Your South Dakota partnership is not legally required to carry workers compensation insurance, because coverage is optional for every private employer in the state. The partners themselves are treated as owners, not employees, so they sit outside the system unless they opt in, while any employee you hire adds real exposure if the partnership goes uninsured.
Who this is for: Partners in a South Dakota general or professional partnership deciding whether to cover themselves and their staff.
The short version
- No South Dakota law forces a partnership to carry workers comp, no matter how many partners or workers it has.
- Partners are owners, not employees, so they are left off coverage unless they choose to opt in.
- Employees are a different story: without a policy, a hurt employee can sue the partnership or collect double benefits.
- A 1099 contractor is presumed an employee until independence is proven, so the label alone does not remove your risk.
- Clients, landlords, and general contractors often require proof of coverage before working with the firm.
Partners vs employees
Like a sole proprietor, a partner is considered the employer rather than an employee, so South Dakota does not automatically cover partners and does not require them to insure themselves. A partner who wants protection for their own on-the-job injuries can opt in by having the partnership buy coverage on them. Employees are the opposite: they are exactly who workers comp is designed for, and they carry the exposure that makes a policy worth buying.
Who sits where
| Person | Default treatment | What to do |
|---|---|---|
| Working partner | Owner, not an employee | Opt in by adding yourself if you want coverage |
| W-2 employee | A covered worker, the main exposure | Carry a policy to cap risk and meet contracts |
| 1099 contractor | Presumed an employee until proven otherwise | Collect proof of coverage or a signed exempt-status form |
| Partnership with no staff | Nothing the state requires you to insure | Add coverage when you hire or a contract demands it |
When a partnership should carry a policy
Two things usually decide it. Risk comes first: once you employ anyone, one serious injury without coverage can become a lawsuit or a doubled benefit award that far exceeds a year of premium, and each partner can be exposed to that. Contracts come second: professional partnerships that lease space or serve larger clients are often asked for proof of coverage, and construction-related partnerships almost always are. Because a 1099 worker is presumed an employee in South Dakota, using contractors does not make the exposure disappear.
An Aberdeen example
Illustrative, not a quote. Two partners run an Aberdeen accounting firm with four employees. The state does not require the partnership to carry workers comp, and the partners are owners rather than employees. They buy a policy anyway to cover the four staff, and choose to add themselves so a partner injured at a client site is protected. Their office lease requires proof of coverage, which they already have on file. See our workers comp for accounting firms page.
Real questions South Dakota owners ask
Does our South Dakota partnership need workers comp?
No. South Dakota makes coverage optional for every private employer, including partnerships. But if you have employees and no policy, a hurt worker can sue the partnership for damages or collect double workers comp, so most firms with staff carry it.
Are the partners covered by workers comp?
Not by default. Partners are treated as owners rather than employees, so they sit outside the system. A partner who wants protection for their own work injuries can opt in by having the partnership buy coverage on them.
Should partners cover themselves?
It depends on the work and your health coverage. Partners in physical trades or who visit job sites often opt in, since a health plan may deny a work-related injury. Partners in low-risk office roles sometimes skip it. We can quote both ways.
Do we have to cover our employees?
The state does not force it, but employees are the reason to carry a policy. They are not covered by any owner exemption, so if one is hurt while you are uninsured, they can sue the partnership or elect double workers comp.
We pay some workers on a 1099. Does that remove our risk?
Not by itself. South Dakota presumes a worker is an employee until independence is proven under a control test, so a 1099 label alone does not settle it. Collect proof of coverage or a signed exempt-status form from each contractor.
A client wants proof of coverage from our firm. Do we need a policy?
If a client, landlord, or general contractor requires proof of coverage, you effectively need a policy to take the work, even though the state does not require one. A signed exempt-status form is only accepted at the other side's discretion.
Can one partner be personally exposed for an injury?
Yes. If the partnership is uninsured and a worker is hurt, the business is directly liable for the damages or the doubled benefit award, and partners can share that exposure. A workers comp policy is what caps it.
Why South Dakota owners choose Morrow
- We shop the right market for you. South Dakota workers comp is optional, so Morrow first helps you decide whether to carry it, then places coverage fast through the state's competitive private market of authorized carriers, since South Dakota has no state fund and no monopolistic fund of any kind.
- We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
- Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
- We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
- Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.
Related South Dakota guides
Every South Dakota business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.
- Business insurance in South Dakota (start here)
- Workers comp: the owner's overview
- I own an LLC: do I need workers comp?
- I'm a sole proprietor: do I need workers comp?
- I own a corporation (C-corp or S-corp): do I need it?
- We're a nonprofit: do we need workers comp?
- My workers are 1099: do I still need it?
- Only part-time or seasonal staff: do I need it?
- I only employ family: do I need workers comp?
- Remote or out-of-state staff: do I need coverage?
- What happens if I don't carry workers comp?
- How much does workers comp cost?
- How do I get workers comp (even if turned down)?
- What insurance do I need for a contractor license?
- Workers compensation insurance, explained
- What workers comp costs (national guide)
- Do sole proprietors need workers comp?
- What workers comp does not cover
- South Dakota accounting firm workers comp
This guide is general information, not legal advice. South Dakota rules and penalty amounts can change, so verify current requirements with South Dakota Department of Labor and Regulation, Division of Labor and Management or a licensed advisor before you rely on them. Last updated: July 2026.