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Are you looking to start a nonprofit in South Dakota? You’ve come to the right place. Known for its vibrant community and rich culture, South Dakota (often referred to as The Mount Rushmore State) is an ideal location for establishing a nonprofit organization. Unlike for-profit businesses, nonprofits focus on addressing pressing social issues and require a strong foundation, thorough research, and a clear mission targeting a specific community problem.
Embarking on the journey of creating a nonprofit entails various crucial steps, such as obtaining 501(c)(3) status. A 501(c)(3) organization is designed for charitable, religious, educational purposes, and more, qualifying it for federal and state tax exemptions.
In the spirit of South Dakota’s motto, “Under God the people rule,” thousands of nonprofits are founded within the state each year. This article will provide a comprehensive guide to starting your own nonprofit corporation in South Dakota. Keep in mind that the steps discussed here are general guidelines, and modifications may be necessary depending on your specific circumstances. To gain a deep understanding of how to start a nonprofit in South Dakota, we encourage you to read this article in its entirety.
On this page, you’ll learn about the following:
- What is a Nonprofit in South Dakota?
- Types of Nonprofits in South Dakota
- How to Start a Nonprofit Corporation in South Dakota
- Step 1: Get a Suitable Name for Your South Dakota Nonprofit Corp
- Step 2: Appoint the Initial Board of Directors
- Step 3: Appoint Your South Dakota Registered Agent
- Step 4: Write South Dakota Nonprofit Bylaws
- Step 5: File the South Dakota Articles of Incorporation
- Step 6: Obtain Tax ID for Your South Dakota Nonprofit Corporation
- Step 7: Get Business Licenses in South Dakota
- Step 8: Federal Tax Exemption
- Step 9: State Tax Exemption
- Step 10: Get Insurance for Your South Dakota Nonprofit
- After Forming Your South Dakota Nonprofit Corporation
What is a Nonprofit in South Dakota?
Nonprofit organizations are legal entities that operate to serve public benefits and address community issues. Unlike for-profit organizations, nonprofits do not aim to generate any profit. The Internal Revenue Service (IRS) generally exempts nonprofit organizations from tax. However, based on the business entity structure, you will receive tax exemptions as a nonprofit.
In South Dakota, ensure you have a community issue to address before you start forming your nonprofit. It can generally be education, religion, charity, social service, or other social issues. Nonprofits do not pay taxes on the money they receive through fundraising programs, donations, or any charitable funding.
Types of Nonprofits in South Dakota
The first thing one has to decide is what type of nonprofit structure one wants. There are several types of nonprofits one can start. Here is a list of nonprofit types one can choose from-
- Nonprofit LLC
- Nonprofit Corporation
- Unincorporated Nonprofit
Forming an LLC in South Dakota for your nonprofit can be a smooth option. However, having a corporation is less complex than having a nonprofit LLC. Hence, it is wise to start a nonprofit corporation instead of an unincorporated nonprofit or nonprofit LLC.– LLCBuddy Editorial Team.
Technically, starting a corporation for your nonprofit protects your personal assets but also is eligible for Federal and State tax exemptions. When you form an LLC for your nonprofit, it only protects your personal assets but does not give you any tax exemptions. On the other hand, a nonprofit Corporation has both corporation and limited liability company benefits. You can also have an unincorporated structure where you don’t have to register it. Unincorporated nonprofits in South Dakota might be eligible for tax exemptions (check with South Dakota Department of Revenue), but this type of organization does not get to enjoy limited liability and personal asset protection.
How to Start a Nonprofit Corporation in South Dakota
Setting up a nonprofit corporation requires a few things to consider. Name of the nonprofit, initial directors, drafting bylaws, get a Registered Agent, obtain tax IDs, insurance, and a bank account – these are important steps you must follow. The steps mentioned here are general business formation steps. State-wise, some steps can be different. Getting an expert consultation before you start your nonprofit corporation formation is recommended. Here are the steps explained below-
Step 1: Get a Suitable Name for Your South Dakota Nonprofit Corp
The first step is to name your nonprofit corporation. You must be sure that the name is available and that no other organization is using this name. You can check the South Dakota LLC name search to find the best suitable name for your organization. You must follow those rules to avoid any legal issues later. You can reserve the name for 120 days for any domestic entity (such as a nonprofit LLC) if you’re not forming the nonprofit immediately.
Step 2: Appoint the Initial Board of Directors
The next step is to get your nonprofit’s initial board of directors. It is very important when you are setting up a nonprofit corporation. You need at least Three unrelated directors to start the organization. If you don’t choose a minimum of Three directors, it will automatically become a member-managed corporation.
