The decision to form an LLC is a momentous one, so congratulations! Whether you’re starting a new business or restructuring an existing business, this is an exciting time for you.
If you’re looking for information about how to form an LLC, you’ve come to the right place. I’ll tell you everything you need to know about how to start an LLC in South Carolina, but first I’ll go over some of the basics, such as what a Limited Liability Company (LLC) is, and some of the benefits of forming an LLC.
(If you want to skip to the “How to Form an LLC” section, click here.)
What Is a South Carolina LLC?
A South Carolina LLC is a Limited Liability Company formed in the state of South Carolina that is governed by the laws, regulations, and statutes of the state of South Carolina.
Why Choose an LLC?
There are many benefits to forming a South Carolina LLC rather than another business structure (like a sole proprietorship). However, these are the three benefits that most often make business owners choose an LLC:
1. Limited Liability and Asset Protection
The first benefit I’ll discuss is likely the most important one: limited liability and personal asset protection. LLC owners are not considered legally responsible for the legal liabilities and business debts of their South Carolina LLCs.
If your LLC ever has legal or financial problems, the creditors of the South Carolina LLC are barred from listing things like your personal property, vehicle, or other personal assets as a means to compensate them for the financial obligations of your South Carolina LLC.
Because the economy is constantly fluctuating in the United States, no business is perpetually safe. All it takes is one unexpected event such as a natural disaster or an economic downturn to cripple even the most well-established businesses. This makes the limited liability protection of LLC owners priceless to many small business owners.
Even if some calamity should befall your business, with a South Carolina LLC you can at least come away from the experience with your assets.
2. Privacy
Another benefit of owning an LLC in South Carolina is the privacy and protection of your personal information you can take advantage of when you form your LLC.
During the past decade, the number of cybercriminals on the internet has exploded and they’ve become masters of their craft. They can now use small bits of information (such as your name and address) to steal your identity, accrue thousands of dollars worth of debt in your name and completely trash your credit score. And the most terrifying part is that they can accomplish all of this so quickly that you’ll likely not even notice it’s happened until it’s too late.
If you use a different business structure, such as a partnership or sole proprietorship, you’re required to register your personal information with the South Carolina Secretary of State. They then list the information on the public record on their website, allowing anyone to access it, no matter how nefarious their intentions may be.
Forming an LLC in South Carolina gives you the option to protect your personal information, however.
To protect your information, and therefore your identity, you need to hire what is known as an LLC formation service. A formation service will register their own information with the South Carolina Secretary of State so that their information is listed on the public record rather than your own. This is a win-win situation for any owner of a South Carolina LLC because their information remains safe and they also retain ownership of their Limited Liability Company even though someone else’s information is listed for their business.
My two favorite LLC formation service providers are Northwest Registered Agent and ZenBusiness.
3. Taxation
The third major benefit of owning an LLC in South Carolina is the tax benefits that LLCs enjoy. You can see the stark contrast between the way that a South Carolina LLC is taxed and the way that a corporation is taxed.
If you choose a corporate business structure (such as an S corporation), then you’ll be taxed using what is known as “double taxation.” Here is how double taxation works for corporations:
Any profits obtained by the corporation are taxed at corporate rates, and then the already-taxed profits are given to corporate shareholders in the form of dividends. Dividends are taxed, as well. This is where the term double taxation comes from.
But when you form an LLC in South Carolina, you avoid double taxation entirely. Here’s how your South Carolina LLC will be taxed:
LLCs are pass-through entities by default and are generally exempt from paying federal taxes. The profits earned by the LLC in South Carolina are taxed at company rates (which aren’t as high as corporate tax rates), and then given to LLC members in the form of personal income. This means that your South Carolina LLC only pays taxes on its profits once.
Your LLC in South Carolina will enjoy tax benefits beyond simply avoiding double taxation.
In 2017, the Tax Cuts and Jobs Act instituted the Qualified Business Income Deduction (QBID). QBID is a 20% tax discount that your business won’t benefit from if you choose any other business structure. This is an excellent reason to choose an LLC!
How to Start an LLC in South Carolina
After learning the fundamentals of an LLC and some of the advantages of forming one in South Carolina, you can make an informed decision about whether the LLC business structure is right for you and your business. If you're still interested in forming an LLC in South Carolina and are certain it's the right for you, the five steps below outline the process.
