Startups have to make decisions that will have a long-lasting impact on their businesses. One of the most important ones would be the business entity structure. Choosing to form a South Carolina LLC will affect taxation and operations. It also determines how much of the owners’ personal assets will be at risk.
Advantages Of Forming A South Carolina LLC
The LLC combines aspects from a corporation and a partnership or sole proprietorship. It offers tax advantages similar to that of a partnership or sole proprietorship. At the same time, it provides asset protection like a corporation. That means the owners, who are called members, will not be held personally liable in case the company incurs debts or faces a lawsuit.
Here are some of the other benefits that LLCs in South Carolina offer:
- No Corporate Or Franchise Taxes – The state does not impose corporate and franchise taxes on LLCs. Members will only have to pay personal income taxes for the revenue they get from the company.
- Low Cost – Starting an LLC in South Carolina is affordable. The state does not levy startups with a lot of expenses. Unlike other states, it does not require the payment of an annual fee.
- Low Property Taxes – South Carolina is among the states with low property taxes. Its effective property tax rate averages 0.56%. That is well under the 1.1% national average.
- No Minutes Of Meetings – Unlike corporations, South Carolina LLCs do not have to follow strict corporate formalities. There is no need to keep formal and detailed minutes of meetings or resolutions.
South Carolina LLC Formation
The business formation process varies depending on the state where the company decides to organize its operations. That means there will be different requirements and fees.
In South Carolina, an LLC will have to file formal paperwork, pay filing fees, and ensure compliance with various state obligations. Here is a step-by-step guide that new entrepreneurs can follow to prevent any mistakes or issues:
Step 1: Choose a company name that abides by the state naming regulations.
Like other states, South Carolina has also set naming regulations that business entities need to follow. An LLC should include the phrase “Limited Liability Company” or “Limited Company” in its business name. The state also allows the use of an abbreviation like “LLC,” “L.L.C.,” “L.C.,” “LC,” or “Ltd. Co.”
Additionally, the company name needs to be unique. If another business entity has already registered a particular name with the Secretary of State, then it can not be used. It is important to check business name availability by searching on the business name database of the Secretary of State.
In some cases, a company may already have a business name but is not yet ready to proceed with the LLC formation process. The state allows the reservation of a name for 120 days. File an Application to Reserve a Limited Liability Company Name with the Corporations Division of the Secretary of State and pay the $25 filing fee.
LLCs are also allowed to use a name different from the one registered in the formation documents when it starts conducting business. That is called a fictitious name, assumed name, or doing business as (DBA). To do this, register a DBA with the county where the company is located and doing business. It is important to note that a company can only apply for a DBA once it has successfully registered the LLC with the state.
Step 2: Select a registered agent.
All LLCs in South Carolina have to have an agent for service of process or registered agent. They will be accepting and sending legal mail and government correspondence on behalf of the LLC. The registered agent can either be an individual or a third-party organization like DoMyLLC. However, they have to meet state qualifications.
For Individuals:
- The individual registered agent has to be a resident of South Carolina.
- They have to be at least 18 years old.
- They can be a member of the LLC.
- There should be a physical street address in the state for the registered office. A P.O. box will not be enough.
- The individual registered agent should be available at the registered office address during regular business hours.
For Commercial Registered Agents:
- The company should be authorized to do business in the state of South Carolina.
- The commercial registered agent needs to have a physical street address. A P.O. box will not suffice.
- There should always be someone available at the registered office address during regular business hours.
Step 3: File the completed Articles of Organization.
The creation of the LLC will be formalized through the submission of a completed Articles of Organization with the Secretary of State. The filing comes with a $110 fee. This can be done online or by mail. Mailed submissions should be addressed to:
South Carolina Secretary of State’s Office
Attn: Corporate Filings
1205 Pendleton Street, Suite 525
Columbia, South Carolina 29201
To complete the paperwork, the company will have to disclose the following pieces of information:
- LLC name
- Name and address of the registered agent
- Initial office address
- Management structure
- A list of the names and addresses of the managers if the company is manager-managed
- Duration or end date of the LLC if it will only last for a specific number of years
- Date of effectivity if not upon the filing of the Articles of Organization
- Names and addresses of the organizers
- Signature of all listed organizers
To better understand this paperwork, check out our article South Carolina Articles Of Organization: Important Things To Remember.
Step 4: Create an operating agreement.
South Carolina, like other states, does not require LLCs to have an operating agreement, but having one is advisable. This formation document is internal paperwork. It establishes how the LLC will be run. That means it includes details on procedures that the company has to follow in managing the business operations.
At the same time, it sets out the rights, powers, duties, and responsibilities of the LLC members and managers. With this, the company can prevent misunderstandings and disputes.
Additionally, an operating agreement can help in the preservation of the asset protection feature of the LLC structure. That is because it serves as proof that the company is a separate entity.
The following are some of the common things LLCs include in the operating agreement:
- Percentage interests of members in the LLC
- Rights and responsibilities of members and managers
- Voting powers of the members
- The allocation of profits and losses
- Rules for holding meetings
- How the company will take votes
- What will happen in case a member decides to sell their interest or if they become disabled or pass away
- The dissolution process
Step 5: Obtain an Employer Identification Number (EIN).
South Carolina LLCs with more than one member need to get an EIN from the Internal Revenue Service (IRS) for tax filing purposes. Meanwhile, an LLC with a sole owner may also need to obtain an EIN if it plans on hiring employees, opening a bank account under the company name, or electing to be taxed as a corporation. The application for an EIN can be done online or by mail and is free of charge.
Step 6: Get the necessary business licenses and permits.
Some LLCs in the state need to have additional business licenses or permits. These may have corresponding fees and reporting requirements. They may vary depending on the industry the LLC operates in, the location of its primary place of business, and the type of business activities it does.
Getting Expert Help
Starting a South Carolina LLC can provide many advantages. But it is important to know how to properly form one to prevent mishandling requirements that could lead to issues.
Forming a business comes with many responsibilities. A startup may find it hard to set aside time to handle the state business formation process. In that case, the best thing to do is to turn to a reliable business filing service company like DoMyLLC.
Our team of experts can streamline the whole ordeal and make the experience hassle-free. We can also serve as a registered agent. Contact us to find out more about our services.