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South Carolina consistently ranks among the top U.S. states in which to start a business. The state offers favorable tax arrangements on business income and even some business properties. From the bustling streets of Charleston and Columbia to the lush landscape of the Upcountry, South Carolina is an ideal place to launch your limited liability company (LLC). This guide will walk you through how to start an LLC in South Carolina.
What is an LLC?
A limited liability company, or LLC, is a common business entity for small businesses in the United States. One or more owners can form an LLC. Each owner is known as a “member.” (LLCs with more than one owner are called multi-member LLCs, and single-owner LLCs are single-member LLCs.) The main structural advantage of running an LLC is that members are shielded from most liability and debts incurred by the company, meaning they will not be held personally responsible for legal or crediting claims against the business.
The LLC’s federal tax treatment is also a significant advantage. LLCs are considered “pass-through” entities, like a sole proprietorship or partnership, meaning the income they generate is taxed only once at the members’ personal-income levels—as opposed to corporations, which pay taxes both on the company’s profit and the income received personally by owners.
Is an LLC right for you?
Whether you opt to form an LLC in South Carolina or another type of business structure will depend mainly on your needs as an entrepreneur. An LLC might be a good fit if:
- You want to limit your personal liability. LLC owners are generally not held personally liable for legal damages and debts incurred by the company.
- You’re looking to limit your tax obligations. LLCs are taxed only at the owners’ personal-income levels, unlike corporations, which also pay tax on corporate income.
- You don’t need to fundraise via the issuance of stock. LLCs are not able to issue stock or have shareholders, as C corporations can. This might limit a business’s ability to raise money from investors.
1. Name your South Carolina LLC
One of the more basic yet important decisions you’ll have to make when launching your LLC in South Carolina involves choosing an entity name. There are two primary considerations when naming your South Carolina LLC:
- Your name must be unique. The LLC’s name must be distinguishable from any existing businesses registered with the State of South Carolina, whether they’re other LLCs, corporations, nonprofits, or partnerships. You can check the availability of your proposed business name via the South Carolina Secretary of State’s Business Name Search.
- Your name must include the entity type. A South Carolina LLC’s name must contain the words “Limited Liability Company,” “Limited Company,” or abbreviations thereof (“LLC,” “L.L.C.,” “LC,” or “L.C.”). “Ltd.” or “Co.” may be substituted for the words “Limited” or “Company, respectively.
2. Create a business plan
Every viable business is based on a thorough business plan—South Carolina LLCs are no exception. A workable business plan includes your LLC’s name and a brief description of the business’s function. It should also offer detailed market analysis, an organizational structure outline, descriptions of products or services, a target customer profile, and plans for marketing, logistics, and finance.
3. Get a federal employer identification number (EIN)
For tax purposes, your South Carolina LLC must be assigned an federal employer identification number, or EIN. You can apply for this number, which identifies your company to state and federal tax authorities, by applying, for free, through the U.S. Internal Revenue Service (IRS).
4. Choose a registered agent in South Carolina
As in every other state, an LLC in South Carolina must appoint a registered agent for legal document receiving and service of process on the business’s behalf. South Carolina registered agents must either be someone residing in the State of South Carolina or a business entity (such as a registered agent service) with a street address in South Carolina. Alternatively, you can appoint an individual or business based out of state if they have a business office somewhere in South Carolina.
5. File your South Carolina Articles of Organization
Once you’ve chosen a name for your South Carolina LLC, it’s time to register it with the Secretary of State’s office, which oversees the authorization of all businesses in the state. You’ll need to file these Articles of Organization online or by mail, and pay an accompanying filing fee of $110. The articles must include the following information:
- Your LLC’s name
- Your principal business address
- The name of your registered agent and their address
- A designation as to whether your LLC is managed by its members (“member-managed”) or by a hired manager (“manager-managed”)—the manager’s names and addresses must be included if the LLC is manager-managed
- The effective date of the articles (if later than the filing date)
- An estimation of how long the LLC will operate (can be “perpetual”)
- The name and address of one or more of the LLC’s organizers (members preparing the articles) and their signatures
6. Obtain business licenses and permits
South Carolina does not require a general business license to operate an LLC within its borders, but LLCs doing business in certain industries may need to acquire one or more specific occupational licenses, permits, or certifications at the state and local levels. Additionally, some counties and municipalities in South Carolina may require you to apply for a business license to operate within their confines.
