How to start a business in South Carolina in 8 steps
According to Forbes, 90% of American billionaires are self-made. That’s a strong motivation for new entrepreneurs to get started realizing their financial and career goals.
Other benefits are the flexible schedule, the ability to focus your business on a social problem with personal meaning, and doing something you love. Who wouldn’t want to start their own business?
You can control a lot of your destiny if you go into business for yourself. However, there are also plenty of rules you’ll have to follow to get started and be successful. First, ask yourself if entrepreneurship is right for you with these 5 questions. Then, let’s do a deep dive into the 8 steps you’ll need to kick off your own business in South Carolina.
1) Think about the type of business you want to start
In 2020, U.S. News ranked South Carolina #11 in business and economic growth. The Palmetto State boasts higher than average employment. It also has a growing population, low taxes and unionization, and an overall business-friendly atmosphere. Industries like aerospace and alternative energy are thriving there. There are many possibilities for the types of businesses you can start.
Your passion and experience will lead you to some of the answers. You should also think about the availability of prominent research partners, an educated labor force, and the kind of commercial property you can lease.
All these factors can help you determine if your business idea can take off in South Carolina. Business support is also available in many industries. For example, Colleton has a food startup resource hub that helps entrepreneurs with localized information on starting a restaurant, food cart, or farmer’s market business. Another business resource, the state’s agribusiness center offers grants and educational programs. Be sure to check into programs that can support your venture.
Even if you’re a master in your field, check out the local competition to find overlooked opportunities or warnings you’re trying to start up in a highly competitive market. See if there are ways for you to offer a better service to stand apart from the competition.
Once you’ve nailed down the kinds of services you’ll offer, the next step is making a business plan. You’ll start by outlining your mission and place in the market. A business plan is a must-have for many incubator programs, investors, and business lenders. It should include financial projections, estimates of your profitability, and a strategy for how many goods and services you will provide.
2) Set up your legal structure
All South Carolina owners can structure their businesses in several ways (this is called “choice of entity”). Most types of structures let owners easily register online with the Secretary of State to get started. You get to choose the structure that works best for your business:
- Sole proprietorship: In this business structure, the owner and business are the most entwined. You make all the profits if you’re the business owner, but business debt is also your personal liability. A sole proprietorship requires no formation documents to be filed with the South Carolina Secretary of State. You just use your Social Security Number to do business and file taxes.
- Partnership: This legal structure functions like a sole proprietorship for two people. However, both owners assume all profit and debt for their business. If you and a co-owner start a business, you have a general partnership automatically. However, you can also file a limited partnership. This option gives your business one general partner and one or more limited partners.
- Limited Liability Company (LLC): A South Carolina LLC offers more tax flexibility and protection for personal assets. Most business lawyers discourage sole proprietorships and partnerships and encourage you to think about the benefits of liability protection. An LLC is a formal business structure. You’ll need to file articles of organization with the Secretary of State to structure your business as an LLC. Structuring your business this way may be a requirement for investors or lenders.
- C-corporation: Shareholders own a corporation, which exists as a separate legal entity apart from its founder. You’ll file articles of incorporation to form this kind of business entity, which can be taxed, sued, and held responsible for its debts. C-corporations and S-corporations have different tax obligations, and you’ll need to be sure you’re eligible to become an S-corporation if that’s your goal. While corporations are generally large with many employees, they are also an attractive legal structure for investors.
It’s wise to explore all your choices. Alternatives like a nonprofit business structure might help you reach your goals, so look into how you’ll grow, generate income, and reinvest in the business before formalizing your venture.
3) Name and register your business
It’s time to let your creativity out to play. Naming your company can be a way to evoke family pride (“Smith and Sons Grocery”) or let your customers know how you’re unique (“All Organics Market”). There are some pitfalls to keep in mind:
- Search for your favorite business name. Is another business using it? You may not be legally able to start a business in the same field with the same name.
- Are you a sole proprietor doing business using a brand that’s not your given name? This “DBA” name is not registered with the Secretary of State. However, it cannot conflict with an existing registered business. So check the South Carolina records, then look into trademarking the name if you want to protect it.
- Do a trademark and domain name search. Look for your name on social media. Is it available?
After registering with the state and finding your name is available and approved, you can register with the IRS to obtain an Employer Identification Number (EIN).
This number functions like a Social Security Number for your business. You’ll be able to open a business bank account and file taxes with your EIN.
It’s official! You’re the proud owner of a new business.
4) Apply for licenses and permits
There is no statewide business license in South Carolina. Instead, all sole proprietorships, partnerships, LLCs, and corporations (in other words, all new businesses) must register at the local or county level before conducting business. Nine counties require licenses:
Just Charleston, Dorchester, and Horry allow online registration. And don’t forget, almost all South Carolina cities require a business license. If you don’t have to get one at the county level, you’ll apply at the city level.
You’ll need licenses in municipalities where you do business, which often means you’ll apply for more than one license. For example, a mobile landscape service with a physical location in Wagener and customers in Perry and Salley would need municipal business licenses in all three.
Different types of businesses can have added licensing requirements. Suppose you are purchasing products for resale in South Carolina. In that case, you can apply for a South Carolina Resale Certificate. You’ll present the certificate to sellers to exempt you from paying sales tax on your purchases.
Are you starting a business like a restaurant, salon, or trade? Other licenses and certifications may be in order. Resources like South Carolina Business One Stop (SCBOS), the U.S. Small Business Administration (SBA), and the Small Business Development Center can help you determine which you need.
5) Choose a location
Now that you have a business plan and an idea of what sets you apart, it’s time to think about location. Since renting or owning a commercial space will be a large part of your budget, consider whether you need a space at all. Ask yourself the following questions:
- Does my business model rely on foot traffic to sell goods or services?
- Can I provide the same quality working from home?
- Does the business have equipment or vehicle storage needs that benefit from a commercial space?
- Will the security of my customers and staff require a commercial space?
If the answer is “yes" (maybe you're opening a restaurant, for example), you can start shopping for commercial property. Try to budget if you need to remodel a space. Buildings that were already restaurants are likely to have food-friendly layouts, commercial hoods, and other up-to-code fixtures. These properties can be the most straightforward for starting your new business.
While many entrepreneurs are successful working from home, other industries will require you to wade into the waters of real estate. Figure out what’s right for you since a lease can be a long-term commitment. This is especially important in more expensive parts of the state, like Charleston.
6) Open a business bank account and prepare for future taxes
With your registered business and EIN, you can open a business bank account. This can be helpful long before state and federal tax time since you’ll have a record of your profits and expenses. You can open a line of credit with a new credit card, helping your cash flow and giving you a safety net.
Get acquainted with bookkeeping requirements early and investigate software and small business accountants familiar with the requirements of your state who can help. Your accountant can also advise you on filing state tax returns with the South Carolina Department of Revenue.
An LLC will not need to file an annual report, but the profit earned will pass through to LLC members, who must file taxes on earnings. However, corporations will need to file state income tax in South Carolina.
Other considerations at tax time include:
- You’ll have to register a business personal property tax account in South Carolina to pay the annual tax on business locations.
- If your business requires a sales tax license, the state will issue a business personal property tax file number you can use to file your taxes. If you’re collecting sales tax, you’ll file monthly for the first six months your business operates.
7) Purchase business insurance
You’re in the paperwork home stretch, but don’t overlook a crucial part of protecting your new business. Like personal insurance, small business insurance can be a lifesaver in the event of an unforeseen circumstance. It can also be a prerequisite for registering your business. Here are some of the coverages you may be required to purchase to get started with small business insurance in South Carolina:
- Workers’ compensation insurance: Required by the state if you have one or more employees, this coverage can offset lost wages, hospital treatment, and rehabilitation for a worker who becomes sick or injured while working.
- General liability insurance: This basic coverage helps protect your company if you are sued for injury or property damage.
- Business interruption insurance: If you are forced to close your business temporarily, this coverage can help cover costs until you are up and running again.
- Business property insurance / Business personal property insurance
You can purchase many of these coverages in a Business Owner’s Policy (BOP), which bundles several of these coverages together for small and medium-sized businesses.
8) Create a marketing plan, hire employees, and more
A marketing plan helps you pinpoint new customers and identify how you’ll reach them. Are you running a business with a physical storefront? When you researched competing companies in your area, you likely got a sense of how they market in your locale. If you can eliminate the competition by offering slightly different services to a somewhat different demographic, you can stake out a successful presence.
For instance, if one local art gallery specializes in landscapes for residential buyers, your gallery could try specializing in abstracts and new commercial buildings and the commercial decorators buying paintings for them. This will make finding your potential buyers on social media easier. You’ll be able to tailor your marketing message better, too.
If you plan on scaling quickly, you should think about hiring employees for your business. First, you’ll want to set up accounting systems for tax withholding and define your employees’ roles. Freeing up your own time to focus on growth and operations can help you determine the tasks you’ll need from employees.
As you work through this list, you’ll find yourself becoming one of the thousands of business owners in South Carolina. Keep doing it like a boss, and when you start hiring your first employees, enroll in workers’ compensation insurance in South Carolina. Protecting your company begins with a quote for small business insurance in South Carolina from Huckleberry. It takes just minutes so you can get back to running your business.