There’s one big reason why South Carolina LLCs are comparatively easier to manage compared to other states. South Carolina doesn’t require LLCs to file an annual report, a requirement that most other states place on LLCs in their territory. The lack of annual filings is one of the reasons why many entrepreneurs now want to learn how to start an LLC in South Carolina. The process isn’t all that different, all it requires is some diligence so that everything is done correctly.
What Is a South Carolina LLC?
A Limited Liability Company or LLC in South Carolina is a business entity that protects the personal assets of the owner from the debts and liabilities of their business. There can be one or more members in an LLC. This business structure is also tax efficient as the income flows through to the owner who then reports it on their tax returns. The entire process of incorporating an LLC in South Carolina doesn’t take more than a few days.
What to Consider Before Forming an LLC in South Carolina?
Before you begin the LLC formation process, you must have clarity on the type of business that you want to do. Start by creating a business plan that highlights the opportunities in the market. It must also include your customer research and insights on potential competitors. This will not only ensure that you hit the ground running but also provide clarity as to why an LLC is the right structure for your business.
How to Start an LLC in South Carolina in 8 Steps
Being diligent in this process means following a good plan so that everything is done correctly. By following these steps, you can be sure that your LLC is set up as it should be and that your business won’t face any problems in the future.
Step 1: Decide on a Business Name
You’ll already know what you want to call the business. Before you start filing the paperwork, check the business name availability online. If someone is already using it or has a trademark on it, you’ll need to come up with another one, since you can’t have the same business name as someone else. Try to come up with a unique name that’s easily distinguishable and makes your business stand out from the competition.
Whatever name you end up choosing, it will need to have the LLC abbreviation or Limited Liability Company at the end. You also have the option to use a DBA or fictitious name if you want the trading name to be different.
Step 2: Choose a Registered Agent
South Carolina requires businesses in the state to have a registered agent. This can be an individual or entity that’s available during normal business hours at a physical address to accept legal documents and the service of process. You can be your own registered agent if you meet these requirements.
If you’re based elsewhere, you’ll need to designate a South Carolina registered agent who will accept these documents on your behalf. The agent service will then be responsible for ensuring that you receive these documents.
Step 3: Prepare and File LLC Articles of Organization
You can’t incorporate an LLC without the Articles of Organization, such is the importance of this legal document. It provides all the necessary information about the business, such as its name, address, names of its members, and more.
The document is then filed with the Secretary of State so that the LLC can become a legal entity that’s separate from its owners. It’s this separation between the two that provides the owners with liability protection for their personal assets.
Step 4: Draft an LLC Operating Agreement
To bring structure to the LLC’s management, you’ll need to create an operating agreement. This is a legal document that lists the rights, responsibilities, and operating procedures of the business entity. Think of it as a contract between the members that governs the internal affairs of the business. This typically includes the distribution of profits and losses, decision-making and dispute resolution mechanisms, etc.
What’s Next After Filing an LLC in South Carolina?
After you’ve filed for an LLC, some additional steps need to be completed so that the LLC can be fully compliant with applicable regulations. These steps are highlighted below:
Step 5: Apply for EIN
The Employer Identification Number or EIN is a nine-digit number that’s unique to every business. The IRS relies on these numbers to identify businesses for taxes. Even if you have multiple LLCs, you’ll need a separate EIN for each one, since it’s not possible to have multiple LLCs under one EIN.
You’ll need the EIN for filing taxes and opening a business bank account. You’ll find it on the confirmation letter once the IRS has approved your application. You can also recover a lost EIN by reaching out to the IRS or finding the confirmation letter.
Step 6: Open a Business Bank Account
You must open a separate bank account for your business. Don’t use a personal account for business purposes. This will ensure clarity for all business transactions and also make things simpler come tax season. As for what you need to open a business bank account, you’ll typically be asked for the business formation documents, and your ID and EIN. Some banks may ask for additional documentation.
