South Carolina is a good choice for you to start your business. The State has previously featured in the America’s Top 10 Pro-Business States list and is known to have a very business-friendly ecosystem. Incorporating an LLC in the State is an excellent way to start your business journey.
An LLC provides good operational flexibility and opens the door for tax savings. The procedure for setting up an LLC in South Carolina may seem confusing and cumbersome. This article will guide you on how to form your LLC in the State.
Naming Your South Carolina LLC
Before you can set up your business, the first step is for you to select a name for your LLC. You must have a unique and appropriate name for your company. While naming your LLC, you must follow all the naming guidelines the State of South Carolina laid down. The policies are provided in SC Code § 33-44-105 (2020).
The name that you select for your LLC in South Carolina should include the words “limited liability company” or “limited company” or its abbreviated version “L.L.C.,” “LLC,” “L.C.,” or “LC.” You can abbreviate the words “Limited” and “Company” as “Ltd.” and “Co.” respectively.
You cannot use any names identical or similar to the name of any business entity registered with South Carolina’s Secretary of State.
The name you select should not create an impression that your business is associated with the government. So, ensure the name does not contain words like “F.B.I.,” “Treasury,” etc.
Similarly, using some restricted words like “Bank” or “Attorney” in the name of your LLC will require you to get additional permissions. It may also need certain licensed professionals like lawyers to be part of the entity.
To get a better understanding of the naming rules for an LLC in South Carolina, you can read the provisions of Chapter 44 of the 2020 South Carolina Code of Laws.
Does Your Business Require a DBA?
A DBA (doing business as) or an assumed name enables you to operate your LLC under a different name. An assumed name is best used for branding purposes, especially when you want to diversify or enter a new market. In South Carolina, DBA is also known by other names such as assumed business name, alternate name, fictitious name, etc.
Since 2006, South Carolina has not had a State-level system for registering DBA names. As a result, DBA names are no longer registered with the office of the Secretary of State.
If your LLC is desirous of an alternate name, you should approach the office of the concerned county clerk in the State where you plan to operate your LLC. However, make sure that the name you select does not closely resemble the name of a business entity already registered with the office of the Secretary of State.
An alternate name in South Carolina is not permanent. It will expire after a certain period, which will vary depending on the county in the State. In most counties, the business license application will have a provision for a DBA name. However, the procedure and fee for the DBA name will vary depending on each county.
You can find the details of the offices of all county clerks in South Carolina.
Apply for a DBA with your countyContact your county clerk’s office
Doing a Name Search and Name Reservation
South Carolina’s guidelines state that the name you select for your business should be distinguishable from other entities registered in South Carolina. You can use the Business Entity Search portal of South Carolina to see if the name you desire is available. It is strongly recommended that you use this facility to avoid the risk of rejection at the time of your application.
Once you have thoroughly checked the name availability and decided on the name for your LLC, you can reserve it. You have to apply to the Secretary of the State for this purpose. The application should include the details of the applicant’s name, the applicant’s address, and the name that the applicant wishes to reserve for the LLC.
If the name selected by you satisfies the naming guidelines, it will be reserved for 120 days by the office of the Secretary of State. However, the reservation period cannot be further renewed.
Reserve Your Name by MailDownload Form
Secretary of State
Attn: Corporate Filings
1205 Pendleton Street Suite 525
Columbia, SC 29201
Registering your business domain
Online business is a major source of revenue for almost every company today. Customers prefer businesses that have an online presence. Therefore, even if you do not plan to start immediately, you must plan to have an online presence for your LLC.
Your business’s website address needs to match your LLC’s name. Your website address is how customers find you online. So before you select a name for your LLC, it is recommended that you ensure that the website address you need is also available.
You can check currently available domain names.
Choose a Registered Agent in South Carolina
In South Carolina, you will need to appoint a registered agent for your LLC. A Registered Agent is an individual or another business entity responsible for receiving all official communication on behalf of the LLC.
The registered agent shall also receive any process service concerning a lawsuit against your company. You can think of a registered agent as a point of contact for your LLC. You need to nominate a registered agent at the time of incorporating your LLC.
Who Can Be a Registered Agent?
As per the provisions of Section 33-44-108 of Chapter 44 of the South Carolina Code of Laws, the agent you select for your LLC must be:
- An individual resident of the State of South Carolina or
- A business entity in the form of a domestic corporation, another LLC, or a foreign corporation/company has obtained authorization to conduct business in South Carolina.
In case you choose an individual to be your registered agent, the person must be above the age of 18 years. They should also have a physical street address in the State.
The registered agent should be available during business hours on all working days.
The laws in the State of South Carolina require that a registered agent be appointed at the time of formation of the LLC. The details of the registered agent (name and address) should be provided in the incorporation documents.
