To set up an LLC in South Carolina, you will need to follow a few easy steps. South Carolina LLCs offer a number of benefits for business owners since they are relatively simpler to start.
How you decide to set up your limited liability company will be based on the type of business you prefer to operate.
Drawing from my experience as a business consultant and collaborating with LLC experts and legal advisors, I will walk you through the process of starting an LLC in South Carolina.
Quick Summary:
- To start an LLC in South Carolina, choose a name, hire a registered agent, file articles of organization and draft an operating agreement.
- Once the LLC has been established, open a business bank account, acquire an EIN, obtain a business license and apply for business insurance.
- A limited liability company offers personal asset protection and is taxed on the members’ individual level.
How to Start an LLC in South Carolina?
To start an LLC in South Carolina, comply with state business protocol and file the required legal documents.
Step 1: Pick a Name for Your South Carolina LLC
South Carolina has very strict guidelines in order for a limited liability company name to meet state regulations. The LLC name should not be already taken by someone else who registered first.
Your LLC name will be used for all transactions, including bank account and tax purposes.
In South Carolina, LLC names must meet the following guidelines:
- The word "Limited Liability Company” or “LLC” must appear in the business entity's legal name.
- Words such as “Federal,” “Treasury” or “Bureau” that might denote any government agency cannot be used in an LLC business name.
- LLC business names must not contain the word "bank," "banking," "trust," "cooperative," "credit union," or any variations of these words unless you obtain special permits.
If you found an available name but are not in the position to start the business yet, you have the option to reserve your desired name by filing a special application to the South Carolina Secretary of State's Division of Corporations.
Name reservation is filed by mail at a $25 filing fee.
South Carolina has its own Legislature website containing detailed naming guidelines, so make sure you read all the instructions thoroughly.
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Step 2: Find a South Carolina Registered Agent
A registered agent in South Carolina is any individual or company given the authority to receive legal documents on behalf of your LLC in South Carolina.
Although you have the option to be your own registered agent, it is advisable to assign a separate registered agent. The individual must be available to accept service of process on behalf of the LLC during regular business hours.
Step 3: File South Carolina Articles of Organization
An LLC in South Carolina can become officially registered only after you file your Articles of Organization.
When you file LLC Articles of Organization, they should include the following information regarding your business:
- The company name
- Business address
- Names and addresses of the members
- A registered agent
- Purpose and type of business
- Organizer
- Termination or completion date if applicable
South Carolina has its own specific guidelines and forms which must be followed when filing with the Secretary of State.
The filing fee for Articles of Organization in South Carolina is $110. Read our article for more information on the cost to form an LLC in South Carolina.
Step 4: Draft an LLC Operating Agreement
An LLC in South Carolina isn't required to have an LLC operating agreement. Nevertheless, it is advisable to draft one since it would outline the structure and operations of the company.
An LLC operating agreement should include the following:
- Each member's capital contribution
- Each member's percentage of ownership
- Voting rights and procedures
- Selling or transferring membership interests
- Acceptance and departure of members
- Other specifications on how you need to do business and internal affairs of your LLC
If you're looking for additional guidance on operating an LLC in South Carolina, consider hiring legal counsel who specializes in small businesses.
It helps ensure you don't violate any state statutes governing limited liability companies while operating your business.
Their expertise will cover the operating agreement and other official documents.
Additional Steps to Forming an LLC
Forming an LLC in South Carolina won't be complete unless you also open a separate bank account, acquire an EIN from the Internal Revenue Service and potentially obtain the business licenses and permits that are applicable to your business.
1. Setting up a Business Bank Account
A separate LLC bank account ensures that you can keep track of company funds and separates your personal finances from the limited liability company.
It simplifies the process of computing and dividing LLC profits at the end of each fiscal year.
The IRS requires businesses to obtain Employer Identification Numbers (EINs) before opening accounts with banks under their business name.
If you're running multiple companies, make sure each one has its own EIN rather than using a single number across different organizations.
2. Acquiring an EIN
LLCs in South Carolina that are planning to open bank accounts or hire employees must have a federal EIN.
This is a nine-digit number identifying the business to file taxes, report wages, and make other filings with the Internal Revenue Service.
It is advisable to apply for an EIN once the business entity has been approved by the South Carolina Secretary of State.
You can get your Federal Employer Identification Number online through the IRS website free of charge.
3. Obtaining Business Licenses and Permits
South Carolina does not require a statewide business license [1]. However, local business licenses should be obtained from the city or county where the company plans to conduct business.
