How to form an LLC in South Carolina in 6 easy steps
The market is just about the only thing South Carolinians won't add hot sauce to because, after COVID, it's heating up with entrepreneurs looking to serve customers amidst all the changes.
If you're thinking about starting a new company in SC, you've probably got more than your share of questions, like "What's the best location, how soon can I be up and going, and where will I get my first customers?" You should also consider if it's a smart idea to start an LLC.
A South Carolina Limited Liability Company (LLC) is a business structure that reduces a business owner's personal liability. In the event of litigation, bankruptcy, or other outstanding debts, personal assets, such as vehicles or homes, cannot be seized. In contrast, if you own a sole proprietorship, you're at risk of losing your personal assets if the business encounters financial difficulties.
However, unlike S corporations, LLCs are not regarded as separate business entities for tax purposes, enabling you to record your company earnings and losses on your individual income tax returns.
If you've decided that an LLC is the best form for your business, now it comes down to the nitty-gritty. Fortunately, it's all pretty smooth. All you have to do is keep an eye on the details!
Here's a step-by-step guide, so your South Carolina LLC formation can skip the headache and maybe even add a little fun.
1) Check if your business name is available
The fun part came up quite quickly. Picking a memorable name is amongst the most exciting aspects of building a company. So choose something unique, attention-grabbing, and compatible with the state's naming rules.
The term "limited liability corporation" or its allowed abbreviations (LC, L.C., LLC, L.L.C., LTD) must be present in your business name.
There should be nothing in the company name that might be confused for a government organization. Consequently, "IRS Tax Team" for an accounting practice won't work.
Additionally, LLC names include restricted titles (titles that require a license, like "architect," "attorney," or "physician"). Here, you may be required to show evidence (such as occupational or business licenses) that a licensed industry expert governs your company.
Perhaps you wish to use a different business name than the one you officially set up or a trade name different from your legal name. You may want to set up a DBA (Doing Business As) to help customers and the government identify who's behind your business, regardless of assumed names. And this distinction may protect you against fraud or misunderstandings in the marketplace.
Once you've selected a name for your LLC, use the South Carolina Business Name Search to check availability.
2) Find a registered agent
A registered agent in South Carolina is a person or a recognized business that acts as the primary point of contact for a company. Any government or legal papers received by your company will be forwarded to your registered agent. According to state law, South Carolina registered agents must be state residents with a street address (no P.O. Boxes).
You may think that functioning as your own registered agent could save you time and money. But, while you may legally fill the position, doing so may cause unwanted consequences.
For starters, the registered agent must be present in the office or storefront during business hours. This will be problematic if you start a landscaping business and travel from spot to spot.
Furthermore, accepting service of process is one of the main reasons for registered agents. For example, if your business gets legal notice of an upcoming lawsuit, you generally don't want it to happen where your customers are served. The interruption may be both humiliating and damaging to your reputation.
Many businesses employ a registered agent service to obtain legal or regulatory documents on their behalf. In addition, some services offer digital documentation, which allows you to assess the severity of an issue without waiting for legal documents to be sent to you.
3) Write your LLC operating agreement
An operating agreement is a blueprint for your business structure that specifies the terms of ownership and operation. This agreement puts the company's details in written form to help you prevent future internal quarrels or even legal problems.
Although state law doesn't require operating agreements, there are significant benefits, even for single-member LLCs.
For example, operating agreements assist single-member LLCs since they help clarify how the business varies from a sole proprietorship. As a result, when the season comes to submit your state tax return, you avoid issues with the South Carolina Department of Revenue.
And the best part is that the agreements are reasonably uncomplicated to draft. To give you an idea, check out this example operating agreement template.
4) File your Articles of Organization
After you've settled on a name, chosen a registered agent, and written an operating agreement, you're ready to file your LLC documents.