Step 3: Appoint Your South Dakota Registered Agent
The third step is to get a South Dakota Registered Agent for your nonprofit corporation. The Registered Agent is a person who receives all the legal documents on your behalf. It is necessary to get a registered agent. He/she must be above 18 years old and have a physical address in South Dakota.
Step 4: Write South Dakota Nonprofit Bylaws
The next important step is to write the company bylaws. The directors and board members must decide how the meetings, elections, voting, and other corporate activities will be held. These bylaws must comply with the South Dakota state law. It is similar to an LLC operating agreement in South Dakota for the LLC owners.
Step 5: File the South Dakota Articles of Incorporation
This is the most important step. File your Articles of Incorporation with the South Dakota Secretary of State. You can do it through two methods, online and by mail. All the formation forms, such as the South Dakota LLC Articles of Organization form, the South Dakota Articles of Incorporation form for corporations, forms for LLPs, and all others can be found on the South Dakota SOS official website. Submit the details of your nonprofit corporation, like the name of the nonprofit, address, name and address of the registered agent, operation dates, directors’ details, and more information related to your company. You can send the form (for offline filing) and the filing fee of $150 for online filing, and $165 for filing by mail. to the Secretary of State Office, 500 E Capitol Ave, Pierre, SD 57501 or upload it online (if available).
Step 6: Obtain Tax ID for Your South Dakota Nonprofit Corporation
The subsequent step involves obtaining a Tax ID for your nonprofit corporation. You will need to acquire an Employer Identification Number (EIN) from the official IRS website. To obtain the EIN, submit your application to the IRS office either by mail or through their online platform. There is no associated cost for this process.
Step 7: Get Business Licenses in South Dakota
The next step is to get the business licenses you need to run your nonprofit organization in South Dakota. Check with the local government office if any special licenses you need to run your nonprofit. You can file your nonprofit as a charity if you want.
Step 8: Federal Tax Exemption
You must submit Form 1023 to the IRS to file for federal tax exemption. This form, titled “Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,” is required for all nonprofit corporations. Smaller nonprofits have the option to file Form 1023-EZ instead. You will be prompted to provide details about your organization upon obtaining the relevant form. Complete the form with the necessary information and submit it. The filing fees are $600 for Form 1023 and $275 for Form 1023-EZ.
Step 9: State Tax Exemption
Once you get the Federal Tax Exempt, it is time for State Tax Exempt. In South Dakota, you must apply for the tax exemption to South Dakota Department of Revenue. Get the form, fill it up with the correct details, and send it to the office. You may need to pay a fee along with the form and supportive documents to apply for the State Tax Exemption. You need Exemption Certificate to apply for the state tax exemption. Read South Dakota classification of taxes to learn more about the South Dakota tax structure.
Step 10: Get Insurance for Your South Dakota Nonprofit
Once you start your nonprofit, you must get insurance to protect your organization. You must get workers’ compensation and unemployment insurance if you have employees. Based on your nonprofit structure, you might need general liability insurance, property, vehicle, auto insurance, etc. You can contact the insurance providers to learn more about which are required for your organization. Also, you can contact South Dakota Division of Insurance for more information.
After Forming Your South Dakota Nonprofit Corporation
Once your nonprofit is formed, there are additional steps to complete:
- Get a Business Bank Account: You must get a business account for all types of business-related transactions in South Dakota. You may need different documents based on the bank and place of business. Check with the bank for it.
- File Nonprofit as Charity: This is optional. Your nonprofit is either for charity purposes or any purpose that meets your community’s needs. If your organization is for charity purposes, then you can file your nonprofit as a charity to enjoy tax exemptions.
- Other Business Compliances: You may need additional compliances based on your nonprofit type. Check with your attorney or local authority for more information.
Names of Nonprofit Corporations in South Dakota
Following are some of the Nonprofit Organizations in South Dakota. The contact information of these organizations can be found on South Dakota SOS official websites.
- Rosholt Charities
- Salem Charities
- Scotland Charities
- Sioux Falls Charities
- Sisseton Charities
- Spearfish Charities
- Springfield Charities
- Stickney Charities.
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Starting a nonprofit corporation in South Dakota is an incredible way to give back to your community and positively impact the causes that matter most to you. By forming a nonprofit, you can provide essential services, promote awareness, and make a lasting difference in the lives of those who need it most. In South Dakota, a lot of nonprofit organizations are there to cater to people in need. Starting a nonprofit corporation is better than an LLC, as it provides limited liability and tax benefits. It helps you save taxes. If you want to start a nonprofit in South Dakota, you must follow the steps mentioned above in the article.