You can choose from the different accounts that banks offer for businesses. Ask them questions about fees and additional services to figure out which option might be best for the unique needs of your business. Accounts are generally opened on the same day.
Step 7: Obtain Licenses or Permits
Most states will have some licensing or permit requirements for business and it’s the same story in South Carolina. Start by asking other people in the industry what the requirements are. You can also search the state’s website for information about licensing and permits.
Depending on the kind of business you’re running, you may also be required to obtain a federal license. The EIN is already a prerequisite for all businesses. Make sure that you obtain these permits before starting to offer services as you wouldn’t want to be penalized for conducting business without the appropriate license.
Step: 8: Get Business Insurance
Like many other states, South Carolina requires businesses to have workers’ compensation insurance if they have four or more employees. Consider other types of LLC business insurance as well, such as general liability insurance, which will protect your business from most claims. Maintaining adequate insurance coverage will ensure that any claim resulting from a workplace incident won’t end up financially damaging your business.
2 Types of LLCs to Consider in South Carolina
You can choose from different types of LLCs to incorporate in South Carolina. Each has its own set of advantages and disadvantages. They’re highlighted below so you can see what suits your business best and make the right decision.
As the name suggests, a single-member LLC has one owner who is solely responsible for the management of the business. It’s easy to set up with minimal paperwork and South Carolina doesn’t require an annual report filing. They’re best for those who want the flexibility of a sole proprietorship with the asset protection of an LLC.
They’re also pass-through entities for tax, so owners will report the income on their personal returns. Avenues for collaboration are limited with single-member LLCs and it’s difficult to raise funds from outside investors.
Multi-member LLCs operate much in the same way as single-member LLCs do. The only difference is that it has two or more members. This is an effective business entity for multiple people who want to start a business together.
All of them enjoy similar liability protection and it’s up to them to decide the equity shares and how the profits and losses will be distributed.
Experience Hasslefree LLC Formation in South Carolina
If you’re interested in forming a South Carolina LLC because it doesn’t require annual report filing or simply want to expand your business to the state, the options highlighted above are your best bets for establishing a foothold in the state.
Fortunately, you don’t need to figure out the entire process yourself. By simply relying on doola’s LLC formation service, you can get an LLC up and running in South Carolina, so that your business can hit the ground quickly.
Why should I file an LLC in South Carolina?
You should file an LLC in South Carolina because, unlike most other states, it doesn’t require LLCs to file an annual report, thus removing one major compliance requirement for business owners.
How long does it take to get an LLC in South Carolina?
After the Articles of Organization have been filed with the Secretary of State, it typically doesn’t take more than a few days for an LLC to be incorporated in South Carolina.
How much does an LLC cost in South Carolina?
The state fee for setting up an LLC in South Carolina is $110. It’s possible to file for the LLC online or you can submit the required documents to the Secretary of State via mail.
How is an LLC taxed in South Carolina?
An LLC is taxed as a pass-through entity in South Carolina. This means that the business itself doesn’t pay any taxes. The profits flow through to the owner who is required to pay taxes on them through their personal returns.
Can I change the name of my LLC in South Carolina after it’s formed?
Yes, you can change the name of an LLC in South Carolina after it’s formed. This will require you to file for the Amended Articles of Organization form with the Secretary of State and pay the state fee of $125.
Can an LLC in South Carolina be taxed as an S-Corporation?
It’s possible for an LLC in South Carolina to elect to be taxed as an S-Corporation. File Form 2553 with the Internal Revenue Service and once approved, your LLC can be taxed as an S-Corporation, thus potentially driving tax benefits as a result of this election.
Do I need to have a physical office for my LLC in South Carolina?
A physical office is required for your LLC in South Carolina if you’re the designated registered agent. If you’re using an agent service, you can operate a business in South Carolina without having a physical office in the state.
Can I dissolve or close my LLC in South Carolina if I no longer need it?
Dissolving an LLC in South Carolina requires the Articles of Termination with the Secretary of State and paying a $10 fee. The process doesn’t take more than a couple of days and the business entity is wound up.