How to Incorporate in South Carolina (May 2024 Update)
Incorporating a business in South Carolina comes with many advantages—the primary one being personal liability protection. When you form a corporation, your personal assets are generally protected from any debts or lawsuits incurred by the business. However, properly establishing a corporation does involve following specific state requirements. In this comprehensive guide, we’ll walk through the key steps for incorporating in South Carolina.
Choosing a Business Structure
The first decision you need to make is what type of corporation you want to establish. The two most common structures for small businesses are C-corps and S-corps.
- C-corps are standard corporations that are taxed separately from their owners. All income and expenses “stay” with the corporation. Profits are not passed through to the shareholders to report on their personal tax returns. One downside is that this leads to double taxation—once at the corporate level and again if profits are distributed to shareholders as dividends. However, C-corps allow for unlimited ownership and investors, making them preferable if you envision eventually going public.
- S-corps function similarly to partnerships in that all income and losses are passed through to the shareholders’ personal tax returns. To elect S-corp status, you file IRS Form 2553. The tradeoff is that S-corps come with ownership restrictions—you can only have 100 shareholders maximum and they must all be U.S. citizens or residents.
In summary:
- C-corps are better for attracting outside investment but come with double taxation
- S-corps avoid double taxation but limit ownership
Choose a Name and Check Availability
South Carolina has rules around corporate names. You must include a designation like Corporation, Incorporated, Company, or a common abbreviation. You also cannot use a name too similar to one already registered with the state.
To check availability, search business filings on the Secretary of State website. If the name you want is taken, you may need to try variations until you find something available.
Once you land on an available business name, you can reserve it for 120 days for a $10 fee while you complete other steps to launch. This prevents anyone else from claiming your name in the meantime.
Appoint Registered Agent
Before incorporating, you must designate a registered agent, which is a person or business that agrees to accept legal documents like service of process on behalf of your corporation. Your agent must maintain a physical street address in South Carolina that is available during normal business hours.
You can serve as your corporation's registered agent. However, then your name and address will be on the public record. Using a registered agent service keeps your information private.
File Articles of Incorporation
To establish a corporation in South Carolina, you must file Articles of Incorporation with the Secretary of State. This essential document formally creates your corporation.
Additionally, an initial report must be submitted alongside the Articles of Incorporation to provide supplemental information about the company, such as the street address and name of the registered agent. Together, these two documents set up the legal existence of your South Carolina corporation.
Your articles must contain certain information, including:
- The corporate name
- Registered agent name and address
- Total number of stock shares allocated across classes (if applicable)
- Share class rights and restrictions (if applicable)
- Incorporator names and signatures
To legally form the corporation, a licensed South Carolina attorney must sign the articles as well. Once filed and approved, you will receive a stamped copy verifying your corporation’s existence.
Obtain Employer Identification Number (EIN)
Even if you don’t plan to hire employees, you still need to get an EIN from the IRS for tax and identification purposes. Banks will ask for this number to open business bank accounts as well.
As a corporation, you must apply for your EIN directly through the IRS website. The process is free and straightforward.
Create Corporate Bylaws
Bylaws outline the operating rules and procedures for your South Carolina corporation. You establish details like:
- When shareholder/director meetings will be held
- The procedures for voting
- Policies surrounding company finances
- Record keeping requirements
How to amend the bylaws
Bylaws must align with state law and your articles of incorporation. While not filed with the state, you should keep a copy at your principal business office.
Hold an Organizational Meeting
Once you legally form your corporation, you need to hold a first meeting to elect directors and officers and adopt the bylaws. Document the actions taken in the meeting minutes, which become part of the business records.
Open a Corporate Bank Account
To keep your personal and business finances separated, open a dedicated corporate bank account. Bring a copy of your filed articles of incorporation, EIN, and corporate bylaws to the bank to open the account.
For more information, take a look at our article on the key benefits of business checking accounts.
Stay Compliant with State Requirements
On an ongoing basis, you must adhere to South Carolina’s requirements for corporations:
- File an initial and annual report
- Pay annual taxes and fees
- Send annual financial statements to shareholders
- Keep records like articles of incorporation, bylaws, and meeting minutes
How Much Does It Cost to Incorporate in SC?
Between state filing fees and costs for an attorney and registered agent service, expect to spend $500-$1,000 to form a South Carolina corporation. Ongoing fees consist of franchise taxes and income taxes at a rate of 5%.
Conclusion
While this covers the core steps for incorporating in South Carolina, every business has unique needs. Connect with the state department of commerce if you have questions or want to confirm that you meet industry-specific requirements. With the proper foundation, incorporating your South Carolina business positions you for success.