Starting an LLC in South Carolina
How to Start an LLC in South Carolina
- Pros and Cons of Forming an LLC in South Carolina
- Starting Your South Carolina LLC
- Maintaining Your South Carolina LLC
- Additional South Carolina Resources
The LLC formation process in South Carolina can seem confusing, but our comprehensive guide gives you all of the necessary information to get you through each phase of forming your own LLC.
Pros and Cons of Forming an LLC in South Carolina
No Corporate/Franchise Taxes
South Carolina does not impose any corporate or franchise tax on LLCs. The only taxes owed on the LLC’s revenue is the personal income tax paid by the members.
Low Start-Up Cost
South Carolina does not levy most new LLC businesses with a lot of expenses — without an annual report fee or any corporate taxes to pay, the primary cost of setting up a new LLC in South Carolina is the $110 filing fee.
Low Property Taxes
South Carolina’s property taxes are among the lowest in the nation — at 0.596%, South Carolina has the fifth best tax rate in the U.S. and is well under the 1.211% national average.
High Alcohol Tax
South Carolina imposes a 5% excise tax on alcohol, on top of the 6% sales tax and 3% city tax. REstaurant owners end up being taxed as much as 16% on the food and alcohol they serve.
High Income Tax
South Carolina has one of the highest income tax rates in the South — the marginal tax scale tops out at 7% for all income over $14,700.
Shrinking Qualified Workforce
South Carolina is seeing a decline in the number of workers even as the state’s unemployment rate continues to drop — the labor participation rate has dropped almost 1% since 2017 and is now approximately 4% below the national average.
Cost of Doing Business
- $110 filing fee
- No annual report
- No corporate/franchise tax
Phase One: Starting Your South Carolina LLC
The first phase of starting an LLC in South Carolina focuses on the initial steps that actually make your business idea a legally recognized reality. The beginning steps are below:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Decide on a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: Create your Operating Agreement
- Step 6: Register for an EIN
Step 1: Name Your South Carolina LLC
The first step in forming your South Carolina LLC is to choose a business name. Please keep in mind that there are both state and federal guidelines concerning the use of certain words and phrases.
Tip: Use a free business name search tool to ensure your company’s desired name is available.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
In addition to naming your LLC, you also need to decide on an address for your business’s website. Verify domain name availability through a website hosting site.
Step 2: Establish Ownership
The owners of an LLC are known as members and managers. All LLCs will have members, but not every LLC will have managers — it depends on the management structure of the business.
LLC Management Structures:
- Member-managed: All members participate in operating and making decisions for the LLC
- Manager-managed: An appointed manager oversees the daily operations of the LLC and the members are not actively involved.
South Carolina LLC Member Guidelines
Required Number of Members
There must be at least one member or manager to form an LLC in South Carolina.
Member Disclosure Requirements
An organizer/authorized representative may sign and file the Articles of Organization in place of the LLC members.
Please Note: The manager(s) must be listed in the Articles of Organization
LLC members in South Carolina may be of any age.
There are no residency restrictions imposed on LLC members in South Carolina.
Step 3: Find a Registered Agent in South Carolina
The registered agent is mandatory for all South Carolina LLCs; in fact, your business cannot be official without this position.
What is a registered agent?
A registered agent is a person or business who is authorized to accept all official mail and legal notices on behalf of the LLC.
Why do you need a registered agent?
South Carolina law requires you to appoint a registered agent so that the state government has a consistent contact person for your LLC.
What are the main requirements for a registered agent?
- The registered agent must have a physical address — not a P.O. Box
- The registered agent must be available during business hours
Who can be a registered agent in South Carolina?
- A state resident with a physical address in South Carolina
- An LLC or corporation that is licensed to do business in South Carolina
Is the registered agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own registered agent for my business?
You can be your own registered agent as long as you have a physical address in South Carolina.
Is being my own registered agent discouraged?
LLC business owners who choose to be their own registered agent risk compromising their personal information.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in South Carolina. Find more information here.
Step 4: File the Articles of Organization
The most important step in creating your South Carolina LLC is filing the Articles of Organization with the Secretary of State.
What is the Articles of Organization?
The Articles of Organization is a legally binding document that is filed with the state government to officially and legally form your LLC.
Why do I need the Articles of Organization?
Your South Carolina LLC will not be legally recognized by the Secretary of State without filing this document. The Articles of Organization is a foundational part of your business.
What is the cost of filing the Articles of Organization?
The filing fee for South Carolina is $110.
What information is included in the Articles of Organization?
- The name and address of the LLC
- The name and location of the registered agent
- The name of the organizer filing the paperwork
- The name of the LLC manager(s) — if applicable
- The chosen LLC management structure
- The duration of the LLC
Additional South Carolina Filing Information — Professional LLCs
South Carolina does not have specific rules for “professional LLCs/PLLCs”; however, professional services businesses may form an LLC.
