COLUMBIA, S.C. (AP) - The South Carolina General Assembly was putting the finishing touches on its 2005 session Thursday touting the year's success for small businesses.

"We've had a banner year legislatively and one of the best legislative years that I've seen in my 25 years up here," Senate Finance Committee chairman Hugh Leatherman said.

Lawmakers say two key bills - an income tax cut for small businesses and changes in the legal system to limit frivolous lawsuits - will help businesses grow and create jobs across the state. Both were signed into law by Gov. Mark Sanford.

After years of steep cuts in the state budget, a brighter economic outlook gave lawmakers the first chance to give a tax break for small-business owners.

The legislation reduces taxes on small-business profits to 5 percent, the same for big businesses, down from 7 percent and will cost $129 million when fully implemented in four years.

That was great news for Evelyn Reis Perry, who owns Carolina Sound Communication, a sound and video business in Charleston.

"We're a growing company and if you spend all your money on taxes you can't spend it on growth," she said.

Rep. James Smith, D-Columbia, gave the Republican governor credit for starting the momentum for small business tax reform.

"Without the governor's effort pushing this idea we probably would have never seen what ultimately became a small business relief," he said.

Sanford had pushed to reduce the state's top income tax in a move intended to attract wealthy retirees and executives. The Senate scaled back the proposal and targeted small businesses. Sanford's plan would have meant $1 billion less in tax collections.

"Nobody was talking about lowering income tax," Sanford said. "We started a wave."

The governor agreed it was a successful year for small businesses even though he didn't get everything he asked for.

"We think it's a very important step in the right direction," said Sanford, who pledged to keep fighting for his income tax cut plan.

But others said the governor's plan was not feasible.

"We were told very clearly by the credit rating agencies we probably would lose our triple-A credit rating" if lawmakers approved Sanford's plan, Leatherman said.

But in the final hours of the session, the House and Senate still remained at odds over one major bill that would give small businesses a tax break for hiring more workers.

Under the Jobs Creation Act, small businesses could hire two people and qualify for job creation tax credits. They now have to hire 10 to get the credit.

Businesswoman Perry had high hopes for the bill to pass this year.

"That's going to be very exciting because we've been creating jobs for 20 years and increasing those jobs exponentially and we've never gotten a tax credit," Perry said. "If a new company comes into town from out of state, they get huge tax credits."