Requirements vary depending on industry type, but some common examples include a general business license, general sales and use tax license, etc.
A general business license applies to any type of occupation or profession and is valid across the state
It's proof that you have registered with both the IRS as well as the South Carolina DOR (Department of Revenue) as an LLC.
Business licenses are particularly important if you're planning to provide professional services in SC.
A professional limited liability company that plans on providing services such as general contracting, general law, medical services, or legal services will need to apply with the Department of Labor, Licensing, and Regulation.
4. Obtaining Business Insurance
Business insurance is a type of insurance that many small business owners overlook when starting up an LLC.
Business insurance protects against lawsuits and claims from customers resulting in financial losses to your company due to injuries, property damage, or other unforeseen circumstances.
Businesses such as manufacturers will need commercial general liability insurance while those providing professional services may apply for a professional liability insurance policy.
South Carolina LLC Taxes
A South Carolina LLC pays taxes in the same way that limited liability companies in many other states pay taxes.
LLCs are considered "pass-through" entities, which means profits and losses pass through directly onto the members' personal income tax forms.
Sales taxes are applied to sales of goods and services in South Carolina.
The sales tax rate is 6%, and it's payable to the South Carolina Department of Revenue.
An LLC can also choose to be taxed as an S corporation or a C corporation.
Electing to be taxed as a C corporation means the members are subject to double taxation. The company is taxed in the corporate level and the owners are required to file on their personal income tax returns.
On the other hand, an S corporation allows you to declare your income as a salary and thus reduce the overall self-employment tax.
South Carolina allows single-member LLCs to operate as sole proprietorships.
Income earned by an LLC is taxed at the owner's individual income rate, much like when you own your own business as a sole proprietor, but if you choose S corporation taxation for your LLC, it will be taxed at corporate rates, which stand currently at 5%.
If you have little to no experience with taxing options, talk to your registered agent or business attorney, who can help you complete the paperwork needed for LLC formation and give you legal or tax advice.
What Are the Benefits of South Carolina LLCs?
The benefits of South Carolina LLCs include pass-through taxation and personal liability protection.
With pass-through taxation, LLC members do not have to pay taxes on their company revenues. Instead, they only report profits (or losses) when filing their own individual income taxes.
In a limited liability company, the business is considered as a separate entity from its members, as a result, their personal assets are protected from debts or lawsuits incurred by the LLC.
South Carolina LLC FAQs
How to Change an Address of an LLC in South Carolina?
To change an address of an LLC in South Carolina, you must file an amendment with the South Carolina Secretary of State.
Does South Carolina Have an Annual LLC Fee?
South Carolina does not have an annual LLC fee because limited liability companies are not required to file annual reports. However, if you choose corporate taxation, you will need to pay a $25 fee to the South Carolina Secretary of State.
Who Is Exempt from Sales Tax in South Carolina?
Government agencies, nonprofit organizations and resold goods are exempt from sales tax in South Carolina.
The detailed list of sales tax exemptions can be found on the South Carolina Department of Commerce website.
How Long Does It Take for an LLC to Be Approved in South Carolina?
It takes 1 to 2 days for an LLC to be approved in South Carolina if you opt to file online. Filing by mail takes longer (up to a month).
Do You Need a Registered Agent for an LLC in South Carolina?
You need a registered agent for an LLC in South Carolina since it is one of the requirements set by the state in order to form an LLC.
Does South Carolina Allow Domestication of LLC?
South Carolina does not allow domestication of LLCs. Essentially, you cannot legally move your LLC from the state it was initially set up into South Carolina.
Does a Foreign LLC Have to Register in South Carolina?
A foreign LLC has to register in South Carolina by filing a Certificate of Authority and other documents with the South Carolina Secretary of State.
Does South Carolina Recognize Single-Member LLC?
South Carolina recognizes single-member LLCs and are taxed similarly to sole proprietorships, and they report income on Schedule C of their individual 1040 tax return.
What Is the South Carolina Certificate of Good Standing?
A South Carolina certificate of good standing is a document that guarantees that a South Carolina LLC has been lawfully established and is in good standing with the state.
Starting an LLC in South Carolina
Setting up an LLC in South Carolina is a fairly straightforward process, as long as you follow the procedures and file the appropriate legal documents.
If you want to do everything by the books, it would be best if you seek professional help from ZenBusiness. The company will ensure that your LLC is set up efficiently by means of their expertise.
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References:
- https://scbos.sc.gov/starting/step2
