South Carolina consistently ranks as one of the top five states in the U.S. to do business in.
Its proximity to New York in the north and Miami to the south makes it an ideal midway point to reach businesses nationally and globally.
Moreover, the state offers access to many skilled employees, courtesy of local educational institutions. Also, the South Carolina Community Development Division offers many programs and resources for new business owners.
So by all accounts, South Carolina is an ideal place to form your LLC.
Table of contents
- Step 1: Choose a business name for your LLC
- Step 2: Appoint a registered agent
- Step 3: File the South Carolina LLC articles of organization
- Step 4: Obtain an EIN (Employer Identification Number) from the IRS
- Step 5: Register with the South Carolina Department of Revenue
- Step 6: Prepare an LLC operating agreement
- Step 7: Open a South Carolina business bank account
Step 1: Choose a business name for your LLC
Choosing a company name is the first step in LLC formation in South Carolina.
South Carolina law has several specific naming requirements:
- The LLC’s name must include the words “Limited Liability Company” or “Limited Company” or any of its abbreviations (LLC, L.L.C., Ltd. Co., etc.).
- There can’t be any restricted words in the LLC’s name (i.e., bank, attorney, insurance) or any words that imply government affiliation like “treasury” or “federal” or “CIA.”
- The selected legal name must be available for use in the state and be different from other registered business names.
You can use the South Carolina Secretary of State’s business name search tool to determine whether a name is available.
If you’ve decided on a name and want to prevent any other legal entity from using it, you can file for name reservation with the SC SOS. It gives you an extension to figure out different aspects of company formation.
Name reservations are valid for up to 120 days and cost $10.
If you reserve a company name, it’s a good idea to secure a website domain as well. If you plan to make a business website (which is a must-do!), you’d want to own the same domain name.
It makes for cohesive branding. Plus, it helps customers easily find your business online.
Some small businesses use trade names, also called a DBA — doing business as a name.
Trade name registration makes sense when you:
- Have several brands under your company umbrella
- Couldn’t register a legal LLC name you’ve wanted to
- Transfer your LLC registration from another state
The cost of a fictitious (trade) name application in South Carolina is:
Foreign LLC business owners must file the Adopting a Fictitious Name form with a self-addressed stamped envelope plus a $2 state filing fee to:
Secretary of State
Attn: Corporate Filings
1205 Pendleton Street, Suite 525
Columbia, SC 29201
Or complete the application online.
Step 2: Appoint a registered agent
In South Carolina, every type of incorporated business must have a registered agent. LLCs are no exception.
A registered agent is an individual or business entity you appoint to receive legal documents on behalf of your LLC. The appointee must have a physical presence in the state (no P.O. boxes accepted) and be available during regular business hours in case of service of process.
Essentially, you have two options:
- Appoint an individual who lives in South Carolina (yourself included)
- Or hire a professional registered agent service provider
Serving as your own registered agent saves you money upfront. But there are several valid reasons why using a professional provider makes sense:
- You must include your registered agent’s contact information in your formation documents. So if you’re running a business from home, your home address becomes public. Bye, privacy — hello junk mail and unsolicited offers.
- Receiving service of process documents in front of your family, neighbors, or customers can be embarrassing. Likewise, there may be severe consequences if you miss an important legal document like a subpoena.
- If you move, you don’t have to worry about updating your address with the secretary of state and paying extra fees.
On average, annual registered agent services cost $49-$159. Note that this only includes fees paid to the service provider and not state filing fees.
Professional service providers can also renew your LLC registration with your state and provide company formation services like filing your articles of organization with the state. However, you can easily handle the latter yourself for less!
Step 3: File the South Carolina LLC articles of organization
Once you’ve decided on a name and appointed a registered agent for your LLC, you can file articles of organization with the South Carolina SOS. This document specifies:
- Your LLC’s legal name
- Registered address
- Lists of the LLC members (owners)
- Registered agent contact information
- Company management structure
The LLC management structure clause is important because it tells the state how your LLC will be operated. Some LLCs are managed by their owners, who are called members. Others elect to hire an external person instead of the members to manage the business.
Also, pay attention to clause 7. Choosing a limited liability company as your business structure protects personal assets from business debts and obligations. Unless a member has chosen to waive their liability protection, leave this section blank when you file articles of organization.
The cost to file articles of organization in South Carolina is $110. You can file by mail or save time by filing online. In this case, you can pay by debit/credit card and get same-day or next-day service along with an instant filing confirmation.
Step 4: Obtain an EIN (Employer Identification Number) from the IRS
LLC members will need to get an Employer Identification Number(EIN) from the IRS to handle federal taxes.
EIN is like the social security number for your business and will be needed to file federal income taxes and state taxes.
If you plan on having employees, your EIN is how the Internal Revenue Service will track your payroll taxes and employment activities.
As a single-member LLC without any payrolled employees, you can skip this step for now.
Obtaining an EIN is free and takes only a few minutes.