*IMPORTANT* If you're new to LLC formation and would like assistance, I have some fantastic news for you. Professional assistance is available to help you with forming your LLC. Referred to as LLC formation services, these companies significantly streamline the formation process.
Services for LLC formation will assist you at every stage of the process, from document filing to post-formation administrative support. These services are available for as little as $0 and are an excellent way to streamline the process of maintaining good standing with the South Carolina Secretary of State.
Northwest Registered Agent, which charges $39* for BoostSuite readers, is my top pick. They provide superior service and consistently exceed expectations.
(*Excludes state filing fees.)
If you're interested in learning more about the advantages of an LLC formation service, read my guide to the best LLC formation service.
1. Obtain Articles of Organization Form
To begin the South Carolina LLC formation process, you must obtain a copy of the Articles of Organization form from the South Carolina Secretary of State.
This is the main document that must be filed and the most important step in the process. You can file the Articles of Organization online or via mail. Regardless of whether you file online or by mail, you must pay a filing fee of $110.
The steps below correspond to the Articles of Organization of South Carolina.
2. Choose Your Business Name
After acquiring the Articles of Organization, the next step is to register the business name of the LLC.
Unfortunately, this step is more time-consuming than simply registering the first LLC name that occurs to you.
According to state business law, your South Carolina LLC’s name must be distinct from any other business names registered with the Secretary of State, just as many websites require a unique username. Additionally, the phrase “Limited Liability Company,” “Limited Company,” or the acronyms “L.L.C.,” “LLC,” “L.C.,” or “LC” must be included in the LLC name. The term “Limited Company” may also be abbreviated as “Ltd.” and “Co.”
To speed up the process, you can submit an Application to Reserve Limited Liability Company Name to the South Carolina Secretary of State Corporations Division to reserve an LLC name for 120 days. The filing fee is $25 and the form may be submitted electronically or via mail.
If the name you’ve had to register isn’t to your liking then you can use what’s known as a trade name or a Doing Business As (DBA) name. There isn’t a state-level registration for DBAs in South Carolina. Instead, you’ll need to register your LLC’s DBA in the county or counties where it/they operate.
3. Choose a South Carolina Registered Agent
The next step in forming an LLC in South Carolina is to appoint a registered agent.
South Carolina law requires all foreign and domestic LLCs to appoint a service of process agent or registered agent.
A registered agent is an individual or business entity that acts as your LLC's point of contact and principal office by receiving mail, official government correspondence, and legal documents, accepting service of process during normal business hours and safeguarding your information by registering their name and address, rather than yours, with the South Carolina Secretary of State.
When it comes to selecting your South Carolina LLC’s registered agent, you have two options. You may act as your business's agent directly or use a commercial registered agent service.
If you choose to act as the agent for your LLC, it is important to note that you will be legally obligated to accept mail, legal papers, and service of process during regular business hours on business days. This may complicate your business's operations, as the majority of South Carolina LLCs operate during regular business hours on business days, and overextending yourself as your LLC's agent is not a prudent move.
If your South Carolina LLC does not respond to a service of process, the court may enter a default judgment against you. Additionally, failing to immediately respond to a service of process or letter from a government agency may result in your LLC losing its “good standing” status with the South Carolina Secretary of State, thereby barring you from conducting business in the state.
By hiring the services of a registered agent in South Carolina rather than acting as your own agent, you can significantly reduce your workload and ensure the security of your information. Appointing an agent for your business guarantees that you receive and are informed of any mail and service of process that the agent accepts on your behalf. The only disadvantage of employing a professional agent is that their business services range in price from $99 to $299 per year.
Given the risks associated with acting as your own registered agent in South Carolina, the expense of employing a registered agent service is justified. I propose that newly established LLCs retain the services of a South Carolina registered agent rather than attempt to complete registered agent tasks on their own.
If you'd like to learn more about registered agent services, read my post about South Carolina's top registered agents.
4. Choose Your LLC Address
The name of your LLC is not the only significant piece of information that must be included on the Articles of Organization form and made public. According to South Carolina state law, every business entity in the state must maintain a public record listing its principal business address.
If you have opted not to employ a registered agent, you may include your business's physical street address. If your business does not have a physical street address, you are required to include your home or office address on the form, which becomes a public record. When deciding which address to list, keep in mind that you cannot use a PO Box as your business address.
If you've retained the services of a registered agent, they'll supply you their address to use as your primary business address. This simplifies the decision-making process for you and safeguards your identity.