You file Articles of Organization with the South Carolina Secretary of State. It's a rather straightforward form, and here's what you need to fill it out correctly:
- The LLC's name
- Registered agent's name and address
- LLC's initial office address
- Manager-run status (if a manager runs the LLC, the manager's name and address are needed)
- Term-end date (if the company should end after a certain period, although uncommon)
- Effective date (left blank if you want effective upon filing)
- LLC's organizer name and address (only one owner is needed)
- Signature of LLC's organizer
The South Carolina Articles of Organization state filing fee is $110. Online Filings can be processed on the same or next business day. By mail, it can take about 5 to 7 business days. So, file online to save time.
Furthermore, companies with headquarters outside the state that wish to do business in South Carolina must establish a foreign LLC by submitting an Application for a Certificate of Authority to Transact Business with the South Carolina Secretary of State.
You can find the state fees and forms here.
Mail LLC filings to:
South Carolina Secretary of State's Office
Attn: Corporate Filings
1205 Pendleton Street, Suite 525
Columbia, SC 29201
5) Get your Employer Identification Number
Your Employer Identification Number (EIN) works in the same way your personal Social Security number does. It identifies your business as a distinct legal entity with the Internal Revenue Service (IRS). It allows you to separate the finances of your LLC on your personal state income tax return. Your EIN separates your personal assets from those of your business, which is why you probably created an LLC.
EINs are required for South Carolina business owners, especially if you run an LLC. You may get a Certificate of Existence, also known as a Certificate of Good Standing, for your LLC if you have completed your Articles of Organization.
Once your EIN and Certificate of Existence are in hand, you may open a business bank account. The account should keep your business expenses separate from personal funds and make it easier to avoid mistakes when filing your tax returns. Furthermore, your LLC will not be subject to federal income taxes. Instead, unlike a C corporation or S Corp, you and the other LLC owners will be taxed on your personal income.
Additionally, your EIN and the distinct legal standing granted by your LLC allow you to recruit workers. Just keep in mind that the state mandates all businesses with four or more employees to carry worker's comp insurance to safeguard their staff.
6) Wrap up other regulation and sales tax requirements
To launch a new business in South Carolina, you must be familiar with local, state, and federal laws, as well as business licenses, insurance requirements, sales tax regulations, and other local, state, and federal restrictions. But you won’t need to attend law school because it's relatively simple.
Licenses and permits
General business licenses are issued at the town, city, and county levels in South Carolina. Also, you may need building and zoning permits. Here's a chart with a breakdown of the nine counties that require business licenses. Contact your local municipalities or county resources for more help.
Depending on the kind of business you run, you may need additional licensing. Business and professional services that need licenses or permits include:
- Accountants, attorneys, financial services, insurance agents, and real estate agents
- Architects, contracting, engineers, general construction, and land surveyors
- Auto repair shops
- Barbers and cosmetologists
- Bars, restaurants, and grocery stores. (Get restaurant and bar insurance here.)
- Doctor's offices (dentists, chiropractors, physicians, surgeons, psychologists, and social workers)
Insurance to protect your business
Small business insurance for South Carolina LLCs protects your organization and its employees. For example, the law requires businesses with four or more employees to get workers' compensation insurance, which helps cover employee medical expenses if an employee becomes ill or injured because of the job. Thankfully, workers' compensation policies are readily available online.
Furthermore, if you have employees in South Carolina, you must register for Unemployment Insurance Tax with the South Carolina Department of Employment and Workforce.
State tax department regulations
If you sell goods, you may be required to collect sales tax. You can locate the Sales Tax Forms here. Also, employers must register with the South Carolina Department of Revenue for Employee Withholding Tax on behalf of their workers.
Other local, state, and federal regulations
South Carolina is one of few states that doesn't require annual reports for your LLC. Instead, your quarterly tax statements function as the state's means to track your business.
While it is unrealistic to include all relevant regulations for every kind of company, this guide is an excellent place to start. If you have any concerns or if your industry is plagued with red tape, contact an attorney.
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True entrepreneurs don't need hot sauce to give them fire in the belly. It's a passion to serve that will propel you through every step of creating a winning product or service, attracting your clientele, and overcoming the unknown. But it's just one minor mishap that could extinguish your hopes and have far-reaching consequences for your young business.
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