You may at any time change the registered agent for your South Carolina LLC by filing a statement of change online or by submitting the request form to the following address: The Secretary of State Attn: Corporate Filings 1205 Pendleton Street, Suite 525 Columbia, SC 29201.
Individual v. Registered Agent Service
While you can appoint yourself as the registered agent of your LLC, it may not be advisable for all businesses. It is advisable that you hire a professional registered agent service as it has many advantages.
A professional registered agent service ensures that you don’t fail to duly respond to any notice or other communication that may be sent to your LLC. They remind you when your returns and other filings are due and help ensure you don’t miss any deadlines. The registered agent’s address is available for the public to access on the concerned websites. So if you work out of your home or a private office, having a professional registered agent service will help you maintain privacy.
Also, if you have appointed a registered agent service, you can focus on growing your business instead of worrying about missing official communication or deadlines.
Filing the Articles of Organization with South Carolina
Articles of Organization is a legal document needed to form and legally incorporate your LLC. In South Carolina, you can officially set up your LLC by filing the Articles of Organization with the office of the Secretary of the State.
You can complete this procedure by following three simple steps. First, acquire a copy of the document. You may do this by creating an account on the portal of the Secretary of State’s website.
The next step is for you to fill out the Articles of Organization form. You should duly complete the form by filling out details related to the following:
- Name of your LLC
- Address of the registered office
- Name and address of the agent for service of process
- Organizer Information (name and addresses)
- Duration of the LLC (perpetual or indicate a dissolution date)
- Governing Authority (member-managed or manager-managed)
- Debt-liability of members
- Effective date (if you wish it to be different from the date of the Articles of Organization)
The third and final step is for you to file your Articles of Organization with the office of South Carolina’s Secretary of State. You can file it either online or by submitting a copy of the duly filled form in person or by mail.
Option 1: File Your Articles of Organization OnlineFile Online – OR –
Option 2: File Your Articles of Organization by MailDownload Form
Secretary of State
Attn: Corporate Filings
1205 Pendleton Street, Suite 525
Columbia, SC 29201
Currently, South Carolina has no provisions for expedient processing of your Articles of Organization. However, online applications are usually processed within 24 hours, and applications by mail get processed within two to three business days.
Public Notice of Formation
The State of South Carolina does not have any provisions pertaining to a mandatory public notice of formation for your LLC.
Create the Operating Agreement for your South Carolina LLC
Suppose you include two of your friends as members of your LLC. What are the duties and responsibilities of each member? Who gets to make certain decisions? An operating agreement can be an effective solution to this problem. It contains the rules of your LLC’s internal operation and provides a framework concerning the duties of members of the LLC and its managers.
In South Carolina, having an operating agreement is not mandatory. However, irrespective of the nature of your business, it shall be advisable for you to have a well-drafted operating agreement.
There are no prescribed templates for an operating agreement in South Carolina. Your operating agreement should ideally cover the following aspects:
- Organization Details
- Duties of Members and Managers
- Management and Voting
- Capital Contributions
- Division of Profit and Losses
- Bookkeeping Procedures
- Procedure for adding new members
- Requirements concerning Meetings and Procedures thereof
These are just a few examples. You may incorporate more provisions to your operating agreement as you deem fit for your business. If your LLC does not have an operating agreement or if the operating agreement is silent concerning the duties of the members or their conduct, then the provisions contained in Chapter 44 of the South Carolina Code of Laws shall apply to your LLC by default. The problem, however, is that these default provisions may not suit the specific requirements of your business.
As per Section 33-44-203 of Chapter 44 of the South Carolina Code of Laws, if the provisions of your operating agreement are inconsistent with that of the articles of organization, the operating agreement shall prevail in matters related to the managers and members. As for other persons, who reasonably rely on the articles of association, the provisions thereof shall prevail.
Writing the Operating Agreement Yourself vs. Hiring a Service
You can create your operating agreement, or you can purchase templates that you can customize to draft the operating agreement of your LLC. It is, however, recommended that you seek the help of an attorney or a professional in preparing your operating agreement. Being experts in South Carolina laws, these attorneys or professionals will help you draft an operating agreement that suits the needs specific to your business model.
Limits of Operating Agreement
There are no specific formats for an Operating Agreement. However, it cannot include any matters prohibited under South Carolina law, such as arbitrary restrictions on the right to access information or records, waiving duty of loyalty or commitment of care, eliminating obligation of good faith dealing, etc.
Obtaining an EIN for your South Carolina LLC
EIN (Employer Identification Number or Federal Identification Numbers or FEINs) is an identification number allotted by the IRS. The IRS uses the EIN to identify an operating business entity for taxation purposes.
The laws in South Carolina require you to get an EIN for your LLC. It will also be necessary to open a bank account, file tax returns, and hire employees. The IRS issues an EIN, and you can apply for it online or through the mail.
