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An S Corporation is not a type of business entity. It is a federal tax classification available to qualifying corporations and LLCs that elect to have their business income pass through to shareholders for tax purposes.
The S Corp designation is governed by Subchapter S of the Internal Revenue Code. When you elect S Corp status, the business itself generally does not pay federal income tax. Instead, income, losses, deductions, and credits flow through to shareholders, who report them on their personal returns. [13]
In South Carolina, an S Corporation files Form SC1120S, S Corporation Income Tax Return, by March 15. The S Corp pays the corporate license fee on Schedule D at $15 plus 0.1% of capital stock and paid-in surplus, with a $25 minimum. Shareholders pay South Carolina personal income tax on their pro rata share at graduated rates up to 6.2% for 2025. [5] [6] [9]
South Carolina also offers an elective entity-level Pass-Through Entity tax under SC Code § 12-6-545(G). A qualifying S Corp may elect to pay state income tax at the entity level on active trade or business income at a flat 3%, preserving the federal SALT deduction. [7] [14]
For business owners earning $60,000 or more in net business income, the S Corp election can provide meaningful self-employment tax savings.
| Action | Deadline | Notes |
|---|---|---|
| File IRS Form 2553 | Within 2 months and 15 days after the start of the tax year | For a January 1 tax year, the deadline is March 15. Late election relief may be available under IRS Rev. Proc. 2013-30. [3] |
| File Form SC1120S (South Carolina) | March 15 (calendar-year filers) | 15th day of the 3rd month after the close of the tax year. Includes the corporate license fee on Schedule D. [5] |
| File Form 1120-S (Federal) | March 15 (calendar-year filers) | Distribute Schedule K-1s to shareholders. [3] |
| Elect entity-level PTE | On a timely-filed Form SC1120S | Annual election made by checking the PTE box on page 1 of Form SC1120S. Taxes active trade or business income at 3%. [7] [14] |
| File SC1120-T (extension) | On or before March 15 | Grants a 6-month extension to file Form SC1120S. Payment of any balance due is still required by March 15. [5] |
| Pay quarterly estimated tax | April 15, June 15, September 15, December 15 | Required if expected South Carolina liability exceeds $100. [5] |
| Set up payroll | Before paying yourself a salary | Register with the SC Department of Employment and Workforce (DEW) through SUITS for unemployment insurance and with SCDOR for withholding before issuing W-2 wages. [11] [12] |
An S Corp is a tax classification, not a standalone entity. You must have an active South Carolina corporation or LLC on file with the Secretary of State before you can elect S Corp tax treatment with the IRS.
If you want to form an LLC first, check this guide.
If you want to incorporate as a C Corp first, check this guide.
Already have an existing LLC or corporation? Move to Step 1.
Form 2553 must be filed no later than 2 months and 15 days after the beginning of the tax year the election is to take effect. [3]
Submit by mail or fax. No filing fee.
Mail to: Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999. Fax: 855-887-7734. [8]
South Carolina follows the federal S Corp classification automatically under SC Code § 12-6-590. Once the IRS accepts your Form 2553, file Form SC1120S annually. No separate state election form is required. [14]
Apply for SC tax accounts through the SCDOR MyDORWAY Business Tax Application. This registers the business for withholding, sales/use tax, and other applicable taxes. [12]
As an S Corp shareholder-employee, you must pay yourself a reasonable salary through W-2 payroll.
If you do not already have an EIN, apply at no charge on the IRS website (irs.gov).
South Carolina does not require a separate Secretary of State annual report. Corporations (C and S) file the annual report as Schedule D within Form SC1120 or SC1120S, together with the license fee. LLCs do not file an annual report in South Carolina. [1] [5]
File IRS Form 1120-S and distribute Schedule K-1s to all shareholders by March 15 (calendar-year filers). File South Carolina Form SC1120S by March 15. [5]
File Form SC1120-T, Application for Extension, on or before March 15. A 6-month extension is granted. Payment of any balance due is still required by the original due date. [5]
Pay quarterly estimated tax if expected South Carolina liability exceeds $100. Shareholders separately pay quarterly SC1040ES estimated tax. [5]
Late filing of Form SC1120S incurs a 5% per month penalty on unpaid tax (maximum 25%), plus a 0.5% per month late payment penalty, plus interest at the federal short-term rate plus 3%. [5]
If you fail to file Form 2553 with the IRS on time, your S Corp election will not take effect for the current tax year. Your business will be taxed as a C Corporation (or as a sole proprietorship or partnership if the underlying entity is an LLC).
The IRS offers late election relief under Revenue Procedure 2013-30. To qualify, you must file within 3 years and 75 days of the intended effective date, demonstrate reasonable cause, and confirm that the entity has consistently filed as if the S election were in effect. [3]
Because South Carolina follows the federal S election automatically, no separate state late-election process is required. [14]
At the federal level, the S Corp election can be revoked by filing a statement of revocation with the IRS, signed by shareholders holding more than 50% of the outstanding shares. [3]
Because South Carolina follows the federal classification, a federal revocation automatically terminates the South Carolina S Corp status. The entity then files Form SC1120 as a C Corp. [14]
South Carolina S Corps pay the annual corporate license fee at the entity level. The fee is $15 plus $1 per $1,000 (0.1%) of capital stock and paid-in or capital surplus, with a $25 minimum. The license fee is reported and paid on Schedule D of Form SC1120S. [5] [6]
| Component | Amount |
|---|---|
| Base fee | $15 [6] |
| Variable fee | 0.1% of capital stock + paid-in surplus |
| Minimum total | $25 |
| Filing location | Schedule D of Form SC1120S [5] |
Under SC Code § 12-6-545(G), qualifying S Corps and partnership-taxed entities may elect to pay South Carolina tax on active trade or business income at the entity level at a flat 3%. The election is made annually by checking the box on page 1 of Form SC1120S. Qualifying owners then exclude that income from their South Carolina taxable income. [7] [14]
The 3% rate is significantly lower than the top individual rate (6.2% for 2025), making the PTE election attractive for high-income shareholders.
