South Dakota Small Business Statistics

A part of the Great Plains, South Dakota is the 5th least populated state in the US. The state economy used to revolve around agriculture, which still has a leading role. At the same time, tourism and the service sector are two other big economic contributors.

Seeking to further diversify its economic climate and engage more new businesses, the state government has created really favorable conditions for small enterprises (SMEs) to launch.

Lower energy costs and a truly loyal taxation system that doesn’t levy personal and corporate incomes give the Mount Rushmore State an edge even over bigger and stronger US economies.

While ranked 22nd in the CNBC “Top States for Business” 2022 rating, the state is the leader among the 10 Best States for Starting a Business by the Small Business and Entrepreneurship version. 

Key South Dakota Small Business Stats

• South Dakota is one of a few US states that showed consistent gross domestic product growth despite the pandemic economic stagnation;
• According to Statista, in 2021, the state GDP was $48.98 billion exceeding the previous year by 4%;
• The annualized GDP growth rate for a five-year period (2017-2022) is recorded at 1.1% under the IBISWorld survey;
• The economic sectors that contribute to the state GDP the most are finances, agriculture, and healthcare services ensuring over 42.4% of the entire GDP;
• Meanwhile, the industries with the highest earnings are hospitals, corn, wheat, & soybean wholesaling, and meat, beef, & poultry processing, with $7.6, $6.7, and $4.9 revenues accordingly;
• As of 2022, there are 90.274 small companies in SD that account for 99% of all businesses operating in the state;
• Private firms generate over 34% of the total SD export worth $1.2 billion and make up nearly 79% of all exporters;
• The highest count of SMEs is concentrated in the following three sectors:
  • Construction: 10.972;
  • Retail trade: 10.856;
  • Real estate: 10.458.
• Company management is the industry with the lowest SME count, with only 91 companies currently working in it;
• For the year 2020-2021, a net gain of new SMEs in South Dakota was 960 entities while the net job loss in the employment market was 900 jobs;
• About 21% of the small entities in SD have employee payrolls;
• In SD, there are 208.353 employees engaged in the SME sector which equates to 58% of all employees;
• Main employers in the SME sector are accommodation and food services and the healthcare industry, with over 30.000 workers engaged in each of them;
• Currently, the minimum wage rate in SD is $9.95 per hour, with a perspective growth to $10.80 per hour in 2023;
• The average wage rate is $22 translating into $45.177 of average annual income across SD;
• The unemployment rate of 2.5% is much lower than the federal minimum of 3.7%.

Top 10 Industries for Small Businesses in SD

SD Small Business Demographics

• SME ownership in SD is not split equally between two gender groups, with the majority of private firms gravitating toward male owners that possess 49.302 SMEs. Notably, 25% of those are employer entities;
• Women own 43.2% of the total SME count in South Dakota which equates to 29.194 small companies, and 11% of them have employees on their payrolls;
• 8.361 private entities are equally owned by both gender groups, with more than 65% of them being job-givers;
• Female workers in SD ensure 48.2% of the entire labor pool;
• Military veterans are owners of 10.9% of the smaller businesses and represent 5.5% of the manpower;
• Racial minorities are not numerous in South Dakota. They control only 4.6% of SMEs in the state and ensure 11.2% of hired employees;
• The SME ownership is split between ethnic groups in the following way:
  • Hispanics: 1.489;
  • Asians: 897;
  • Alaska Natives and American Indians: 827;
  • Black Americans: 750.

SD Small Business Formation

• To become a part of the SD business environment via South Dakota LLC establishment or incorporation, you just need to register formation docs with the state and pay a compulsory fee of $150 for online filings and $165 for mailed filings;
• To lawfully operate in SD, businesses need to stay compliant and maintain a South Dakota registered agent and file an annual state report along with a $50 to $65 filing fee;
• South Dakota is one of a few states along with Texas, Ohio, Wyoming, and Nevada that do not tax corporate incomes. Besides, there is no personal income tax in SD as well which means you won’t have to pay any levies over your revenues;
• An SD sales tax rate is 4.50% and the upper limit of the local sales tax rate is also 4.50%. With that, an average sales tax rate across the state results in 6.40%;
• An SD taxation system ranks 2nd among 50 states on the State Business Tax Climate Index for 2022, thus, attracting entrepreneurs;
• South Dakota has a separate franchise tax for financial institutions and banks that depends on the net income and is charged under a graduated system. Rates vary from 6.8% for incomes of $400 million and below to 0.25% for incomes of $1.2 billion and more.

References

1. South Dakota Small Business Statistics (2022)
2. South Dakota Small Business Economic Profile 2022
3. SD Tax Rates & Rankings
4. South Dakota State Economic Profile