Like many states, South Carolina is a great place to start an LLC. It provides liability protection for your business and personal assets and tax advantages such as pass-through taxation.
You can file online with the SC Secretary of State’s office in just a few minutes and only about $70. While there is not one single reason you should choose to form an LLC in South Carolina, here are some good ones.
Forming an LLC in South Carolina is Easy
STEP 1: Name your South Carolina LLC
- The name of your LLC must contain the words Limited Liability Company or the abbreviation “L.L.C.” after it. It may not contain language stating that it is a limited partnership unless it is one.
- The name of your LLC cannot be the same as another LLC on file with the Secretary of State’s office.
- Names can be reserved for 120 days by filing an Application to Reserve a Business Entity Name with the South Carolina Secretary of State.
- “LLC” names cannot begin or end with a unique character such as an ampersand (&) so also avoid using “&Company,” “&Inc.,” etc. at least for now – you will have to change their company name later if they plan on doing business under those names.
No “Doing Business As” (DBA) is required in SC, so if you choose not to form an LLC and just want to do business as a sole proprietor, that works too!
FAQ: Naming a South Carolina LLC
Q. What is an LLC’s name?
A. The official and registered name is called its “fictitious name” or, more popularly, its DBA (Doing Business As).
Q. What are the benefits of choosing a unique LLC name?
A. Choosing a unique business name for your LLC that any other South Carolina company has not used can help you avoid confusion while preserving brand identity.
Also, having a unique name may help insulate you from potential claims by unhappy clients who have had prior dealings with another entity with a similar or even identical business name in South Carolina.
STEP 2: Choose a Registered Agent in South Carolina
Your LLC must have its own registered agent and office in South Carolina. A registered agent is a person designated to receive official notices on behalf of your LLC. The registered agent can be you, another individual, or a South Carolina-based company such as Nationwide Registered Agents.
In most cases, it is simplest to use an attorney as your registered agent because they will know how to properly accept any official documents from the state that are being sent, but this is not required.
In addition to having a registered agent, you should have an office for conducting business with clients and customers located at the same address where your registered agent receives documents for your LLC. You can use a PO Box, but it must be at the same address where all official communications are sent.
FAQ: Nominating a South Carolina Registered Agent Service
Q. Where is a South Carolina LLC required to have its registered agent?
A. All limited liability companies must have an office or place to conduct business in the state of South Carolina and a resident or firm that agrees to accept official service on behalf of the company.
This can be any person, corporation, or association over 18 years old who resides in South Carolina or maintains an office address in SC (Business Location).
STEP 3: File the South Carolina Articles of Organization with the SC SOS
A limited liability company is created when a South Carolina Secretary of State office receives Articles of Organization from at least one person already a member (owner) of the LLC.
The articles must include the LLC’s name, address, and registered agent, along with information about each initial member, including their names and addresses.
There are no fees for filing the Articles of Organization in South Carolina, but there may be additional fees depending on how many owners your LLC has. For example, if you’ve decided that your LLC will only have two members (owners), then filing an annual report with this agency may be done online for free.
FAQ: Filing South Carolina LLC Documents
Q. How long does it take for an LLC to be created?
A. Once the Secretary of State office receives articles of organization, the LLC will be officially established within 1-2 days (excluding holidays). Keep in mind that many Secretaries of State offices are closed on federal holidays so you’ll want to file your articles early during the week before any holiday.
However, if you file online through SC Secretary of State business services, most filings made before 4:30 pm Monday – Friday and not including federal holidays may be processed within one hour. You can even request expedited processing and same-day filings via their website with a $25 fee which is optional if you do not need your document filed quickly.
STEP 4: Create a South Carolina LLC Operating Agreement
An LLC may operate with or without an operating agreement. If you choose to have one, it usually sets out the rights and duties of each member (owner), which can include profit-sharing distributions, percentages of ownership, how funds are withdrawn, voting rights for members, etc.
It is strongly recommended that you create a limited liability company operating agreement so your business can continue if any of its owners are absent or pass away unexpectedly.
Without an operating agreement document in place, your LLC’s default rules under South Carolina statutes will govern many aspects of your limited liability company’s operation including the percentage of profits each member receives as well as what happens upon death or this individual being out-of-business.
FAQ: Creating a South Carolina LLC Operating Agreement
Q. How to create a South Carolina limited liability company operating agreement?
A. An LLC operating agreement should be created by the members of the business and kept in their records to ensure that all small business owners are aware of ongoing policies, procedures, and rules for the business.
