Starting a nonprofit in South Dakota is easy
Most nonprofits formed for religious, charitable, scientific, literary, or educational purposes, are eligible for federal and state tax exemptions under 501(c)(3) laws. To start a tax-exempt nonprofit organization, you must first start a nonprofit according to the rules of the state, and then apply for 501(c)(3) status with the IRS. To start your tax exempt 501(c)(3) nonprofit organization, follow these steps:
Step 1: Name Your South Dakota Nonprofit
Choosing a name for your organization is the first and most important step in starting your nonprofit corporation. Be sure to choose a name that complies with South Dakota naming requirements and is easily searchable by potential members and donors.
1. Follow the naming guidelines:
- The name of your organization must be distinguishable from other South Dakota businesses.
- Your organization’s name cannot imply its purpose is for anything other than what is stated in the articles of incorporation.
Read the South Dakota Legislature's official guidelines for the complete rules on naming an South Dakota-based organization.
2. Is the name available in South Dakota? Make sure the name you want isn't already taken by doing a Business Information Search on the Secretary of State’s website.
3. Is the URL available? We recommend that you check to see if your business name is available as a web domain. Even if you don't plan to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
Step 2: Choose a Registered Agent in South Dakota
Your nonprofit is required to nominate a South Dakota registered agent for your organization.
What is a Registered Agent? A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business' point of contact with the state.
Who can be a Registered Agent? A registered agent must be a resident of South Dakota or a corporation, such as a registered agent service, authorized to transact business in Texas. You may elect an individual within the company including yourself.
Step 3: Select your Directors & Officers
The directors of an organization come together to form a board of directors. This board of directors is responsible for overseeing the operations of the nonprofit.
The president, secretary, and other members of nonprofit who have individual responsibilities and authorities are known as officers.
The organization structure of your nonprofit in South Dakota MUST include:
- At least 3 directors not related to each other
- A president
- A vice president
- A secretary
- A treasurer
NOTE: The president and secretary positions cannot be held by the same person.
Step 4: Adopt Bylaws & Conflict of Interest Policy
To be eligible to apply for 501(c)(3) status, your nonprofit is required to have the following two documents:
- Conflict of interest policy
What are Bylaws? Bylaws are the rules outlining the operating procedures of the nonprofit.
What is a Conflict of Interest Policy? A Conflict of Interest Policy is the collection of rules put in place to ensure that any decisions made by the board of directors or the officers benefits the nonprofit and not individual members.
NOTE: The bylaws and conflict of interest policy must be adopted by the nonprofit during its first organizational meeting where the directors and officers are officially appointed.
Step 5: File the South Dakota Articles of Incorporation
To register your nonprofit, you will need to file Articles of Incorporation - Domestic Nonprofit Corporation with the State of South Dakota.
You must submit your Articles of Incorporation via mail as there is currently no option to file online.
Article I: Entity Name
Enter the Name you selected in Step 1.
Article IA: Purpose
Describe your nonprofit organization’s purpose.
In order to be eligible for 501(c)(3) status, your organization’s purpose must be limited to one or more of the following:
- Testing for public safety
- Fostering national/international amateur sports competition
- Preventing cruelty to animals/children
Article II: Period of Existence
The majority of organizations have no end date in mind and will therefore be considered perpetual. Only check the second box and provide a date if your nonprofit should cease to exist on a specific date.
Article III: Membership
Mark the appropriate box to indicate on whether or not your nonprofit corporation will have members.
Article IV: Principal Office
List the complete address for your nonprofit’s principal office.
Article V: Registered Agent and Registered Office
Your nonprofit’s registered agent can be any entity that is registered to do business in South Dakota or any person who is a resident of the state. Your organization cannot act as its own registered agent.
Any person you designate as the registered agent must have already consented to act as the registered agent for your organization. You don’t have to include proof of this consent with your articles of incorporation.
Provide details regarding the registered agent you selected in Step 2.
Article VI: Incorporator(s)
An incorporator is a person who completes, signs, and submits the articles of incorporation. This person does not need to be a part of your organization. This can be you or a lawyer helping you with the process of formation. Provide the name and street address of each incorporator.
Article VII: Directors
You will need to name at least 3 directors and you must provide a street address for each director.
Enter the information of the directors selected in Step 3.
Article VIII: Classification of Members
If your nonprofit will have different classifications of members, include that information here.
