Definition

What is an LLC?

A Limited Liability Company (LLC) is a type of business entity that combines the liability protections of a corporation with the tax benefits and flexibility of a partnership. The owners, known as members, are not personally liable for company obligations, and have the potential to allocate profits and losses more flexibly than if they formed another kind of business entity. 

LLCs provide entrepreneurs with different levels of protection and taxation options tailored to their specific needs. Additionally, they do not need to meet the same formalities as corporations regarding meetings, record keeping, and decision-making processes. A lot of startups and small businesses prefer forming one because of this.

Advantages

What Are The Advantages Of An LLC In SC?

Starting an LLC in South Carolina can provide you with several advantages. From pass-through taxation to limited liability and legal identity, we will look at the most important benefits of forming an LLC in South Carolina.

Disadvantages

What Are The Disadvantages Of An LLC In South Carolina?

A Limited Liability Company is a business structure that provides limited legal protection to its owners, making it attractive to those who want to start their own business. However, there are some drawbacks to starting one that you should consider before taking the plunge. Let’s take a look at what some of those disadvantages are.

LLC Formation

How To Create An LLC In South Carolina

If you are considering setting up an LLC in SC, it is important to understand all the steps necessary for its formation. Here is a complete breakdown of the LLC formation process in the state:

1. Choose a name for your LLC
2. Reserve your business name
3. Hire a Registered Agent
4. File an Article of Organization
5. Create an Operating Agreement

Choose a name for your LLC

Naming is an important step in setting up any new business. The right name can help your LLC stand out and create a strong, memorable brand. Here are some guidelines to remember when you choose a name for your LLC in South Carolina:

• Your LLC name must contain the words “limited liability company,” “LLC,” or some other variation.
• You can use abbreviations to make the name more concise, such as “LLC” or “Ltd.”
• The LLC name must be distinguishable from any other registered business name in SC.
• Use keywords that describe your business, such as the type of product or service you provide. This will help customers easily identify your business.
• Avoid names that are too long or hard to remember, and don’t choose names that have some government restrictions or are offensive.
• Consider registering a domain name that matches your LLC name to protect your brand and make it easier for customers to find you online.

Reserve your business name

To safeguard your chosen business name from being claimed by others, reserve it. In South Carolina, you can reserve an LLC name for a period of 120 days. This can be done by filing an application with the Secretary of State. The fee for reserving a name is $25.

Getting a DBA

If you’re looking to operate your LLC in South Carolina under a name other than its official one, registering for a DBA, or “Doing Business As,” is the way to go. Each county has its own process, which can be initiated through the County Clerk’s office.

Hire a Registered Agent

The second step to forming an LLC in SC is to designate a registered agent for the company. This knowledgeable professional plays a vital role in safeguarding the interests of business owners and ensuring compliance with legal requirements. They are responsible for accepting legal documents and service of process on behalf of your LLC. This means they will receive important legal notices, lawsuits, and other official documents on behalf of your business.

The registered agent must have a physical address located in South Carolina and be available during regular business hours to receive all government forms and legal and tax documents on behalf of the LLC. Choosing a dependable registered agent ensures that these important communications are received promptly and that your company remains compliant.

File an Article of Organization

Once you have completed the necessary paperwork and gathered the required information, the next step in starting your South Carolina LLC is to file the Articles of Organization. This document outlines all essential details about your business, such as the LLC’s name, duration, purpose, principal office address, registered office address, and information about any appointed managers. Make sure that all the information provided in the documents is accurate and complete to prevent unnecessary fees and other complications down the road. 

Filing these documents with the Secretary of State costs $110 and can be done online or by mail. It’s important to remember that the state does not offer expedited filings, so it’s best to plan when starting the process. After submission, you can check your status on their website.

Create an Operating Agreement

While it isn’t mandatory to do so, we highly recommend drafting an Operating Agreement in South Carolina. This document serves as a guidebook for all LLC members, outlining their roles, responsibilities, and the overall structure of the business. It covers crucial aspects such as capital contributions, profit and loss allocation, decision-making processes, and member rights and obligations. 

This can help you solidify your expectations, steer clear of disputes, and provide clarity for everyone involved with the company. Plus, it may also prove useful if you decide to run a business bank account or seek financial assistance from a lender at some point.

Obtain an EIN

An Employer Identification Number (EIN) is used to identify the LLC to the IRS for federal tax filing and reporting purposes. It is also used to set up a business bank account with financial institutions, apply for required state licenses, and other services that require verification of the legal entity’s status. 

The process of applying for an EIN is quick and easy. Just fill out the online SS-4 form from the IRS, and you should obtain your number in minutes.

Formation of a Foreign LLC In SC

Need to conduct business in South Carolina even though you’re not a local? Foreign entities must file an application for a Certificate of Authority with the Secretary of State to do so. Accompany your application with a valid certificate from your foreign state, such as a Certificate of Good Standing or Certificate of Existence, and pay the $110 registration fee. 

If you plan to conduct business outside of South Carolina with your LLC, you will need to go through the process of Foreign Qualification or obtaining a Certificate of Authority and/or Compliance. This allows your South Carolina LLC to legally operate in other states. You may also be required to complete an application and pay filing fees. However, you must contact your state government entity administering businesses (often the Secretary) for the specific guidelines.

For additional requirements specific to South Carolina, your state, and the industry you belong to, contact the SC Secretary of State directly.