It’s recommended that you keep an original signed copy with an LLC member (owner) but also make a digital version available online where it can be accessed regularly among other members and managers – especially if a manager has been designated or someone is acting as managing member for your limited liability company.
STEP 5: Get a South Carolina LLC EIN
An Employer Identification Number (EIN) is a nine-digit tax ID number given by the Internal Revenue Service for business entities to be used when filing tax returns. It’s not required for South Carolina LLCs but you still need one in order to open a bank account, apply for a loan, and file income taxes.
There are several ways that your South Carolina limited liability company may obtain an EIN:
- Online at the IRS website via their EIN tool which will require information from your articles of organization.
- Phone at 1-800-829-4933 which requires the same information as mentioned above
- Mail using Form SS 4 which can be downloaded from IRS website – this document requires your Articles of Organization so send via postal mail- do not fax or email
- It’s also possible to have an EIN number issued by the South Carolina Secretary of State for a fee of $50. Simply search “SC EIN” using your browser, complete their online form, and pay using a credit card.
- You’ll also need your LLC’s Federal Employer Identification Number (FEIN).
FAQ: Getting a South Carolina LLC EIN
Q. Where do I get an LLC’s Federal Employer Identification Number?
A. The IRS uses a nine-digit tax ID number known as the FEIN, or Federal Employer Identification Number, to identify business entities for federal tax purposes.
You can get your South Carolina limited liability company’s FEIN from the IRS at 1-800-829-4933 by following these steps:
- Download Form SS 4 if you did not receive one in your new LLC kit
- Go online and input this form’s information into the EIN tool
- Answer questions regarding your LLC – this will finalize the application
- Make sure you have a copy of your Articles of Organization on hand before starting!
It is also recommended that you keep a printed version of this document after applying so you can always provide proof of application.
What is an LLC?
A limited liability company (LLC) is a business structure that provides the advantages of both a corporation and a partnership. If you are just starting your own business, you should consider whether an LLC protection plan would be beneficial to your situation.
Pros and cons
- An LLC offers both limited liability and tax pass-through; owners of the company (called members) are not held personally liable for business debts and they can report taxes on personal income taxes
- LLCs offer more flexibility than a corporation in terms of setting up operational rules
- Members may not be involved in day-to-day management but they retain all benefits as if they were actively working; they also avoid double taxation (taxation at the corporate and individual level) like what happens with a C Corporation. Just make sure your LLC is formed properly
- Self-employment tax savings since a single member is taxed as a sole proprietor, and an LLC with only one member cannot be taxed
- Members are entitled to their share of money left in the LLC
- An unprofitable LLC will result in the business losing its limited liability status which means it’s no longer an effective shield against lawsuits
- Accountants, bankers, and other professionals may view an LLC unfavorably
- An LLC will not be treated as a corporation for tax purposes, so you may have to apply your self-employment taxes on Schedule C
How much does it cost to start an LLC in SC?
You only need $50 to form a South Carolina Limited Liability Company. You can use this fee when you sign up with the Secretary of State and opt for expedited service so your paperwork will be processed in just 24 hours. If you choose regular processing, your filing will take 5-7 business days.
Here’s how it works:
- Visit the South Carolina Business One Stop site and complete the online registration
- Complete the Application for Exempt Organization Filing (Form TA1)
- Pay using a credit or debit card
NOTE: Some companies charge higher fees than what we list above because they offer “premium” packages that come with extra services. We recommend going with one of the options above because upgrading to a premium package will not guarantee your LLC’s success and may only delay the inevitable.
Types of LLCs
You can keep your personal assets safe in this company structure, but if the business fails you still have to pay taxes on it
This is when two or more members are involved. Like with single-member LLCs, owners will be taxed on business profits even if the company doesn’t earn anything for them
Usually formed by an SC entrepreneur who wants to open up shop in another state; requires additional filings with the Secretary of State before operating in South Carolina.
Considering Using an LLC Formation Service?
If you’re looking for a provider to handle your LLC formation, it’s best to do some research before committing.
You need a service that is professional and a company with a proven track record in the industry. Nowadays, you can find dozens of companies offering low prices for LLC services, but don’t be fooled by flashy advertising trying to convince you otherwise!
Research is indeed the key and whatever you do -don’t jump the gun and commit to the first company you come across.
Separate Your Personal and Business Assets
Just like when you own a traditional corporation, if you form your LLC in South Carolina, it is important to keep your personal and business assets separate. This means not using the LLC bank account for personal expenses nor should you ever use your personal credit card for business purchases or expenses.
