

Can I transfer ownership of a South Dakota LLC to multiple individuals or entities?

Ownership of a South Dakota LLC can be transferred to multiple individuals or entities by distributing membership interests according to the terms outlined in the LLC’s operating agreement or other governing documents.

Are there any immigration or residency requirements for transferring ownership of a South Dakota LLC?

South Dakota does not have specific immigration or residency requirements for transferring ownership of an LLC, but individuals transferring ownership should comply with relevant federal laws and regulations.

Can I transfer ownership of a South Dakota LLC to a business entity?

Ownership of a South Dakota LLC can be transferred to a business entity, such as a corporation or another LLC, subject to any restrictions outlined in the LLC’s operating agreement or state laws.

What documents are required to transfer ownership of a South Dakota LLC?

The documents required to transfer ownership of a South Dakota LLC may include a bill of sale, membership interest assignment, amended articles of organization, updated operating agreement, and any other legal documents necessary to formalize the transfer.

Can ownership of a South Dakota LLC be transferred through a buyout agreement?

Yes, ownership of a South Dakota LLC can be transferred through a buyout agreement, which typically outlines the terms of the transfer, payment arrangements, and other conditions governing the sale of membership interests.

Is there a specific form for transferring ownership of a South Dakota LLC?

There is no specific form provided by the state of South Dakota for transferring ownership of an LLC, but the transfer must be recorded with the Secretary of State by filing an amendment to the LLC’s articles of organization.

What rights do new owners have in a South Dakota LLC after a transfer of ownership?

New owners in a South Dakota LLC have the rights and responsibilities outlined in the LLC’s operating agreement and relevant laws, including voting rights, profit distributions, management rights, and other member benefits.

Can I reverse a transfer of ownership in a South Dakota LLC?

Reversing a transfer of ownership in a South Dakota LLC may require the consent of all members and compliance with applicable laws, but the ability to reverse a transfer depends on the specific circumstances and legal requirements.

Can I transfer ownership of a South Dakota LLC during a lawsuit or bankruptcy?

Transferring ownership of a South Dakota LLC during a lawsuit or bankruptcy may involve legal considerations, restrictions, or implications, so it is recommended to consult with an attorney or financial advisor before proceeding with the transfer.

What rights do existing owners have when another member transfers ownership of a South Dakota LLC?

Existing owners in a South Dakota LLC may have certain rights or protections outlined in the LLC’s operating agreement or state laws when another member transfers ownership, such as the right of first refusal, buyout options, or consent requirements.

Can I transfer ownership of a South Dakota LLC without notifying other members?

The requirements for notifying other members when transferring ownership of a South Dakota LLC should be outlined in the LLC’s operating agreement or articles of organization, so it is advisable to follow the procedures and obtain consent as necessary.

What are the consequences of failing to update ownership information with the South Dakota Secretary of State after a transfer?

Failing to update ownership information with the South Dakota Secretary of State after a transfer of ownership in an LLC may result in legal or regulatory violations, invalidation of the transfer, or challenges in enforcing member rights or obligations.

Can I transfer ownership of a South Dakota LLC to a minor?

Transferring ownership of a South Dakota LLC to a minor may involve additional legal considerations, restrictions, or guardianship requirements to ensure compliance with state laws and protect the minor’s interests.

Do I need to amend my LLC operating agreement when transferring ownership in South Dakota?

Yes, it is recommended to amend the LLC operating agreement to reflect the change in ownership and the details of the transfer.

Are there any specific forms required for transferring ownership of a South Dakota LLC?

While there are no specific forms required by the state, it is advisable to document the transfer in writing and update the LLC’s records accordingly.

In Conclusion

As you all know, forming a limited liability company is much easier than forming a corporation, a partnership, or any other type of business. The ease of transferring ownership from one to another is one of the many reasons for entrepreneurs to start an LLC. In South Dakota, transferring LLC ownership does not need a lot of paperwork or steps. You must update the formation papers with the new ownership information, file the amendment to the formation document, tell people about it, and comply with the state.

Though it seems easy to file documents while transferring ownership, it could be more complex than just these steps. Based on the local regulations, nature of business, or some other administrative rules, transferring ownership in South Dakota might take more than what it looks like. It is recommended to consult a professional or attorney before you take such an important business decision.