You can use South Carolina’s Business One Stop website to learn more about what licenses may apply to your LLC, and find resources for research into local requirements.
7. Understand South Carolina state tax requirements
Certain LLCs doing business in the State of South Carolina may be required to register with its Department of Revenue—in particular, LLCs that collect sales tax on retail goods and services and any LLCs with permanent employees. The sales tax rate in South Carolina is 6%. The maximum county sales tax rate is 3%.
If your South Carolina LLC employs any non-members you will also need to pay unemployment insurance tax through the state’s Department of Employment and Workforce, and the employee withholding tax, through the Department of Revenue. You can register to pay LLC taxes through South Carolina’s Business One Stop website.
8. Prepare an LLC operating agreement
An operating agreement is a legal document that outlines your LLC’s ownership, organizational structure, and operating procedures. LLCs in South Carolina are not required to prepare or file operating agreements, but for administrative and goal-setting purposes, having one on hand can still be a good idea. A solid operating agreement includes:
- How ownership rights are distributed between members
- Members’ roles and responsibilities
- Procedures for when a member wants to leave the LLC, or for when the LLC winds down
- Details relevant to how you have elected to be taxed as an LLC
9. Examine business insurance options in South Carolina
Purchasing insurance for your South Carolina LLC is essential to managing risk and can free up your mind to focus on growing your business. Standard insurance plans for businesses in South Carolina include:
- Workers’ compensation insurance. Workers’ comp is an insurance policy that covers employees’ injuries and illnesses incurred on the job (even death). It’s the only kind of insurance South Carolina LLCs are required to purchase by law, should they employ any non-members.
- General liability insurance. A policy that protects your business broadly from lawsuits, financial losses resulting from property damage, and injuries on the job—for example, if a customer slips and falls on your property. You’re not obligated to buy general liability insurance according to state law, but many commercial leases require it.
- Professional liability insurance. Insurance for LLCs that provide professional services—such as consultancies, accountants’ offices, medical professionals, or real-estate agents—which covers financial losses resulting from mistakes like bad advice.
10. Understand financial considerations
Aside from buying insurance, you may have to make additional investments to get your South Carolina LLC up and running. This might include rent toward a lease on a brick-and-mortar retail space, paying for a professionally designed website or social media management, or purchasing equipment and software. In addition to paying employees, you may want to hire contractors and other professionals to support the business, like lawyers and accountants. Resources are available to help entrepreneurs raise startup funding to assist with these costs.
11. Market your LLC
With all your administrative startup boxes checked, it’s time to get the word out about your new venture—and make it stand out from the competition. A solid marketing plan for your small business should include:
- Market research. Gain an intimate understanding of your target customer before you market your product(s) or service(s).
- Advertising. Promote your LLC by paying for advertising or by hiring an agency to do this for you.
- Social media. A robust social media presence is highly recommended for small businesses. Your South Carolina LLC needs to maintain a wide footprint on platforms including Facebook, Instagram, and YouTube, to reach as many customers as possible.
- Public relations. Paid media will only get you so far. To increase brand visibility, try to develop organic relationships with media outlets within South Carolina and nationally.
Forming an LLC in South Carolina FAQ
How much does starting and maintaining an LLC in South Carolina cost?
It costs $110 to register your LLC in South Carolina. You are not required to file an annual report or pay any associated annual fees for maintaining your LLC in the state.
Do you need a registered agent in South Carolina?
Your LLC must appoint a registered agent in South Carolina—either an individual or agency with a principal business address in the state or an individual or agency with one or more business locations in the state.
How do state taxes work in South Carolina?
State income tax is levied on any earnings members draw from an LLC. They are taxed through your personal income tax return. Sellers of retail goods and services also pay a sales-and-use tax of 6%. Every LLC in South Carolina with permanent employees must withhold taxes from the wages of any employees.