As a South Dakota sole proprietor you are not required to carry workers compensation insurance, and you are not automatically covered by it either. The law treats you as the business owner, not an employee, so you fall outside the system unless you choose to buy coverage on yourself. That choice, and whether you hire anyone, is what decides if you need a policy.
Who this is for: South Dakota sole proprietors, from solo trades to small shops, deciding whether to cover themselves and what happens once they bring on help.
The short version
- A sole proprietor is not an employee under South Dakota law, so nothing forces you to insure yourself.
- You can opt in and buy workers comp on yourself if you want protection for your own on-the-job injuries.
- The day you hire an employee, coverage is still optional, but going without it exposes you to a lawsuit or double benefits.
- A 1099 helper does not solve the problem, because South Dakota presumes workers are employees until independence is proven.
- General contractors and clients often require proof of coverage even from a one-person business before they hire you.
Covering yourself is a choice
Because you are the owner, South Dakota leaves you out of the workers comp system by default. You can opt in by purchasing a policy that covers you, and many solo tradespeople do, because a standard health plan often will not pay for an injury it treats as work-related. If you work a low-risk desk trade you may decide the coverage is not worth it. Either way it is your call, and we can quote it both with and without you on the policy.
What changes when you hire
| Your situation | Does the state require comp? | What to weigh |
|---|---|---|
| Just you, no workers | No, and you are not an employee | Buy coverage on yourself only if you want it or a client requires it |
| You plus a W-2 employee | No, coverage stays optional | Going without it exposes you to a lawsuit or double benefits |
| You plus a 1099 helper | No, but the helper is presumed an employee | Get proof of coverage or a signed exempt-status form |
| Bidding for a contractor or client | Not by law, but likely by contract | You may need proof of coverage to win the job |
Why a one-person business often buys anyway
Two reasons push solo owners to carry coverage even though it is optional. First, protecting your own income: if you are hurt and cannot work, a policy that covers you can pay medical bills and a portion of lost wages that your health plan will not. Second, winning work: general contractors and larger clients frequently require proof of coverage from everyone on a job, including a sole proprietor, and a signed exempt-status form is only accepted at their discretion. If your pipeline depends on those contracts, a policy pays for itself.
A Watertown example
Illustrative, not a quote. A Watertown handyman runs as a sole proprietor with no employees. The state does not require him to carry workers comp, and he is not covered by default. He decides to buy a policy on himself because his health plan would deny a fall from a ladder as work-related. When a property management company hires him for ongoing repairs, it asks for proof of coverage before adding him to its vendor list, and he already has a certificate ready. See our workers comp for outdoor trades page.
Real questions South Dakota owners ask
Do I need workers comp as a South Dakota sole proprietor?
No. South Dakota does not require it, and as the owner you are not treated as an employee, so you are not covered by default either. You can choose to buy a policy on yourself, and you decide whether to cover employees you hire.
Am I covered by workers comp automatically?
No. Because the law sees a sole proprietor as the business owner rather than an employee, you sit outside the system unless you opt in and buy coverage on yourself. If you want protection for your own work injuries, you have to ask for it.
Should I buy coverage on myself?
It depends on your trade and your health coverage. Many health plans deny injuries they consider work-related, so solo tradespeople in physical work often opt in. If you do low-risk office work you might skip it. We can quote it both ways so you can compare.
What happens when I hire my first employee?
Coverage is still optional, but the stakes rise. Without a policy, a hurt employee can sue you for full damages or collect double workers comp. Most owners buy coverage at their first hire to cap that exposure and to meet client contracts.
Can I just pay a helper on a 1099 to avoid this?
Not reliably. South Dakota presumes a worker is an employee until you prove independence under a control test, so a 1099 label alone does not remove your exposure. If the helper is really working under your direction, treat them as an employee.
A general contractor wants proof of coverage. I have no employees.
That is common. A general contractor can require proof of coverage from everyone on the job, including a solo owner, and does not have to accept a signed exempt-status form. If you want the work, a policy that covers you is usually the cleanest answer.
What is an exempt-status form?
It is a signed, notarized form on which an independent contractor declares they are not an employee. It creates a rebuttable presumption that they are exempt, but no general contractor is required to accept it, so many still ask for a real policy.
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 own a corporation (C-corp or S-corp): do I need it?
- We're a partnership: do we need workers comp?
- 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?
- Hiring your first employee: what changes
- South Dakota landscaper 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.