Do I need to sue a client in SD if his business is in SD, but I live in MN? Or can I sue them in Sm. Claims in MN?

It depends on the client's contacts with MN. Generally speaking, a defendant cannot be hailed into court in a remote state unless the defendant has so-called "minimum contacts" with the remote state. This generally means that the defendant acted in a manner in which he somehow purposely availed himself of the benefits of doing business in the remote state. You do not provide any information about the defendant's contacts with MN, so it is not possible to provide a definitive answer to your question.