Option 1: Request an EIN from the IRSApply online – OR –
Option 2: Apply for an EIN by Mail or FaxDownload form
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
File Annual Reports in South Carolina
An annual report is a document used by the authorities to get the latest and updated information about all the business entities operating in the State. Most States require you to file this report annually. In South Carolina, however, LLCs do not need to file an annual report unless it is taxed as a C corporation or S Corporation. Such LLCs should file Form CL-1, the initial report filed at the time of incorporation.
After that, LLCs taxed as a C corporation or S Corporation can file their annual returns in Form SC 1120 and Form SC 1120S, respectively, with the Department of Revenue, South Carolina. The annual report will be filed along with the corporate tax return, which is due when your taxes are due. The annual report in South Carolina is part of your tax returns. Therefore the fee for the annual report is paid as a part of the licensing fee and income tax.
Tax Liability for Your South Carolina LLC
As someone who owns an LLC in South Carolina, federal and State taxes will apply to you and the business. There are four ways in which LLC will be taxed:
- Sole proprietorship: a business owned by a single person
- Partnership: a business owned by multiple people
- C – Corporation: income is split or segregated for taxation
- S – Corporation: tax liability is split between the business and its owners
Federal Tax Liability
By default, an LLC is treated as a ‘pass-through entity,’ meaning it does not pay any tax directly. However, the members are liable to pay taxes on the income they earn from the LLC. You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions in the nature of business expenses. You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc. However, federal corporate taxes must be paid if you treat your LLC as a corporation for tax purposes.
If you’re a single-member LLC, your default taxation type will be that of a sole proprietor. The LLC has to report its activities under Schedule C, Schedule E and/or Schedule F of Form 1040.
If your LLC has more than one member, it will be taxed as a ‘partnership’ by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in the K-1 form of each partner.
If you would like your LLC to be taxed like a C-Corp or S-Corp, you can do so by filing Form 8832 and Form 2553, respectively.
State Tax Liability
In South Carolina, LLCs are treated as “pass-through tax entities”. This means that the State income tax will depend on how you treat your business. By default, LLCs are treated as partnerships for taxation purposes. Therefore, taxes are not paid at the company level. Instead, you will be required to pay income taxes on the money you earn from the LLC. But if you treat the LLC as a corporation for tax purposes, corporate tax at prescribed rates of the State shall apply.
Similarly, if your LLC is engaged in selling certain physical products or specific services, you will be required to pay “Sales and Use Tax” in South Carolina. For this purpose, you must first obtain a seller’s permit from the State. To better understand matters related to Sales Tax in the State, you can access the Sale Tax Workshop portal of the Department of Revenue or read the Sale and Use Tax FAQs.
If your LLC has hired employees, you must sign up for Unemployment Insurance Tax and Employee Withholding Tax.
Permits and Licenses
An LLC operating in South Carolina must comply with State and Federal regulations. Accordingly, your business will be subject to three licensing jurisdictions: Federal, State and Local.
Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.
Some business activities requiring Federal Licenses and Permits are:
- Alcoholic beverages
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics
At the State level, your LLC should get a seller’s permit if it sells specific physical products or services to which sales tax applies. The seller’s permit is called a ‘retail license’ in South Carolina. You can apply for a retail license online using South Carolina’s Department of Revenue’s website. The fee applicable is $50.
Depending on where you operate your business, you may also be required to get the local government’s license and permit. Some counties requiring local business licenses are Beaufort County, Charleston County, Dorchester County, Horry County, Jasper County, Marion County, Orangeburg County, Richland County, and Sumter County. To know more about local licensing requirements, get in touch with the office of your city government or local county.
For more information regarding;
- South Carolina’s License and Permit Requirements
- South Carolina’s Department of Commerce – Regulatory Resources
- Federal Permits and License
Business Bank Account and Phone Number
It is always prudent to open a separate Bank Account for your LLC and have an individual designated phone number. Having a different account helps you to avoid mix-ups and helps ensure that your personal assets are not affected in case of insolvency or lawsuits.
Apart from this, it also helps in better organization of the accounts of your business and aids in receiving certain business loans, licenses, permits, subsidies, and other benefits given by the government through different welfare programs.
Using your phone number for your LLC can prove to be very inconvenient. Therefore, it is best either get a separate phone number for your business or hire a phone answering service. Doing this would protect your privacy, look professional and reduce the risk of missing important calls.
You can obtain a business phone number through various services providing the same. Look out for the features that suit you the most, toll-free number, international calls, text messages facilities, hardware/software involved, etc.
Setting up your business in South Carolina has a lot of benefits. Depending on the type of business, LLCs in the State may be eligible for various tax credits such as the ‘Job Tax Credits and Investment Tax Credit’ scheme. Your company may also be eligible for certain Sales and Use Tax Incentives and Local Property Tax Incentives.
Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.
On completing the above steps, your LLC is legally incorporated and ready to do business. Enjoy your LLC!