How to Start an LLC in South Carolina (May 2024 Update)
A limited liability company (LLC) combines the tax benefits of a partnership with the liability protections of a corporation. Forming an LLC shields your personal assets from business debts and claims, only exposing the business's assets. LLCs also provide flexibility in ownership, management structure, and taxation options.
With so many advantages, it's no wonder LLCs have become a go-to choice for small business owners and entrepreneurs. If you’re looking to launch a business in South Carolina, starting an LLC is likely the best route to take. While the process may seem complicated, it only takes six straightforward steps to set up your South Carolina LLC.
This guide will walk you through each requirement in detail, including choosing a business name, designating a registered agent, filing formation documents, creating an operating agreement, obtaining licensing, and staying compliant. With a little work upfront, your South Carolina LLC will be off and running in no time!
Choosing an Available Business Name
The first official step is to pick a unique name for your South Carolina LLC. Your chosen name needs to comply with the state's naming guidelines and check for availability against current names.
LLC names in South Carolina must include the words "Limited Liability Company," the abbreviation "L.L.C." or "LLC," or the abbreviations "LC" or "L.C." You also can't use restricted words that imply your LLC is a bank, university, or government agency unless you meet strict licensing criteria.
Before settling on a name, verify availability by checking the Secretary of State's database. If your desired name already exists, you’ll have to select a new one. You're free to reserve a name for 120 days for a $25 fee while preparing your additional paperwork.
Many LLCs also use a “doing business as” name or DBA as their public-facing brand name, while the official LLC name meets the state guidelines. Typically no registration is needed for your DBA.
Appointing a Registered Agent
South Carolina requires all LLCs to designate a registered agent, which is a person or business entity that agrees to accept service of process and official documents on behalf of the LLC. This agent must have an in-state physical address (no P.O. boxes allowed) and be available during normal business hours.
You have three options when selecting a registered agent:
- Yourself
- Another LLC member or manager
- A third-party registered agent service
Using a professional service can provide an extra layer of privacy since their address will be on public record rather than your home or office address.
Filing the Articles of Organization
To legally form your LLC, you must file Articles of Organization with the Secretary of State, either online or through the mail. Preparing your Articles of Organization isn’t as complex as it sounds – it’s basically just filling out a form with some key information.
You’ll need to provide your LLC’s name, registered agent and their address, the principal address for your LLC, the names and addresses of each organizer, details on management structure, duration period of the LLC, and member liability status.
The filing fee depends on your submission method, but ranges from $110-$125. Once the Secretary of State approves your documents, you will receive an official certificate of organization signifying your LLC now exists as a recognized legal entity.
Creating an Operating Agreement
While not technically required, creating an operating agreement for your South Carolina LLC is highly recommended. This document establishes internal business practices and policies that aren’t listed in your formation paperwork.
Typical provisions include member percentages/ownership breakdown, voting procedures, management structure, profit/loss distribution, buy-sell clauses, and measures for dissolving the LLC. Having these details mapped out ahead of time can prevent disagreements down the road.
Your operating agreement acts as an instruction manual for how your LLC will function and gives you greater credibility in court if disputes arise. It's meant to be an internal guiding document rather than filed with any government agency.
Obtaining an EIN
Most LLCs need a Federal Employer Identification Number (EIN) for tax and banking purposes. Also known as a Federal Tax ID Number, EINs allow LLCs to open business bank accounts, apply for business licenses, hire employees, and file taxes appropriately.
Sole proprietorships can use Social Security numbers instead, but multi-member LLCs must have an EINeven if they don't plan to hire employees. The EIN formally identifies your business entity to the IRS for tax reporting and deductions.
You'll need to provide details on your LLC's ownership structure and purpose. When applying online, you can obtain your EIN instantly after submitting your information.
Complying with Licenses, Permits, Taxes and More
Local Business Licenses
While there’s no statewide general business license, most cities and counties in South Carolina do require local business licenses. Check your local municipal website for details on obtaining one, including any zoning permits or other approvals you might need. Costs and requirements can vary based on your LLC’s activities.
State Tax Registration
You may need to register your new LLC with the South Carolina Department of Revenue, especially if you plan to hire employees or collect sales tax. The DOR registration allows you to obtain any tax licenses your LLC needs and file state taxes appropriately. You can register online through the state’s business portal.
Federal and State Taxes
LLCs themselves don’t pay federal income taxes. Instead, earnings and losses “pass through” the business to the LLC owners. The individual owners then report that activity on their personal tax returns. LLCs default to being taxed as partnerships if multi-member, while single-member LLCs default to sole proprietorships.
You can elect an alternate tax status like S-Corp or C-Corp by filing with the IRS. Just remember that state taxes mirror federal taxes for LLCs. So you would file South Carolina taxes the same way you file federal based on your LLC’s structure.
Ongoing Obligations
Staying compliant with annual filings and reports is crucial to keep your LLC in good standing. Unlike some states, South Carolina has no formal ongoing filing requirements. You won’t need to submit annual reports or pay annual state fees. But do be sure to keep up with your tax filings, licensing renewals, and registered agent services.
Frequently Asked Questions
How much does it cost to form an LLC in South Carolina?
The state charges a $110-$125 filing fee to establish an LLC, depending on online vs paper submission. You also may need to pay a small fee to reserve your business name and minimum incorporation fees if using an LLC formation service. Ongoing costs will include registered agent fees, licensing, taxes, and legal/accounting help.
What are the main advantages of starting an LLC?
LLCs offer liability protection by separating your personal assets from business assets, flexibility in management and ownership decisions, pass-through taxation benefits, and credibility with customers. LLCs tend to provide more structure than sole proprietorships but less paperwork than corporations.
Is South Carolina a business-friendly state for LLCs?
South Carolina offers a very favorable environment for starting and running an LLC. There's no income tax on pass-through earnings, no corporate income tax, and no ongoing state fees. The LLC formation process is affordable and straightforward. SC does well in overall business climate rankings.
How long does it take to form an LLC in South Carolina?
If you submit your Articles of Organization online, expect approval within 1-2 business days. Filing by mail adds processing time, so allow 3-4 weeks total if using paper submission. You can complete all steps to legally form your LLC in under two weeks in most cases.
Conclusion
Launching a South Carolina LLC only takes six simple steps, even with having to name your business, appoint a registered agent, file formation paperwork, create an operating agreement, obtain licensing, and stay compliant.
Following this guide eliminates the complexity of getting your LLC off the ground. While legal and tax considerations still apply, you can formally establish your LLC's business structure in a quick and straightforward manner.
Make sure to thoroughly research additional requirements in your local county and municipality. Revisit your operating agreement as your business evolves. Stay in good standing by submitting timely filings and renewals.
Starting an LLC can feel intimidating, but South Carolina aims to create a welcoming environment for new businesses to help drive the state’s ongoing growth. Follow these best practices as you get your organization up and running. Before long, you’ll be reaping the many advantages of operating as a South Carolina LLC!