5. Sign and File Your Articles of Organization
The final step is to sign and file the South Carolina LLC Articles of Organization. Make sure that you’ve verified the accuracy of the forms before filing and that all the relevant fields have been filled out.
The following information is required to be listed on the Articles:
- LLC name
- LLC designation
- Name and address of the LLC's registered agent
- Address of the LLC's initial designated office
- Whether the LLC will be overseen by a manager and if so, the manager's name and address must be included
- Term end date if the LLC will operate for a limited time
- Whether the LLC's effective date will be delayed—leave blank if you want the LLC to become effective immediately upon submitting the Articles of Organization
- Name and address of at least one organizer of the LLC
- Signature of each listed organizer
After entering all this information and verifying its accuracy, it's time to sign and submit your South Carolina LLC’s Articles of Organization. If you sign the form yourself, your personal information becomes a public record, which you can avoid by employing an LLC formation service.
You may file your South Carolina Articles of Organization online or by mail, and the filing fee is $110.
If you'd prefer to file the Articles of Organization for your LLC online, you may do so here. To file online, you must register a username and password with the online filing service.
If you’d like to submit by mail, please send your completed form together with the filing fee to the following address:
South Carolina Secretary of State
Attn: Corporate Filings
1205 Pendleton Street, Suite 525
Columbia, SC 29201
Other LLC Activities
While filing your Articles of Organization is a significant milestone for your business, it is far from the final step you will perform as an LLC owner. Several activities are required to maintain your LLC’s good standing with the Secretary of State.
Unlike most states, South Carolina does not require LLCs to file annual reports.
If you plan to hire employees, sell goods, and collect sales tax, or if your LLC has multiple members, then you must register with the South Carolina Department of Revenue (DOR). In most cases, you can register your LLC with the DOR via the South Carolina Business One Stop (SCBOS) website.
Most businesses will be required to obtain additional business licenses and permits. Depending on the type of business you plan on conducting and where your business operates, your city or county may have additional licensing requirements. Check with the city or county clerk in your South Carolina LLC’s primary business location for any local business license requirements. South Carolina does not mandate a general business license.
Beyond these activities, you must get a Certificate of Good Standing from the Secretary of State, pay taxes, and adhere to various compliance requirements to preserve your good legal standing with the Secretary of State.
If you want to lighten your overall workload or are inexperienced with applying for business licenses and tax registration, consider hiring a South Carolina PEO service and subscribing to online legal services.
South Carolina LLC Fee Summary
The cost of forming an LLC is a frequently asked question. Here are some of the fees associated with forming an LLC in South Carolina:
Articles of Organization: $110
Name Reservation: $25
Registered Agent Fee: $99–$299
Annual Report: N/A
State Personal Income Tax: 0%–7%
State Corporate Income Tax: 5%
After Starting Your South Carolina LLC
Starting an LLC is a significant accomplishment, and you should be proud of yourself. So go ahead and host a party, go out to a great restaurant for dinner, enjoy a night out with your significant other, or reward yourself with a shopping spree.
But don't relax for too long because you still have work to do. For your LLC to be successful, you must follow these three steps.
Step 1. Create an Operating Agreement
Even though Operating Agreements aren’t required by the South Carolina state government, it’s in the best interest of your LLC to adopt one.
The LLC Operating Agreement is an internal document that outlines all the managerial, structural, financial, and operational aspects of your organization. Operating Agreements should name LLC members, specify their responsibilities, who they should work closely with, their managers, and how much of the company they own.
Furthermore, your Operating Agreement should outline who among the LLC members has the right to make strategic business decisions for the company. Before drafting your Operating Agreement, you should decide whether your LLC will be member-managed or manager-managed and whether it will be a single-member LLC or a multimember LLC so that you may explain the management structure of your LLC in the document.
A provision defining the succession order of LLC members should be included in your LLC Operating Agreement. Many small business owners overlook this component, but it will prove important if there is a schism among LLC members that results in members leaving or joining.
Operating Agreements must contain the correct terminology and lay out clear operational instructions since your company is obligated to operate in accordance with such directions. Your business can be hampered if you draft a bad Operating Agreement that doesn’t account for factors like business development and innovation. With a well-written Operating Agreement, it's possible to watch your company soar to new heights.
Given the importance of the Operating Agreement, I'll give you a few options to choose from so you draft it correctly the first time.
