How to start a business in South Dakota in 14 steps (2025 guide)

Starting a business is your chance to bring your ideas to life, make a difference in your community, and create something you’re truly proud of. South Dakota is a great place to do just that, whether you're inspired to open a small shop in Sioux Falls, launch a tech startup, or contribute to the state’s booming tourism industry.

The step-by-step guide below explains how to start a business in South Dakota, including the financial, legal, and tax considerations. Now, you can concentrate on providing goods and services to customers and others in South Dakota and beyond.

Why start a business in South Dakota in 2025?

With low taxes and the availability of grants and incentives, South Dakota presents an inviting business climate. The state encourages economic development through entrepreneurs in a vast array of fields, including agriculture, technology, construction, and science. With its monuments, events, plains, and hills, South Dakota also offers opportunities for tourism-oriented businesses.

Here are the topics we’ll cover in this step-by-step guide: 

• 14 steps to starting a business in South Dakota
• Step 1: Decide what type of industry is best for your business
• Step 2: Conduct industry research
• Step 3: Create a business plan
• Step 4: Choose your business entity: Types of business entities in South Dakota
• Step 5: Secure funds: South Dakota small business funding, loans, and grants
• Step 6: Choose your South Dakota business name and South Dakota DBA
• Step 7: Pick a business location in South Dakota
• Step 8: Find a South Dakota registered agent 
• Step 9: Get a South Dakota EIN and file your tax and employer identification documents 
• Step 10: Register as a small business in South Dakota 
• Step 11: Register for your business license and permits in South Dakota
• Step 12: Secure insurance for your South Dakota small business 
• Step 13: Prepare to pay taxes on your business in South Dakota
• Step 14: Set up your business bank account
• Additional resources to get your business started
• Frequently asked questions

14 steps to starting a business in South Dakota

Starting a business requires dedication and a clear plan. But with the right tools, guidance, and small business resources, you can move forward and build a thriving business in South Dakota. Let’s break it down into 14 simple steps to get you started.

Step 1: Decide what type of business is best for your entity

The first step in starting your business is figuring out what kind of business makes the most sense for you. Think about your skills, experience, and interests. What are you good at, and what do you love doing? These questions will guide you toward a business idea you’re passionate about and capable of running.

Need help getting started? Explore small business ideas for inspiration.

Step 2: Conduct industry research

Conduct industry research, which includes finding the number of potential creditors and the costs of starting and running the business. For example, restaurant chains and other franchisors post minimum costs or funding needed to open the franchise. You'll also want to research demographics for your type of business and conduct a competitive analysis.

Step 3: Create a business plan

Form a clear road map for how you will open and operate. This includes how you will finance, what you will sell or offer, how you will market, and your anticipated earnings over time. Lenders, economic development agencies, and investors will rely on your plan when deciding whether to fund you.

Here’s what you typically need to include in your business plan:

• Executive summary: Offer a brief overview of your business plan and highlight the key points from each section. 
• Company description: Share your mission, company’s background, and business goals.
• Market research and potential: Analyze your target audience and industry trends
• Competitive analysis: Evaluate your competitors and explain what makes your business unique
• Products and services: Outline what you’re offering and the value it provides to your customers.
• Marketing and sales: Describe your strategy for attracting and keeping customers.
• Business financials: Present your financial projections, including expected income and cash flow.
• Management and leadership: Highlight the experience and skills of your leadership team
• Funding request: State how much funding you need and how you plan to use it.
• Appendix: Include any additional documents or details that support your plan

Take time to craft your plan, and use a free business plan template to help you get started. For additional assistance, reach out to the South Dakota Small Business Development Center. 

Step 4: Choose your business entity: Types of business entities in South Dakota

Consider your preferences for taxation, control, ownership, and avoiding personal liability when you choose a business structure. South Dakota recognizes these business entity structures.

Sole proprietorship

A business owned and operated by one person, with no legal distinction between the owner and the business.

General partnership

A business owned by two or more people who share profits, losses, and management responsibilities.

Corporation

A legal entity separate from its owners, with shareholders who have limited liability for the company's debts and obligations.

Limited liability company (LLC)

A hybrid business structure combining the limited liability of a corporation with the tax flexibility of a partnership. Learn more about LLCs.

Step 5: Secure funds: South Dakota small business funding, loans, and grants

Small businesses in South Dakota need funding to start operations. This includes buying equipment, renting or buying a location, hiring employees, and advertising. The costs can widely vary depending on your industry and type of business, but expenses can easily reach tens of thousands of dollars.

