It's not really a matter of corruption. It's a matter of attracting people and businesses there that value privacy. Another state that does stuff like this is Delaware. Ever wonder why nearly EVERY large corporation founded before the 90s is incorporated in Wilmington Delaware? This is why. Up until the 90s, Delaware had THE BEST financial privacy laws in the US, and even rated among the top places in the world for financial privacy.

After the 90s, other states caught on that they could lure in large corporations, as well as privacy obsessed entrepreneurs by updating their laws to make them similar to Delaware. From that point, it's basically been a stick measuring contest of states trying to subvert the federal government by passing laws that allow private citizens to screw over the feds by denying them the ability look into your business dealing without going through a lengthy, drawn out process, after which they STILL might not get access.

These states also provide a method of subverting the estate tax by allowing private citizens to set up eternal trusts. Basically, where you have it set up so that all of your assets belong to a living trust, and the beneficial owner is changed upon the death of the current owner. The legal owner is the trust, which can't die, ergo, bypassing the estate tax and simplifying estate transfer, why keeping your life's investments in the family, essentially indefinitely. Most states have a limit of 300-3,000 years that these eternal trusts can exist, but South Dakota is one of the few that actually allows indefinite eternal trusts. Meaning there is no time limit on their lifespan. There's currently movements to extend them even further (10,000+ years) in states where their constitution forbids them making it literally indefinite.

So stuff like this CAN be abused, but it also works for entrepreneurs who want governments out of their business. For the record, the incentive for all of these states to do this lies in business license fees. If everyone in the country is registering their business in South Dakota, then South Dakota gets all of those fees, and can charge small-medium sized surcharge fees on an annual basis. A couple thousand dollars usually. But when you're talking about millions of people, those thousands of dollars add up. It can also incentivize people to move there for retirement, since it will simplify their estate transfer, and in states like South Dakota, Tennessee, and Nevada (The number 1,2, and 3 ranked states for this kind of thing) where there is no state income tax, there's a REALLY big incentive to set up shop for business owners and retirees.