South Carolina imposes a graduated individual income tax with a top rate of 6.2% for tax year 2025, indexed annually with a phase-down toward 6.0%. Owners may also use Form I-335 to claim the owner-level reduced 3% rate on active trade or business income from pass-throughs. [7] [9]
South Carolina state sales tax is 6% on retail sales of tangible personal property and certain services. Counties and municipalities may add local option taxes. Register through SCDOR MyDORWAY. [10]
| Item | Cost |
|---|---|
| Articles of Incorporation (includes CL-1 Initial Report) | $135 [2] |
| Articles of Organization (LLC) | $110 [2] |
| IRS Form 2553 filing | No fee [3] |
| Federal EIN (Form SS-4) | No fee |
| Annual License Fee (S Corp, minimum) | $25 per year [6] |
| Registered Agent service (typical commercial) | $100 to $300 per year |
| Feature | S Corporation | LLC |
|---|---|---|
| Formation Document | Articles of Incorporation ($135) | Articles of Organization ($110) |
| Federal Tax Treatment | Pass-through (Form 1120-S) | Pass-through by default (Form 1065 or Schedule C) |
| South Carolina Tax Treatment | SC1120S; auto-recognized | SC1065 (partnership) or no return (disregarded) |
| Annual Report | Schedule D of SC1120S | None required |
| Self-Employment Tax | Only on a W-2 salary | 15.3% on all net earnings |
| License Fee | $25 minimum, $15 + 0.1% formula | Generally, no LLC-level fee |
| Ownership Limits | Max 100 U.S.-person shareholders, one class of stock | Unlimited members, any type |
| Management | Directors and officers required | Flexible; member or manager managed |
| Reasonable Salary Required | Yes | No |
| PTE Election | Yes (3% on active trade or business income) | Yes, if taxed as an S Corp or a partnership |
| Best For | Owners earning $60K+ wanting SE-tax savings | Small businesses prioritizing simplicity |
The S Corp election makes the most financial sense when your net business income is high enough that the self-employment tax savings outweigh the cost of running payroll and the additional compliance burden. Use this guide:
| Net Business Income | Recommendation |
|---|---|
| Under $40,000 | An S Corp likely does not make sense. |
| $40,000 to $60,000 | Borderline. Run the numbers with a CPA. |
| $60,000 to $100,000 | Usually saves $2,000 to $5,000 per year. |
| $100,000 to $200,000 | Strong candidate. Savings often $5,000 to $10,000+ per year. |
| Over $200,000 | Almost always advantageous. |
Keep in mind that South Carolina’s $25 minimum license fee and ongoing CPA fees are modest compared with those of other states. S Corps still have ownership restrictions that may not suit every business model.
| Requirement | Details |
|---|---|
| Form 1120-S (Federal) | Due March 15. Distribute K-1s to shareholders. |
| Form SC1120S (South Carolina) | Due March 15. Includes Schedule D annual report and license fee. [5] |
| Form 941 (Federal Payroll Tax) | Filed quarterly. |
| SC Withholding (WH-1605 / WH-1606) | Quarterly and annual withholding returns filed with SCDOR. [12] |
| UCE-120 (DEW quarterly UI report) | Quarterly UI contribution report filed through SUITS. [11] |
| W-2s and 1099s | Distributed by January 31. Filed with IRS, SSA, and SCDOR. |
| Estimated Tax Payments | Quarterly federal and South Carolina estimated tax if expected liability exceeds $100. |
| PTE Election (if applicable) | Made annually by checking the box on page 1 of Form SC1120S. [7] |
| Registered Agent Maintenance | Keep agent and physical South Carolina address current with the Secretary of State. |
[1] South Carolina Department of Revenue. S Corporation Page. Accessed May 18, 2026.
[2] South Carolina Secretary of State. Business Entities Online Filings. Accessed May 18, 2026.
[3] IRS. Instructions for Form 2553. Accessed May 18, 2026.
[4] South Carolina Legislature. SC Code Title 33, Chapter 5 (Registered Office and Agent). Accessed May 18, 2026.
[5] SCDOR. Form SC1120S (S Corporation Income Tax Return). Accessed May 18, 2026.
[6] South Carolina Legislature. SC Code Title 12, Chapter 20 (Corporation License Fees, § 12-20-50). Accessed May 18, 2026.
[7] SCDOR. Form I-435 (Active Trade or Business Income). Accessed May 18, 2026.
[8] IRS. Where to File Your Taxes (for Form 2553). Accessed May 18, 2026.
[9] SCDOR. 2025 SC1040 Tax Tables. Accessed May 18, 2026.
[10] SCDOR. Sales and Use Tax (6% state rate). Accessed May 18, 2026.
[11] South Carolina Department of Employment and Workforce. SUITS Employer Registration. Accessed May 18, 2026.
[12] SCDOR. MyDORWAY Business Tax Application. Accessed May 18, 2026.
[13] IRS. S Corporations. Accessed May 18, 2026.
[14] South Carolina Legislature. SC Code Title 12, Chapter 6 (Income Tax Act, §§ 12-6-530, 12-6-545, 12-6-590). Accessed May 18, 2026.
