South Dakota’s Small Firms, Finance Sector and 2027 Rules

Nearly all of South Dakota’s businesses are small: 96,770 of them, 98.9% of the state’s firms, have fewer than 500 employees. The more telling number is who they employ. Small firms account for 216,705 jobs, 58.0% of private-sector employment in the state, the fourth-highest share of any state and well above the national 45.9%.

Those counts date from 2022 and reappear unchanged in the SBA profile published in September 2026. What the new edition adds is more recent: in the twelve months through March 2025, small businesses created more net jobs than the state’s economy as a whole. This page sets that against how South Dakota earns its money, which leans on finance and farming, and against what it costs to run a company there now and after two rule changes due in 2027.

Fourth Among the States for Small-Business Jobs

Small firms also paid 50.9% of South Dakota’s private payroll, the fifth-highest share among the states. Most of them are very small: 74,028 of the 96,770 have no employees at all. Of the businesses the Census Bureau could classify by location in 2023, 39.1% were in rural areas, against 16.5% nationally.

Their weight has grown over time. Between 1998 and 2022, employment at South Dakota’s small businesses rose 21.3%, compared with 13.1% for small businesses nationwide. A separate source, the Bureau of Labor Statistics’ job-flow data, measures something different: jobs gained and lost by establishments, sorted by the size of the business, from March 2024 to March 2025. It points the same way: small businesses added 1,496 jobs on net while the state’s total net gain was 958, which means larger employers shed about 538. Nationally, small businesses produced 35.9% of net new jobs over the same year.

How much of each industry’s workforce small firms hold varies a great deal:

• Repair, personal and other services: 97.1% of jobs are at small firms.
• Construction: 90.9%.
• Arts, entertainment and recreation: 85.1%.
• Health care and social assistance: 44.1%.
• Manufacturing: 40.0%.
• Finance and insurance: 39.5%, one of the lowest shares of any sector.

What It Costs Now, and What Changes in 2027

Most of South Dakota’s filing fees and tax rates are stable, but two changes are already written into law for 2027. The Secretary of State’s fee schedule and the Department of Revenue give the current figures:

Until the 2027 rule takes effect, the timing is set by codified law 59-11-25: the first annual report is due “before the first day of the second month of the year following the year” the company was authorized, and each later report “by the same date each subsequent year.” The Secretary of State’s business search shows the due date for each company. Under the new rule, a company in good standing can switch between the two dates with a change-of-filing-date form. Banks and other financial institutions are the one income tax exception: they pay a bank franchise tax, with a $200 minimum.

Business filings keep rising. South Dakotans submitted 9,610 applications for new businesses from January through August 2026, 16.0% more than a year earlier, against 13.5% nationally, after a 2025 total of 12,092, the highest in state records going back to 2005. Fewer of those filings plan a payroll, though: applications listing a planned first wage payment fell 20.0%, close to the national drop of 18.4%. Federally guaranteed lending also moved the other way: 86 SBA 7(a) loans from October 2025 through June 2026, against 137 in the same months a year before, a drop of 37.2% that closely tracks the national 33.4%.

The filing itself is explained step by step in how to form a South Dakota LLC, the full budget for a new company, from the $150 filing to yearly reports, is in South Dakota LLC costs, and co-owners can start from a free South Dakota operating agreement.

Finance and Farms: Where South Dakota’s Output Comes From

South Dakota’s economy produced $80.7 billion in 2025. Finance and insurance was the largest single industry at $13.2 billion, 16.35% of the total and about twice the national share of 7.94%; only Delaware and New York draw a larger part of their output from finance. Agriculture, forestry, fishing and hunting added $6.5 billion, or 8.08% of GDP, the highest share of any state, where the national figure is 0.88%.

Set that output against employment and the picture changes. In 2022 small firms held only 39.5% of finance and insurance jobs, well under their 58.0% share of all jobs, so the state’s largest industry by output is one of its least small-business-heavy. The two figures come from different sources and years, BEA output for 2025 and Census employment for 2022, but the gap is wide.

Several state laws bear on the sector. South Dakota levies no personal or corporate income tax. Since 1982, lenders and borrowers who agree on an interest rate in writing face no state usury cap, unless a maximum is specifically set elsewhere in state law. The common-law rule against perpetuities, which elsewhere limits how long a trust can last, is not in force. Banks pay a franchise tax on a scale that runs from 6% of net income down to 0.25% on income above $1.2 billion.

The finance jobs cluster around Sioux Falls. Minnehaha County counts 8,693 finance and insurance jobs averaging $101,927, and neighboring Lincoln County’s finance workers average $111,458. Statewide, banks, card issuers and other credit intermediaries employ 13,546 people at $90,558 on average, although that group has lost 5.8% of its jobs in two years while pay rose 4.9%. Growth in 2025 was concentrated in the same places: Minnehaha, Lincoln and Pennington, the county around Rapid City, together added 2,550 private jobs, more than the state’s total gain of 1,945, while private employment fell in 36 of the 65 counties with published figures.

Farming moves the totals more than the payrolls, since most farm owners are not employees. Livestock production still employs 5.66 times the national share of workers. In 2024, agriculture took 1.10 percentage points off growth, and real GDP rose just 0.8%, 47th among the states. Growth recovered to 1.4% in 2025, tied for 36th, against 2.1% nationally. By employment, the largest sector is health care, with 71,670 private jobs in 2025, 28,573 of them in private hospitals.

South Dakota Questions, With the Numbers

Sources

• SBA Office of Advocacy: the 2026 profile of South Dakota, and the other state profiles released with it, used for the ranking.
• Bureau of Labor Statistics 2025 annual payroll data for the state and its counties, with 2024 files for the two-year changes.
• Bureau of Economic Analysis GDP by state and industry, including each industry’s contribution to real growth.
• Census Bureau Business Formation Statistics through August 2026, and SBA 7(a) loan records released through June 30, 2026.
• South Dakota’s Secretary of State (filing fees), Department of Revenue (taxes), Department of Labor and Regulation (minimum wage), and codified laws 54-3-1.1, 43-5-8, 10-43-4, 10-45-2 and 59-11-25.