Types of LLC

Which type of LLC is ideal for me?

Starting a new business is a thrilling experience, and choosing the right type of LLC is a crucial decision. In South Carolina, there are several types of LLCs you can form, depending on your specific needs and preferences. Here’s a brief overview of your options:

1. Single-Member LLC: If you’re a solo entrepreneur, a single-member LLC can be a perfect fit. With this structure, you’ll be the only owner and decision-maker for your business. This setup offers personal asset protection and simplified tax filing since you can report your income and expenses on your personal tax return.
2. Multi-Member LLC: A multi-member LLC is a great choice if you plan to have multiple owners or partners in your business. This structure allows for more flexibility in management and decision-making. You’ll need to create an operating agreement that outlines how the LLC will be managed and how profits and losses will be allocated among members. Keep in mind that each member will be responsible for paying taxes on their share of the profits.
3. Manager-Managed LLC: In a manager-managed LLC, the members appoint one or more managers to handle the daily operations and decision-making for the business. The managers can be members themselves or external hires. This structure can be helpful if the members want to be less involved in daily operations or if the business requires specialized knowledge or experience.
4. Member-Managed LLC: Unlike the manager-managed LLC, a member-managed LLC involves all members actively participating in the daily operations and decision-making of the company. This can be a suitable option if you want a more collaborative approach to running your business.

While South Carolina doesn’t have a Series LLC option like some other states, the available LLC types should cover most business needs. As you choose the right type of LLC for your business, consider factors like the size of your operation, the number of members involved, and your desired level of management involvement. It’s always a good idea to consult with legal and financial professionals to help you make the best decision for your specific situation.

LLC Taxes

How Are South Carolina LLCs Taxed?

Every business is mandated by the IRS to pay taxes. It just depends on the type of business entity you have and other factors. Here’s a brief overview of the taxes you may encounter as an LLC operating in South Carolina.

Income Tax

As a business owner in SC, you must pay income tax. The state applies standard tax rates to determine the amount of tax you owe. However, there are certain allowances and deductions available that can help reduce your tax liability. South Carolina has a range of progressive tax rates, from 0% to 7%, that apply to different income brackets.  Additionally, if you have employees in your business, they will also be subject to taxation based on their earnings.

Sale & Use Tax 

You are responsible for collecting sales tax at the time of purchase from your customers. The current statewide sales tax rate in South Carolina is 6%, but don’t forget that local tax rates may also apply. Some counties may have authorized an additional 1% tax on revenue, which would be applicable in those areas.

Self Employment Tax

LLC members and managers must pay self-employment tax administered by FICA. This covers Social Security, Medicare, and other benefits at a rate of 15.3%. This tax is designed to ensure that self-employed individuals, including members and managers of LLCs, contribute to social insurance programs.

Costs

Costs Of Forming an LLC In South Carolina

Starting an LLC in South Carolina begins with filing the Articles of Organization to the Secretary of State. To initiate the process of starting a business in South Carolina, there is a fee of $125. This fee includes an initial cost of $110, along with an additional $15 fee for electronic records access.

Here’s a quick breakdown of the most pertinent costs:

One-Time 

• Formation Fee for State: $110
• Reserve Business Name: $25

Annually 

• Registered Agent Cost: $100-$300

Quarterly  

• Registered Agent Cost: $100-$300

LLCs taxed as corporations (an option for businesses generating bigger profits) must submit form SC1120 (C-corps) or SC1120S (S-corps), along with a license fee, by April 15th of each fiscal year. This licensing fee is calculated based on 0.1% of the LLC’s capital and paid in surplus plus $15. The minimum amount due cannot be less than $25. 

Additionally, remember that certain licenses and permits are required by the state, which means added fees for their processing.

Starting A Business

Starting a Business In South Carolina

There is no shortage of exciting options for those looking to start their own business in SC. From the booming tech industry to the growing hospitality sector, starting a business in South Carolina provides every entrepreneur with endless opportunities for success. Let’s look at some of the top business options.

Technology 

With its low cost of living, entrepreneurial tax credits, and access to capital, South Carolina is an ideal place for entrepreneurs looking to start a successful tech company. The state is also home to several world-class research facilities and universities producing cutting-edge technology solutions and innovative startups. 

SC even has a growing network of venture capital firms, angel investors, and funding programs that are keen on supporting promising tech ventures. All of these factors create a fertile ground for innovation, collaboration, and entrepreneurial success in the dynamic field of technology.

Hospitality 

The hospitality industry has long been one of the main drivers of economic growth in South Carolina. With its stunning beaches, beautiful mountains, and expansive forests, there are plenty of opportunities for people to get involved in this burgeoning sector. Whether it’s providing accommodations, dining experiences, or recreational services, the local hospitality industry offers a wide range of possibilities for individuals looking to capitalize on the state’s natural splendor and tourism appeal.

Manufacturing 

South Carolina has become a hub for manufacturing over the past few decades as more companies move their operations into the state due to its competitive tax environment and proximity to major markets like Charlotte and Atlanta. There are plenty of opportunities for entrepreneurs who want to take advantage of this trend by launching their own manufacturing businesses. 

Comparisons

Is LLC The Best Entity For Me?

Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.

FAQ

Frequently Asked Questions About Starting An LLC In South Carolina

Here are the most commonly asked questions about forming an LLC business in the state of South Carolina: