Forming an LLC in South Carolina
The business structure that you choose for your new business is essential. Deciding to form a limited liability company (LLC) is common for someone looking to start a small business. Choosing an LLC impacts taxes, daily operations, and how much your personal assets are at risk so make sure that you know all of the requirements for forming an LLC in South Carolina.
Steps for Forming an LLC in South Carolina
Name Your LLC
Choosing a business name is one of the first things you should do to get your business up and running. Take some time to sit down and brainstorm to come up with company names that will attract potential customers and stand out against the competition.
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Next, you'll need to consider the state LLC laws. Under South Carolina law, the name that you choose for your LLC must be distinguishable from all other business names registered or reserved with the state. This means that you must pick an LLC name that is unique and different from the business names that are already on record. To make sure that the name you settle on for your business is available, you'll need to perform a name search through the South Carolina Business Entities Database.
Also, note that you'll have to include one of the following phrases or abbreviations in your LLC name (and remember that using Ltd. does not fulfill the requirements):
- Limited Liability Company
- Limited Company
Get a Registered Agent
You'll need to choose a registered agent for service of process in South Carolina. Registered agents accept legal documents on behalf of a company when there's a lawsuit. To comply with the requirements of South Carolina law, your South Carolina registered agent:
- Must have a physical street address in South Carolina
- May be a South Carolina resident or a business entity authorized to do business in South Carolina
Your registered agent needs to be available during regular business hours. Some entrepreneurs choose to use a registered agent service to fulfill the legal requirements under South Carolina law.
File Your Articles of Organization
You'll need to file South Carolina articles of organization to officially form your LLC. You can file online or download the form and submit it by mail. The filing fee is $110. Your LLC articles of organization should contain:
- LLC's name and address
- Registered agent's name and address
- Name and address of every LLC organizer
- Whether the LLC is member-managed or manager-managed
Your LLC has an effective date of formation once your file the articles of organization with the Secretary of State.
Draft an Operating Agreement
LLC operating agreements are essential documents even though they're not filed with the state. Your operating agreement should address topics such as: voting powers, ownership of the LLC, admission process for new members, dissolution, and the distribution of profits and losses.
Get an EIN
An EIN (Employer Identification Number) or Tax ID number is a number that identifies your business for federal tax purposes. It's similar to an individual's Social Security number but assigned to businesses. The IRS (Internal Revenue Service) supplies these numbers, and it's easy and free to get one. You'll likely need an EIN to open a business bank account and hire employees. Apply for your EIN online or by mail.
Set Up Business and Tax Accounts
You'll need to open a business bank account to keep your personal and business funds separate. If you don't maintain this separation between your personal and business funds, you could lose your liability protection. Get a credit card and debit card for your business, as well. It'll make things easier when you prepare to do your taxes and handle the accounting.
You should set up an online account with the Secretary of State's Corporation Search, Filing, and Document Retrieval System. Here you can make changes to your LLC, request documents, and access South Carolina business forms and templates. You can also register with the South Carolina Department of Revenue and create a business tax account with MyDORWay to file and pay business taxes online.
Your LLC will likely be subject to certain state taxes depending on the type of business it does.
State Business Tax
The South Carolina business tax rate depends on the structure of the business. Business owners of an LLC pay self-employment taxes on their profits.
State Employer Tax
If your LLC has employees, you're required to take the state's withholding tax from their wages and deposit the amount withheld with the Department of Revenue. LLCs with employees should also register for unemployment insurance with the South Carolina Department of Employment and Workforce.
Sales and Use Tax
Sales tax is imposed on the sale of goods and certain services in South Carolina. Counties are also permitted to impose a local sales tax if approved by voters in that county. The state use tax applies to the purchase of tangible goods for use in South Carolina when no state sales tax has been paid. The statewide sales and use tax rate is 6%. A list of the different types of sales and use taxes in South Carolina can be found on the Department of Revenue's website.
Business Licenses and Permits
In South Carolina, business licenses are issued by the local town, city, or county where your LLC is located. Contact your LLC's local government to find out if you are required to obtain any licenses or permits. If your LLC sells, leases, or rents certain goods and services or engages in particular kinds of business, you will likely need to get a specific license in the county where you transact business. For example, LLCs that sell goods need a retail license to operate. To learn more about business license requirements, visit the Department of Revenue website.
If your LLC offers certain professional services, like accountants and veterinarians, you're required to have specific licenses issued by the applicable state agency. A list of professions requiring licenses can be found on South Carolina's Business One Stop.
Registration in Other States
If you want to conduct business in a state outside of South Carolina, you have to apply for permission to do so in that state. Usually, this involves registering as a foreign LLC in the new state.
Once your business is up and running, you must meet annual filing requirements. While many states require an annual report from LLCs, South Carolina does not. However, you will be responsible for annually filing:
- State business taxes
- State employer withholdings
- Sales and use taxes
Additionally, if you operate in other states, you are responsible for the annual filings required by those states as well.