Having separate entities allows you to maintain a neutral standpoint while running your SC limited liability company, keeping away from any allegations of wrongdoing by either party.
For example, there have been some cases where business owners found themselves in the middle of a lawsuit but were able to escape by pointing fingers at their partner’s actions.
In general, though, both parties will benefit from having a separation between their respective finances since doing so also keeps things more organized from a bookkeeping standpoint.
1. Opening a business checking account:
When you open a business checking account with your South Carolina LLC’s EIN, the money in that account is no longer considered to be personal income.
If you’re spending from that account and it contains personal funds, then technically you are misappropriating those funds.
Remember – always keep your LLC’s finances separate!
2. Getting a business credit card:
Since your South Carolina LLC is not a lending organization, you will be able to open a business credit card that is associated with its EIN.
You can then use that card for business expenses and keep track of those transactions in the appropriate books. This also goes for any personal credit cards you have as well – do not use them unless it’s an absolute emergency!
3. Hiring a business accountant:
While you’re at it, don’t forget to hire a business accountant to keep your books organized and make sure that your LLCs stay compliant with all local government regulations.
Get Business Insurance For Your South Carolina LLC
1) General Liability Insurance:
In South Carolina, you have the option of insuring your LLC for commercial general liability. This is a common type of insurance that covers a wide range of potential liabilities in a business setting and offers protection against bodily injury or property damage claims made by other parties in connection with your company’s operations.
Although this applies to both corporations and LLCs alike, it doesn’t hurt to remind readers that LLCs are not required to carry business insurance nor do they need to file articles of organization with the state if they don’t want to. In fact, opening an LLC can be done without any formality at all!
But remember – even though it makes no difference from a legal standpoint where you live when opening an account, it is still advisable to register your LLC with the state; it’s just part of what we call ‘good business sense.
2) Workers’ Compensation Insurance:
South Carolina does not require LLCs to carry workers’ compensation insurance, though if you decide to do so, you will need to file from SC WC-100.
Keep in mind that payment must be submitted along with the state’s maximum premium limits.
3) Unemployment Insurance:
Unemployment insurance is required for South Carolina LLCs that have four or more employees. This is done through reporting quarterly at the South Carolina Department of Employment and Workforce.
Understanding these two things – general liability insurance, on one hand, and unemployment insurance, on the other – will go a long way in helping you protect your business against losses caused by accidents or injuries suffered by others while it’s in operation.
Create Your Business Website
One of the many benefits of setting up an LLC in South Carolina is that you can create your own business website to advertise your products and services.
Simply put, the internet has opened up many new insurance opportunities for small businesses so there are plenty of reasons why you should seriously consider creating an online presence!
Send Out a Press Release
Don’t forget about advertising and promotion!
Send out a press release to your local newspaper or media outlet to let the world know that you’ve created an LLC.
This is especially helpful as you begin running advertisement campaigns, as some businesses may be interested in doing business with someone who has already made a name for themselves locally.
Business Permits and Licenses
Although this is not a requirement for doing business in South Carolina, it’s still a good idea to get your LLC registered with the state. Licenses and permits vary a lot within various states.
Most of the time, you can do this at the SC Secretary of State website or by completing state forms that are available online.
If you are unsure about any of this information, feel free to consult with an attorney who specializes in this area of law before opening your new company.
Types of licenses and permits you may need:
- Federal Tax Identification Number (IRS Form SS-4)
- Sales and use tax permit (South Carolina Department of Revenue Form ST-8)
- State sales and use tax license (SC Department of Revenue Form SUT)
South Carolina LLC Tax Filing Requirements
One of the things LLC owners are always saying is that they cannot wait to be taxed as a corporation!
When you get right down to it, that’s true because South Carolina imposes no income tax or franchise fee on LLCs. This means the only form of tax your company will have to worry about filing paperwork for is sales tax.
If you are not sure whether or not your business needs this type of license, give the SC Department of Revenue a call toll-free at 888-303-3078.
South Carolina Annual Reports for LLCs
Once you have established an LLC in South Carolina, there are several ways to complete annual reports depending on what kind of organizational structure your company has.
If it’s run by one family member, the only organizational reports required to pertain to articles of organization and/or by-laws.
On the other hand, if multiple members own your enterprise, you’ll need to file an annual report as part of business license renewal in addition to articles of organization and/or by-laws.
South Carolina Sales Tax
South Carolina’s sales and use tax are administered by the SC Department of Revenue (http://www.sctax.org/) and no matter what you sell, your business will need to register for a state tax ID number if it’s total taxable retail sales exceed $12,000 annually.