Here are some option funding options to consider:

Here are a few options available in South Dakota:

Dakota Seeds

Under this grant from the South Dakota Governor's Office for Economic Development, science, technology, engineering, and math businesses get an incentive to hire interns. The state matches each intern's pay up to $2,000.

Workforce Development

The Governor's Office for Economic Development reimburses eligible businesses half of the training costs for new and current employees. The grant focuses on businesses whose growth requires employees to have additional skills.

South Dakota Works

This loan program finances the acquisition of equipment, land, buildings, and other fixed assets. Borrowers can also get working capital. South Dakota Works loans usually have a limit of $1 million.

Step 6: Choose your South Dakota business name and South Dakota DBA

Decide what to name your business. A well-thought name expresses your identity and brings you positive attention. Make sure it is unique and simple to pronounce and spell. If you conduct business other than in your given name or that of the entity you form, you must register the "Doing Business As" (DBA) name as an assumed name.

Reserve your business name

Apply with the South Dakota Secretary of State Business Services to reserve your name. You can do this for your proposed corporation, limited liability company, limited partnership, or limited liability partnership.

Filing a DBA (Doing Business As)

File for a DBA, also known as an assumed or a fictitious name, when you want to use a name for your business other than its legal name. Go to the South Dakota Secretary of State business name registry to file your assumed name. Provide your name or entity's name, ID number, and address. The Secretary of State charges $10 for filing, and you must renew the assumed name every five years.

Step 7: Pick a business location in South Dakota

Decide your business location. South Dakota boasts many scenic areas, such as the Crazy Horse Memorial and Mount Rushmore. The annual Sturgis Bike Rally draws many visitors. Hospitality and restaurant businesses are often established in these areas. Whatever your business, learn about the local regulations, income, road system, workforce, and population of the areas where you plan to do business. If applicable, you may consider running your business from home, which can help lessen overhead costs like rent, utilities, and commuting.

Below, we highlight three major cities in South Dakota.

Sioux Falls

Sioux Falls stands as South Dakota's most populous city. It's an economic hub that offers numerous business incentives. It has a robust healthcare sector and a growing technology industry.

Rapid City

Rapid City is roughly a half-hour drive from Mount Rushmore and is also close to the Black Hills. Its location makes it prime for tourism-related businesses, and it also has a healthy manufacturing sector.

Aberdeen

Aberdeen's business resources include the Aberdeen Development Corporation, which offers financial incentives and other support for businesses related to manufacturing, agriculture, and education. New businesses can seek help from the Aberdeen Business Improvement District, which has been funded in part through the Department of Housing and Urban Development. The Aberdeen Downtown Association administers a revolving loan program for businesses to open and operate in downtown.

Step 8: Find a South Dakota registered agent

Registered business entities in South Dakota must have an individual or a company to accept service and receipt of legal documents and notices on behalf of the business. If you are a South Dakota resident, you may designate yourself as your business's registered agent. Other South Dakota residents or business entities may also be registered agents. If a foreign entity is authorized to do business in South Dakota, it, too, may serve. The South Dakota Secretary of State maintains a list of commercial registered agents who engage in such business.

Step 9: Get a South Dakota EIN, and file your tax and employer identification documents

An EIN (Employer Identification Number) is a nine-digit number the IRS uses to identify your business for tax purposes. Although South Dakota doesn't require a state EIN, you'll need one to file payroll taxes and federal tax returns, open a business bank account, and apply for loans. You can apply for a free EIN through the IRS website. 

Step 10: Register a small business in South Dakota

The requirements for registering your entity, fees, and forms depend on the type of business structure you elect. Take a look at the chart below:

Step 11: Register for your business license and permits in South Dakota

Prior to doing business, you must obtain the necessary permits and licenses. These include occupational or professional licenses and permits for various activities, such as food preparation, alcohol sales, retail sales, and sales of milk or milk products.

Do you need a business license in South Dakota?

South Dakota does not issue a license to do business in general. Depending on your occupation or proposed business, various boards, agencies, and local governments may require permits. Some are listed by the South Dakota Governor's Office of Economic Development.

Specific state boards and agencies issue licenses for various occupations. South Dakota's Board of Technical Professions licenses architects, engineers, land surveyors, land architects, and petroleum release services. Consult the "Blue Book" for laws and requirements or the Board's online page.

