Whether you're an experienced business owner or new to the entrepreneurial world, understanding how to navigate starting a Limited Liability Company (LLC) is crucial. This guide will walk you through the steps of starting an LLC in South Carolina, from choosing a business name to weighing the costs and advantages. Forming an LLC in the Palmetto State opens up an exciting new chapter for entrepreneurs.
As we walk through the specifics of starting a business, remember that starting an LLC is more than legal documents - it's a vehicle for building a successful, sustainable company.
How to start an LLC in South Carolina in 7 steps
01. Pick your business name
When starting a business in South Carolina, you should begin by selecting a name for your LLC. This isn't just a creative process, it's a legal must too. Your business name should be unique and must not be the same as or too similar to other names on record with the South Carolina Secretary of State. Make sure your chosen name ends with "LLC," "L.L.C.," or "Limited Liability Company" to meet state requirements.
Here's how you can make your business name stand out and meet all legal requirements:
Use the South Carolina Secretary of State's online database to search for existing business names.
Avoid restricted words that could confuse your LLC with a government agency (e.g., FBI, Treasury).
Also check domain availability if you plan to also focus on creating a website, which can be easily done through platforms like Wix.
Tip: If you need help coming up with a unique name for your business, consider using an online business name generator.
02. Choose your registered agent
Every LLC in South Carolina must have a registered agent, an individual or company that agrees to accept legal papers on behalf of your LLC. Your registered agent must be available during regular business hours and have a physical address in South Carolina.
Need help setting up your LLC? Wix has partnered with LegalZoom, the No. 1 choice for online business formation to help you start, run and grow your business.
03. Obtain state business permits
Depending on the nature of your business, you may need specific permits or licenses to operate legally in South Carolina. These could range from general business licenses to industry-specific permits.
To obtain the necessary permits in order to register your business, check with local and state agencies to determine what permits you need. Fill out all required paperwork accurately and submit them to the appropriate authorities. Then be prepared to pay any associated fees for obtaining your permits.
Learn more: How to get a business license
04. File Articles of Organization
The Articles of Organization is a crucial document that officially establishes your LLC in South Carolina. You'll need to file it with the South Carolina Secretary of State, either online or by mail and include the required filing fee.
Filing involves the following:
Gathering and submitting details like your LLC's name, registered agent information and management structure.
Fill out Form 203: This is the specific form used for filing an LLC's Articles of Organization in South Carolina.
Complete the submission process by paying the necessary fee. This is $125 to file an LLC online or $110 by mail.
05. Draft your LLC operating agreement
While not legally required in South Carolina, creating an operating agreement is highly recommended. This internal document outlines ownership structures, member roles and operational procedures for your type of business.
Here’s why an operating agreement is important:
Clarifies business rules and guidelines: It sets clear expectations for members regarding operations and conflict resolution.
Protects LLC status: Helps maintain limited liability status by proving that your LLC is a separate business entity.
Prevents misunderstandings: Reduces potential disputes among members by detailing policies and procedures for how the business should be run.
06. Apply for an EIN and pay relevant taxes
An Employer Identification Number (EIN) functions like a social security number for your LLC. It’s necessary for hiring employees, opening bank accounts and filing taxes. To apply for one you'll need to:
Apply online or via mail: The IRS provides free EIN registration through their website or via mail submission.
Understand your business tax obligations: Learn about state-specific taxes that apply to your LLC, such as franchise tax or sales tax. In South Carolina for an LLC owner this means a 15.3% self-employed tax (12.4% social security, 2.9% Medicare). For more information, visit the South Carolina Comptroller's Office website.
07. Organize annual reports
In some states, annual reports are mandatory filings that keep your company's information up-to-date with the state government. If your LLC is taxed as a sole proprietorship or a partnership, it's exempt from the annual report requirement in South Carolina.
How much does it cost to start an LLC in South Carolina?
When forming an LLC in South Carolina, it's critical to budget for the numerous expenses. These costs might vary based on the intricacy of your organization and any extra services you might require. The following is a summary of the average costs associated with forming an LLC in South Carolina.
The primary fees for forming an LLC in South Carolina
Filing fee for Articles of Organization: The state of South Carolina requires a non-refundable fee to file your Articles of Organization. This is one of the primary costs you'll incur. For an LLC it costs $110.
Registered agent fee: If you choose to hire a professional registered agent, they will charge a service fee. This fee varies depending on the agent or service company you select.
Business permits and licenses: The cost for permits and licenses can vary widely depending on the type of business you're starting and the specific regulations in your industry.
Operating agreement costs: If you use legal services or software to help draft your LLC Operating Agreement, there may be associated costs.
EIN registration: Obtaining an EIN from the IRS is free of charge.
State Business Taxes: Depending on your business operations, you may need to pay state taxes, such as sales tax or employer taxes.
Additional costs may include:
Legal or financial consulting fees: If you seek professional advice during the formation process, these services will add to your startup costs.
Domain registration and website creation: Establishing an online presence via a website is crucial in today's market. Costs here include domain registration and potentially hiring a web designer or using a website builder like Wix.
Business insurance: Depending on your industry, you might need various types of insurance to protect your LLC.
Learn more: How much does it cost to start an LLC
Who can start an LLC in South Carolina
In South Carolina, almost anyone can start an LLC, but there are a few eligibility criteria you need to meet. Here's what you should know about who can form an LLC in the Palmetto State.