You can use a free Operating Agreement template from Northwest Registered Agent, which is simple to use and quite useful for any new LLC owner. The next option is to use online legal services that will assist you with drafting a legally solid Operating Agreement by providing you with legal phrasing assistance. As a final option, you might use a company formation service, which can prepare an Operating Agreement on your behalf as part of their services.
Step 2. Apply For an Employer Identification Number
The next step is to submit an application for a Federal Employer Identification Number, or EIN, from the Internal Revenue Service (IRS). If your business collects sales tax or hires employees, you must obtain an EIN. You’ll also need an EIN to open business bank accounts.
Among the benefits of obtaining an EIN are the following:
- An EIN will qualify your LLC for business permits and licenses it wouldn’t otherwise qualify for.
- You can use your EIN in place of your Social Security Number on many forms, which protects your identity.
However, you aren’t required to collect sales tax or hire employees to obtain an EIN. It’s merely a federal tax identification number for businesses.
It’s quite simple to apply for an IRS Employer Identification Number. All you have to do is go to the Internal Revenue Service website, navigate over to the Online Application Portal between 7 a.m.–10 p.m. Monday–Friday, fill out the application and submit it.
If you’re looking for a simpler option, most business formation services apply for an EIN on behalf of your business as part of their services.
Step 3. Open a Business Bank Account
The final stage in establishing the proper business foundations for your LLC is to open a separate business bank account for your new LLC.
While many business owners forget this stage, it’s essential to your LLC's success.
Frequently, business owners use their personal bank account to conduct business and personal transactions under the assumption that having a single account for both purposes is convenient or time-saving. However, you should avoid this method for two compelling reasons.
The first reason is that while you may believe you are capable of later separating personal and business transactions for tax purposes, you aren’t. While it's easy to distinguish between two transactions made within a few days of one another, it's nearly impossible to determine whether a transaction was made for personal or business purposes when poring over a statement containing hundreds of transactions made as long ago as 11 or 12 months. This significantly complicates filing state and federal income taxes both for your business and yourself.
The second reason is that if you use your personal account to manage business finances for your LLC, you void the personal liability protection you have when you form an LLC. Additionally, your personal data, identity, and funds in your personal bank account are all at risk.
In summary, if you want to safeguard your personal finances and identity while also saving yourself a headache come tax season, simply open a business bank account for your LLC.
To open a business bank account, you will need what is referred to as a “bank kit.” This bundle contains a variety of formation paperwork, including your EIN, formation documents, initial resolution, and Operating Agreement.
Of course, you can create your own kit. And, as with the other steps, a formation service will create it for you, saving you time and effort.
South Carolina LLC FAQs
Can I form an LLC in South Carolina from out of state?
There is a process for registering a foreign LLC if your LLC is located outside of South Carolina. The fundamental difference between this and the domestic LLC formation process is the primary form. Before a foreign LLC can lawfully operate in South Carolina, it must file an Application for a Certificate to Transact Business with the South Carolina Secretary of State. A registered agent in South Carolina is necessary for a foreign LLC as well. A foreign LLC can appoint a person or a business entity authorized to perform this function in South Carolina, just as with a domestic LLC.
The process entails a $110 filing fee and the application must be sent in via mail. Additionally, a Certificate of Good Standing or proof of legal existence from the LLC's home state must be attached to this document and must be no more than 30 days old.
Can I form a Professional LLC in South Carolina
If your South Carolina LLC provides professional services such as legal or accounting, you must follow the PLLC formation guidelines. PLLCs are limited to delivering a single licensed professional service, and all members must have the requisite business licenses and permits or be registered with the state in order to conduct the licensed professional service for which the LLC was formed. You may be asked to supply a copy of each LLC member's current business license or state registration as part of the PLLC formation process.
In Summary
Establishing an LLC is always a significant business move that deserves to be celebrated. Congratulations on demonstrating the fortitude necessary to navigate this process and take control of your business's future.
If you choose not to use an LLC formation service (which can be as low as $0*), the following five steps will guide you through the process of forming a South Carolina LLC:
(*Does not include state filing fees)
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
Whether you're launching a new business or reorganizing an existing one, forming an LLC can be a time-consuming process. It's easy to become overwhelmed by the sea of red tape, mounds of paperwork that you must file, and legal jargon that you must learn in order to form your LLC. However, nothing equals the sense of achievement you'll experience if you complete it all on your own.
Congratulations on forming a South Carolina LLC today, and best of luck with your business endeavors!