Check with the municipal or county government on any required permits when starting a business. For example, in the city of Pierre, you must have a permit for businesses such as pawn shops, sidewalk alcohol sales, tattoo shops, electrical contracting, plumbing contracting, and residential construction contracting.

Step 12: Secure insurance for your South Dakota small business

Natural and human-made accidents damage property and injure people. These events can cripple your business if you do not have adequate insurance. Below are some typical insurance products businesses should obtain.

Types of small business insurance in South Dakota

These types of insurance include:

Step 13: Prepare to pay taxes on your business in South Dakota

South Dakota small businesses have obligations to pay federal income and payroll taxes. You will find an inviting tax environment in South Dakota if you incorporate.

Here are the frequent types of South Dakota business taxes:

State income tax

Corporations pay no state income tax in South Dakota. As a further benefit to a South Dakota small business, the state does not tax gross receipts. The municipality where you operate may impose a gross receipts tax.

Franchise tax

Think of a franchise tax as one imposed because you're conducting business. South Dakota does not have a franchise tax, making it an inviting location to start a business.

Payroll taxes

Businesses incur payroll taxes when hiring employees. Federal payroll taxes include Social Security, Medicare, and the Federal Unemployment Insurance Program. South Dakota imposes a "Reemployment Assistance for Businesses Tax"

Federal taxes

In addition to state and local taxes, all businesses must pay applicable federal taxes, including:

• Federal income tax
• Self-employment tax (for sole proprietors and partners)
• Employment taxes (if you have employees), including the Federal Unemployment Tax Act (FUTA tax)
• Excise taxes (for certain industries)

To ensure you understand your federal tax obligations, check out these IRS resources: Publication 334, Tax Guide for Small Business and Publication 583, Taxpayers Starting a Business and Keeping Records.

Other unique South Dakota tax situations

South Dakota's 4.2% sales tax is the second lowest among adjoining states. At 4.0%, only Wyoming's stands lower.

Tax Credits and Incentives for South Dakota Employers

Along with favorable tax rates, South Dakota provides incentives and breaks for many businesses. For example, the Reinvestment Payment Program repays businesses with equipment upgrades of more than $2 million. The South Dakota Jobs Program affords an offset to initial costs of new or expanding facilities under $20 million and equipment upgrades of less than $2 million.

Step 14: Set up your business bank account

Your business should have a bank account to keep your business money separate from personal funds. This helps you accurately keep your books so you can analyze business performance, prepare taxes, and claim tax credits. Here are the steps to open your business bank account:

1. Gather all necessary business documents, such as your EIN, formation papers, registrations, permits, and licenses, before opening your small business bank account.
2. Look for a bank or credit union that meets your needs, whether it’s access to business loans or high-yield savings options.
3. Start building business credit by using a dedicated credit card for purchases and expenses related to your operations.
4. Choose accounting software that aligns with your business needs to streamline your financial records.
5. Consider hiring an accountant familiar with your industry and local tax regulations to handle bookkeeping and financial management.

Additional resources to get your business started 

There are several state and federal resources that can support your business with guidance, training, potential funding and more. 

State resources

• South Dakota Small Business Development Center (SBDC): The SBDC offers free business consulting, market research, and training workshops to help small business owners in all stages of their journey.
• South Dakota Secretary of State Business Services: This office assists with business registrations, name reservations, and compliance. They also maintain a list of commercial registered agents for your business needs.
• South Dakota Workforce Development Council: The council supports small businesses through job training programs and connections to skilled employees.
• South Dakota Governor’s Office of Economic Development (GOED): GOED provides valuable tools for entrepreneurs and information on financing, incentives, and business support programs.

Federal resources

• Small Business Administration (SBA): The SBA supports small businesses through various loan programs, including the 7(a) loan, provides resources for government contracting, and offers counseling and training programs to help entrepreneurs start and grow their businesses.
• Grants.gov: This centralized platform simplifies the process of searching for and applying for federal grants across various sectors. It also provides grant writing tips and has a Grants Learning Center featuring the basics of grants, eligibility, and more. 
• Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR): SBIR and STTR programs provide research and development funding to innovative tech companies. 
• SCORE: SCORE is a national nonprofit organization that partners with the U.S. Small Business Administration (SBA) to provide free mentoring and educational resources to entrepreneurs and small business owners. While not a direct federal agency, SCORE is an independent organization with a network of volunteer business mentors across the United States.
• U.S. Department of Agriculture (USDA): The USDA website lists grants, loans, and other programs and resources for farmers and other businesses serving rural America. 

Disclaimer: 

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.