Age requirement
You must be at least 18 years old to form an LLC in South Carolina.
Residency
There is no residency requirement to start an LLC in South Carolina. You don't have to live in the state or even in the United States to form an LLC here.
Legal status
Individuals, including non-U.S. citizens and people without permanent residency, can form an LLC as long as they have a valid visa that allows them to engage in business activities in the U.S.
Number of members
South Carolina allows for single-member LLCs as well as multi-member LLCs. There is no maximum number of members.
Business purpose
Your LLC must be formed for a lawful business purpose. South Carolina does not allow formation of LLCs for illegal activities.
Benefits of starting an LLC in South Carolina
Forming an LLC in South Carolina has a number of benefits that may appeal to business owners. These advantages vary from legal protection to tax breaks, making it a popular choice among many entrepreneurs.
Learn more: Benefits of an LLC
Limited liability protection
As the name suggests, an LLC provides its owners with limited liability. This means your personal assets will be protected if your business faces lawsuits or debts.
“A limited liability company—or LLC—is a type of business entity that offers some of the benefits of a corporation with less formality. One key benefit of an LLC is that it can protect a small business owner’s personal assets—like homes, cars and personal bank accounts—from lawsuits against the business.” Shylene D’Addario, VP and associate general counsel at LegalZoom
Pass-through taxation
LLCs often benefit from pass-through taxation where profits are only taxed once on the members' personal tax returns, avoiding the double taxation faced by C Corporations.
Flexibility in management
Unlike corporations, LLCs have a flexible management structure that doesn't require a board of directors or annual meetings.
Ease of formation and compliance
Forming an LLC in South Carolina is relatively straightforward, with fewer formalities and compliance requirements compared to other entities like corporations.
Credibility with customers and partners
Having 'LLC' after your business name can enhance your credibility with potential customers, suppliers and financial institutions. You can then choose an .llc domain for your website to reinforce this credibility.
Disadvantages of starting an LLC in South Carolina
While creating an LLC in South Carolina offers several advantages, it is also vital to examine the possible drawbacks. Being aware of these disadvantages will allow you to make an educated choice about whether an LLC is the best structure for your business.
Here are some issues you may encounter with an LLC in South Carolina:
Limited growth potential
Since an LLC can't issue shares of stock like a corporation, it may be harder to attract investors and raise capital.
Self-employment taxes
Members of an LLC may be subject to self-employment taxes on their share of the profits.
State fees and regulations
There are annual report filing requirements and fees that must be maintained to keep the LLC in good standing.
Transferability of ownership
Transferring ownership interests in an LLC can be more complex than with a corporation.
Variability by state
The rules governing LLCs can vary significantly from state to state, which might complicate interstate business operations.
Why start an LLC over another business entity in South Carolina?
Choosing the right business structure is crucial and many entrepreneurs find that forming an LLC in South Carolina offers several advantages over other types of business entities. Here's why an LLC might be the best choice for your business:
Sole proprietorship: Unlike a sole proprietorship, an LLC provides personal asset protection, separating your personal liabilities from those of your business.
Partnership: An LLC offers more protection for each member compared to a partnership, where each partner can be personally liable for the debts of the business.
Corporation: While corporations also provide limited liability protection, they’re also subject to double taxation (taxes on both corporate profits and shareholder dividends). An LLC avoids this with pass-through taxation.
LLCs also offer these unique advantages:
Operational flexibility: Corporations are required to have a formal structure with directors and officers, while an LLC can be managed by its members or managers, providing greater operational flexibility.
Fewer record-keeping requirements: An LLC has less stringent requirements for record-keeping and reporting compared to a corporation.
Profit distribution flexibility: Profits in an LLC can be distributed in any manner agreed upon by the members, unlike corporations that distribute profits according to the number and type of shares held.
You've formed your LLC in South Carolina, now what?
After successfully incorporating an LLC in South Carolina, the process of building and growing your firm begins. Here are some of the steps you should take to ensure that your LLC runs efficiently and in compliance with state rules.
Here are some next steps to consider after incorporating your LLC:
Open a business bank account
Keep your personal and business finances separate by opening a dedicated bank account for your LLC. This will simplify accounting and tax filing and help maintain your liability protection.
Obtain business insurance
Protect your LLC with the appropriate insurance policies. Common options include general liability insurance, professional liability insurance and property insurance.
For example, if you’re looking to start a lawn care business in the state you’ll need to consider general liability insurance, professional liability insurance, workers’ compensation insurance, tools and equipment insurance and potentially commercial property insurance too.
Stay compliant with state regulations
Ensure you file any required annual reports with the South Carolina Secretary of State and renew any permits or licenses as needed.
Additionally, focus on these areas to manage and grow your LLC:
Understand ongoing compliance requirements: Familiarize yourself with any annual filings or fees required by the state of South Carolina to keep your LLC in good standing.
Develop a strong brand identity: Create a logo with a logo maker, establish a clear and unique brand voice and build a professional website to present a distinct image to customers.
Implement a good accounting system: Good financial management is essential for any business. Set up an accounting system that allows you to track expenses, profits and financial growth accurately.
For more information on how to start an LLC by state
How to start an LLC in South Carolina FAQ
How long does it take to form an LLC in South Carolina?
The time it takes to form an LLC in South Carolina can vary. Online filings may be processed quicker, often within a few business days, while mailed applications can take several weeks.