You’ll need to answer several questions about your business — the type of business structure, industry, state of incorporation, and contact information. Once done, you’ll get your EIN instantly online.
Step 5: Register with the South Carolina Department of Revenue
A business that operates a retail location in South Carolina must obtain a retail license (also known as use tax registration).
It applies to sales made online and doesn’t matter if you make 1 sale or 100 sales. If you have multiple retail locations, each location must have a separate retail license.
You’ll need to register with the South Carolina Department of Revenue on the MyDORWay portal as either a new South Carolina business or remote seller:
This registration also applies to any business that needs a local tax ID to report other state taxes.
Step 6: Prepare an LLC operating agreement
Whether you’re a single-member or multi-member LLC, you’ll want to create an operating agreement.
South Carolina, like most states, doesn’t require you to file an operating agreement with the secretary of state, but it’s highly recommended to have this document internally.
A company’s operating agreement lays out the baseline company management principles around:
- Adding and removing members
- Capital contribution
- Voting rights
- Managerial responsibilities
In case of a sale or dispute about corporate matters, the operating agreement decides how you’ll resolve disagreements among members.
The benefits are obvious for multi-member LLCs, but what if you’re a single-member LLC?
You may not need it now. But if you ever decide to add more members or become incapacitated, your operating agreement lets others know how to maintain your business while you’re unable to.
If you don’t have an operating agreement, any issues in your LLC will be decided according to South Carolina law, which may not be in your favor.
You can find many templates online to draft a simple operating agreement. As noted earlier, this is also something a professional service provider or corporate attorney can help you with.
Step 7: Open a South Carolina business bank account
Unlike a sole proprietorship, personal and business finance commingling is a big no-no. Doing so can result in the loss of personal liability protection the LLC grants you as an owner.
Thus, open a business bank account as soon as you get your articles of organization approved.
Banks tend to offer incentives to business owners like reduced monthly fees, interest earned on balances, or discounted lending.
Here are some local SC banks that offer small business bank accounts with account opening fees of $100 or less:
- Bank of America
- SC State Credit Union
- Bank of South Carolina
- First-Citizens Bank of South Carolina
Important LLC taxes, costs, and fees in SC
Compliance is key to maintaining a good standing for your LLC.
Unlike other states, South Carlina doesn’t require annual report filings for LLCs, reporting taxes as sole proprietorship or partnership.
However, if there were some changes to your company (e.g., registered agent details), you’ll need to file a respective form with the state and pay a filing fee.
Both types of entities are subject to paying a business license fee. The fee is progressive. To estimate your dues, you’ll have to multiply your total capital paid in surplus by 0.1%, then add $15. The minimum state fee is $25.
- C-corporations must submit the state tax form SC1120
- S-corporations must submit the state tax form SC1120S
During your first year, you’ll also have to submit the CL-1, the Initial Annual Report of Corporations. The Form CL-1 must be filed within 60 days of conducting business in the state.
Apart from the above, you should also verify compliance with other state tax requirements.
A business that has created a nexus with South Carolina for sales tax or income tax purposes must file the appropriate tax returns and pay any state taxes that are due.
LLCs doing business in South Carolina can create nexus with the state without physical presence.
That’s because the economic nexus goes beyond physical presence to include the number of transactions or value of assets that a business has in the state. These, in turn, create income tax nexus and tax liability.
In most cases, the nexus obligation relates to sales tax. Every SC business selling taxable goods or services in the state (or to state residents) must register with DOR for a local sales tax license. The statewide sales tax rate is 6%. But individual counties may charge an extra 1%.
Businesses with $15,000 or more in sales tax liability must file electronic sales tax returns. Failure to comply with tax filing requirements can result in hefty tax bills plus penalties, interest, and noncompliance with South Carolina laws.
To learn more about your tax obligations, check in with the South Carolina Department of Revenue.
South Carolina business permits and licenses
On a statewide level, South Carolina doesn’t require a blanket business license.
Instead, each city, state, and locality issue their business permits and licenses.
Your licensing requirements will depend on the location and industry you operate in. SC Business One Stop website has a chart explaining who needs a business license.
In most cases, companies in regulated industries (agriculture, food & beverages, finance, engineering, etc.) will require city permits.
Likewise, regulated professions such as accounting, engineering, and beauty services require service providers to possess a professional license. Online businesses and home-based businesses must also have a business license.
Pros and cons of opening an LLC in SC
As a small business-friendly state, South Carolina offers plenty of support to local business owners. But there are also some drawbacks to planting your corporate flag in this state.
- Articles of Organization can be filed same or next day
- No annual LLC renewals required
- Various local low-cost business banking options
- No minimal annual franchise taxes
- Extra compliance requirements for LLCs filing taxes as S-corp
- High business property tax rates
- No burgeoning tech startup scene
South Carolina LLC FAQs
Below are some of the most frequently asked questions (FAQs) about forming an LLC in South Carolina.