Examples of Professional Service Businesses:
- Physicians/Medical Professionals
- Professional Counselors and Psychologists
- Architects and Engineers
- Social Workers
A few points to consider:
- All members of the LLC must be licensed in the profession of the business.
- The LLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the LLC’s profession.
Step 5: Create an LLC Operating Agreement
Another part of your South Carolina LLC’s foundation is the LLC Operating Agreement. This document is vital for your business.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legally binding document that defines the roles of the members/managers and lays out the details of the LLC’s operating procedures.
Why do I need an LLC Operating Agreement?
The LLC Operating Agreement is necessary because it provides structure through explanation of member roles, protects assets from creditors, and reduces internal disputes and lawsuits.
Do I need to file the LLC Operating Agreement?
You do not need to file the Operating Agreement anywhere; it is for your business’s benefit and remains in-house.
What goes into an LLC Operating Agreement?
While the Operating Agreement should be unique to your LLC, most documents include the following information:
- List of the members/managers and their roles
- Designation of authority in the LLC
- Initial capital contributions of the members
- Voting designations and percentages of the members
- Member transfer/addition rules and restrictions
- Distribution of profits
- Meeting schedule
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Register for an EIN
Most businesses formed in South Carolina must register for an EIN. Your South Carolina LLC will not be able to conduct business without this ID.
What is an EIN?
The EIN is a nine-digit number that is assigned to your business by the Internal Revenue Service (IRS) in order to identify your business with the federal government.
What does EIN stand for?
EIN is an acronym for Employer Identification Number. It is also known as a Federal Tax ID.
Are all businesses required to have an EIN?
Federal law dictates that certain types of business entities register for an EIN:
- Any business with employees (even if owned by one person)
- Any business with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.
Why does my LLC business need an EIN?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
In short, if you make money through your business and it has employees, you must have an EIN.
Is the EIN publicly listed?
The EIN for your LLC will be part of public record.
Can I use my Social Security Number as the EIN?
You may use your social security number as your EIN, but you also put sensitive information at risk.
Swyft Filings offers EIN services for small businesses in South Carolina. Find more information here.
Phase Two: Maintaining Your South Carolina LLC
The next phase of forming your South Carolina LLC deals with compliance rules and regulations (taxes and permits). The next few steps are:
- Step 1: Register for Taxes in South Carolina
- Step 1B: File Initial Report — If Applicable
- Step 2: Apply for Permits and Licenses
- Step 3: Request a Certificate of Existence
Step 1: Register for South Carolina State Taxes
South Carolina does not charge LLCs with a corporate or franchise tax. LLC members are still required to pay state and federal income taxes on their earnings.
State Income Taxes
South Carolina’s state income tax rates are listed in the table below:
Corporate Tax Information
You can also choose to have your LLC taxed as a corporation; if so, you will be responsible for paying corporate taxes on your business’s earnings
Corporations in South Carolina are required to pay two types of taxes:
- Corporate Income Tax = 5% on all taxable income.
- Corporate License Fee = $1.00 per $1,000 (+ $15 charge) of all capital stock or surplus
Please Note: The minimum corporate license fee is $25
Additional Tax Information
Other taxes your LLC may need to pay:
- Sales and Use Tax at 6.0%
- Employee Withholding Tax
- Unemployment Tax
Step 1B: File the Initial Report of Corporations
Most LLCs are not required to file an annual report. For LLCs that opt to be taxed as a C-Corp/S-Corp, there are two forms that the business must file for the Department of Revenue:
- The Initial Report of Corporations (IRC)
- Corporate Tax Return (SC 1120 or SC1120s)
IRC Form Information
Due Date: Within 60 days of LLC formation
Implications of Late Filings: None
SC 1120 Form Information
Due Date: 15th day of 3rd month after close of tax year (i.e. March 15th)
Frequency: Every year
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in South Carolina can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: Request a Certificate of Existence
After your South Carolina LLC has been formed and is ready for business, there is still one last step — securing a Certificate of Existence for your business.
What is a Certificate of Existence?
The Certificate of Existence, also known as a Certificate of Good Standing, is a certification that confirms your business is properly formed and is in compliance with the state.
Who issues the Certificate of Existence?
The Certificate of Existence is generally issued by the Secretary of State.
When can I request a Certificate of Existence for my business?
You will be able to request a Certificate of Existence after your LLC is officially formed through the Secretary of State.
Why do I need a Certificate of Existence?
Having a Certificate of Existence gives your new LLC credibility with banks, financial institutions, and other businesses. Many companies and banks will not agree to any business deals if your LLC does not have this certification.
Does the Certificate of Existence have an expiration date?
The Certificate of Existence does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Existence for your South Carolina LLC. Click here for more information.