South Carolina Employer Taxes
As an LLC that is not registered as a corporation, you will be subject to the same withholding and unemployment insurance responsibilities as most other South Carolina employers.
If you would like more information about this, simply visit the Employment and Workforce (E-W) website at https://lmi.sces.sc.gov/LMI/default.asp.
South Carolina Corporation Taxes
When it comes to running your business as a C-corporation in South Carolina, know that all profits are taxed twice: once at the corporate level and then again when they’re distributed to individual shareholders.
For example, even though Microsoft is headquartered in Washington State – one of seven states without a personal income tax structure – it still has to pay state taxes on its earnings in South Carolina.
- The SC corporate income tax rate is among the lowest in the nation at 6%.
- The corporate franchise tax is $1,000 annually. If your annual taxable income exceeds $100,000, you will owe an additional 1% ($10,000 max).
South Carolina Franchise Taxes for LLCs
One of the best reasons to incorporate or form an LLC in South Carolina is that neither type of company has to pay state franchise taxes anymore. Instead, all eligible companies are subject to one percent (1%) fee each year based on net worth.
Net worth must be calculated by starting with total assets and then subtracting liabilities.
The amount owed is the lesser of either the net worth or stock value multiplied by one percent (1%).
South Carolina Personal Property Tax Returns for LLCs
Even though you are no longer required to pay franchise taxes, your business will still have to file a personal property return each year if it owns vehicles, computers, or other office equipment used in operations.
You can also expect to make an annual payment based on the company’s total taxable market value.
Federal LLC Tax Filing
When it comes to your federal tax filing requirements, you’ll have a lot of decisions to make whether your business is taxed as an S-corporation, partnership, or sole proprietorship.
In other words, the type of filing paperwork you should submit depends on how many owners are involved in company operations and whether they are from out of state.
The only time that matters is when you need to file a separate return for each owner since they reside in more than one state.
Hiring Employees in South Carolina
If you plan to hire employees, your company will need to register with the SC Department of Employment and Workforce (http://www.sces.sc.gov/).
No matter what business you’re in, you must still follow federal guidelines for withholding and depositing payroll taxes whether they are paid via check or direct deposit.
- Keep in mind that once a new hire starts work, it is up to them to file an individual South Carolina return even if he or she is not a resident of the state.
- If they fail to submit a tax payment by April 15th each year, their wages may be subject to a 10% penalty fee as well as interest charges from the original due date until filing day.
- If they don’t go through with the filing process, it will be your responsibility as an employer to submit their taxes on time since you are now held liable for withholding federal income taxes.
FAQ: Hiring Employees in South Carolina
Q. Why are you required to register with the SC Department of Employment and Workforce?
A. Whether your business is located in South Carolina or not, it must still follow federal guidelines for withholding and depositing payroll taxes whether they are paid via check or direct deposit.
All employers – regardless if they have employees or not – must maintain a record book for at least three years after the date of employee termination.
Q. What about Unemployment Insurance?
A. Like most other states, South Carolina business operates its unemployment program through an agency called FirstCarolina Corporation (http://www.firstcarolina.com/). As with any type of insurance, there are costs involved which you can manage by taking steps to reduce employee turnover rates as well as verify that new hires are qualified for the position.
Q. Can I receive a refund if my company owes less than $500?
A. Unfortunately, no refunds will be issued after you file your tax return electronically. If you choose to submit a paper copy instead of an electronic one, then refunds may be processed by mail as long as total withholding is less than $500 and you do not owe any federal taxes.
Keep in mind though that some states such as South Carolina charge fees to send you this form by mail whereas others such as Missouri do not offer this service at all so it is best to check with your state before making your decision whether or not to submit by paper or electronic method.
How to Obtain a Certificate of Good Standing in South Carolina?
When it comes to starting an LLC in SC, the only form you will need is a Certificate of Good Standing from your Secretary of State office. In other words, this document verifies that your LLC is in good standing with all state and federal regulations.
Some companies may let you pay for this type of service which can cost up to $100 depending on where you live but there are always third-party options that provide the same level of verification free of charge provided that they have all information readily available online.
If you’re thinking of starting a South Carolina LLC today, then you’ll need to keep track of all forms and tax schedules since most states will send them directly to your company’s main address.
If you plan on hiring new employees, then they must be registered even if they live outside the state. Finally, remember that there is no such thing as an SC LLC filing fee but additional federal fees may apply once you begin operating as a business with sales over $300k each year.