Article IX: Election of Directors
If your nonprofit’s directors will not be elected or appointed by its members, provide more information about how they will be elected or appointed.
Article X: Supplemental Provisions/ Information
Use this section of the articles of incorporation to formally state what the assets of your nonprofit will be used for, and what will happen to the assets if your nonprofit is dissolved.
To be eligible for 501(c)(3) status, you must convince the IRS that the organization’s assets will always only be used for the purposes approved under 501(c)(3) rules. To this end you must include provisions ensuring that in the event your organization is dissolved, the assets of the organization will be used towards tax exempt purposes.
Section 5 of this sample document provides an example of these provisions required for 501(c)(3) eligibility.
When you sign and date the form you are affirming everything written in the form. You are also affirming that the registered agent listed has already consented to be the registered agent for this nonprofit organization.
Submit 2 copies of the Articles of Incorporation (original plus a copy) to:
Secretary of State Office
500 E Capitol Ave
Pierre, SD 57501
Information: (605) 773-4845
Web Site: https://sdsos.gov/business-services/corporations/corporate-forms/nonprofit-corporations.aspx
The $30 filing fee may be paid by personal checks payable to Secretary of State
Q. How long does it take to process the Articles of Incorporation?
A. It typically takes 3-7 business days to process Articles of Incorporation.
Step 6: Get an EIN
What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity such as your nonprofit corporation. It is essentially a social security number for your organization.
Why do I need an EIN? An EIN is required for the following:
- To open a business bank account for the company
- For Federal and State tax purposes
- To hire employees for the company
Where do I get an EIN? An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done online or by mail.
Step 7: Apply for 501(c)(3) Status
Before a nonprofit can apply for 501(c)(3) status it must,
- Elect at least 3 directors not related to each other
- File the Articles of Incorporation with the required provisions (As covered in Step 5)
- Adopt the bylaws and conflict of interest policy
- Have an EIN number
Once these four conditions have been met your nonprofit can apply for 501(c)(3) tax exempt status by filing Form-1023 online.
If your application is approved, the IRS will send you a determination letter stating that your organization is exempt from federal taxes under section 501(c)(3).
FAQ: Starting Your Nonprofit
When should an organization apply for federal tax exemption?
Form 1023 must be filed within 27 months from the end of the first month your organization was created.
How long will it take for the IRS to process Form 1023/1023-EZ?
Soon after sending your application you should receive an acknowledgment of receipt of your application.
If your application is simple and complete, IRS will send your determination letter within 180 days for Form 1023
If you have not heard from them by that time you can call (877) 829-5500 to inquire about your application.
Protect Your Business & Personal Assets
1. Opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
To open a bank account for your nonprofit corporation you will typically need the following:
- The EIN for the nonprofit
- A copy of the nonprofit’s bylaws
- A copy of the Certificate of Formation
2. Getting a business credit card:
- Helps you separate personal and business expenses.
- Builds your company's credit history, which can be useful to raise capital later on.
Business insurance helps you manage risks and focus on growing your business.
The most common types of business insurance are:
- General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
- Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers against claims of malpractice and other business errors.
- Workers' Compensation Insurance: A type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths.
Recommended: Inform your employees about their rights and stay compliant by posting labor law posters in your workplace.
Properly Sign Legal Documents
Improperly signing a document as yourself and not as a representative of the business can leave you open to personal liability.
When signing legal documents on behalf of your nonprofit, you could follow this formula to avoid problems:
- Formal name of your organization
- Your signature
- Your name
- Your position in the business as its authorized representative
See the image below for an example:
This ensures that you are signing on behalf of your nonprofit and not as yourself.
State of South Dakota Quick Links
- IRS - Information for Charities & Nonprofits
- IRS - Required Provisions for Organizing Documents
- IRS - 990 Series for Tax-Exempt Organizations
- IRS - Applying for Tax-Exempt Status
- IRS - 501(c)(3) Compliance Guide
- South Dakota Legislature - Codified Laws - Nonprofit Corporations
- South Dakota Secretary of State - Business Services
- South Dakota Secretary of State - Nonprofit Pamphlet
- South Dakota Secretary of State - Nonprofit Forms
- South Dakota State Government Information Gateway - Businesses
- South Dakota Department of Revenue
- South Dakota Department of Labor & Regulation