With its warm climate and welcoming people, South Carolina is a popular tourist destination as well as a growing economic center in the Southeast. There are lots of opportunities here to form all kinds of businesses, and an LLC is a great choice for anyone looking to start their first company.
Once you’ve decided to form an LLC, you’ll find that there’s no shortage of tips on the Internet about how to do it. It can be hard to tell what rules you need to follow. That’s why we’re here — to strip away the confusing stuff you don’t need and distill the process into simple, easy-to-follow steps.
In this article, you’ll find all the tools you need to start an LLC in South Carolina, including:
- Tips on drafting and filing the documents you need for your South Carolina LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
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Step 1: Name your South Carolina LLC
Before you can form your LLC, you need to think of a good name. That process is controlled to an extent by South Carolina law.
Words You Have to Use
South Carolina Code section 33-44-105 requires your LLC to have the words “limited liability company” or “limited company” in its name. These phrases can be abbreviated to “LLC” or “LC.” You can also shorten “limited” to “ltd.” and “company” to “co.” if you like.
Your company’s name must also have enough words to be “distinguishable” from the name of every other company doing business in the state. For example, let’s say you want to open a shop called “Beachside Seashells, LLC.” Upon doing a business entity search, you find a corporation named “Beachside Seashells, Inc.”
In this case, your proposed name is too similar to that of the existing company to get approved. So, you need to add words that will distinguish your business. Here, it would probably work if you changed your name to “Myrtle Beachside Seashells, LLC.”
Words You Can’t Use
As in other states, you can’t name your LLC something that implies your LLC is a different kind of company. For example, you can’t use words like “corporation” or “partnership” in an LLC’s name.
You also can’t give your company a name that will lead the public to believe that it is a governmental entity. “Federal Tax Office, LLC” or “United States Central Intelligence, LLC,” would probably be disallowed on that basis.
South Carolina Code section 34-3-10 also prevents you from using the words “bank” or banking in your company name unless you are a legally formed bank in the state.
On a similar note, if your business name implies that you need a license to operate (e.g., “law firm” or “barbershop”), you should probably check with the state agency that regulates that business. They will tell you what words you can and cannot use for the type of business they oversee.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
Research the LLC Name You Want
Now that you have a good idea of what name you’d like your company to have, you need to research to make sure that name isn’t yet taken. To that end, the South Carolina Secretary of State offers a free online Business Name Search.
You can use this search to explore different words and combinations to find something that will be unique enough to be approved by the South Carolina Secretary of State.
Get a Matching Domain
Once you settle on an LLC name, we recommend you get a matching domain, even if you don’t have immediate plans for a website.
Competitors can buy your perfect domain and its variations to block you from using them.
Domain squatters sift through public records of newly registered LLCs and will buy their matching URLs, only to relist them with huge markups.
A domain name from GoDaddy.com or a similar registrar will cost you between $20 and $50 per year, with regular specials and sales where you can get large discounts.
It pays to check now.
Once you have your domain name, you can also create a branded email address through GoDaddy.
South Carolina DBA: Using a Fictitious Business Name
Once you’ve researched LLC names and found one that fits the rules, you may discover that you didn’t quite get the name you wanted. Or, maybe you’ve already gone into business, and you need to tweak your LLC’s name a bit so that it isn’t confused with a competitor.
These problems come up fairly often, and there is a simple solution for them. You can get a fictitious business name for your LLC, also known as a “doing business as” name (DBA). Though this is a very common procedure, it is a bit different in South Carolina than it is in other states.
The South Carolina Secretary of State does not keep a registry of DBA names. That means that you must go to the city or county governments of the places where you do business and, when you register for a business license, indicate the business name you will be using with the public.
This process will be a little different between the various local governments. For example, see Richland County’s guidance on DBAs here.
Step 2: Appoint a Registered Agent for your LLC
South Carolina Code section 33-44-108 requires your LLC to have a registered agent and office in the state. A registered agent is your LLC’s point of contact with the public. They receive correspondence and service of process for your LLC.
Service of process is a legal term for business letters or legal papers. In other words, your agent is there for the state or the public to communicate with you.
Though your registered office can be the same as your place of business, it doesn’t have to be.
If your LLC is sued, your South Carolina registered agent is the fastest and most reliable way for you to find out. The agent and office are listed on the Secretary of State’s website for this purpose.
If a person filing a lawsuit can’t find your agent, they can try to serve you in other ways, but there is a risk that you might not learn about the suit until it is too late. In that case, you could lose the lawsuit by default judgment. (A default judgment happens when you lose because you didn’t answer.)
The law gives you options about whom you can appoint as your agent. You can name any business in the state as your agent. Any South Carolina Resident at your registered office can also be your agent.
Of course, this means that you can also be your LLC’s agent if you choose. Just because you can, though, doesn’t mean you should.
Hiring a company is a better move. A registered agent company lets your LLC use the company’s address for its registered office. The agent then gets your important letters and service of process and passes it on to you.
You might be thinking that the job doesn’t sound hard enough to justify hiring someone else. Being your own agent can be tempting for a few reasons:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Those are solid points. But there are also a lot of reasons not to do it yourself:
- No privacy: Your name and address will be published on the Secretary of State’s website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your agency address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Registered agent companies are an easy way to avoid these issues. They aren’t pricey, either. They usually cost around $100 per year. Their name and address, not yours, are listed on the Internet. Depend on your agent to make sure you don’t miss anything. That way, you can focus on your business.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
A professional service can also help if your LLC will do business in multiple states and you need to register as a foreign LLC. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your South Carolina LLC Articles of Organization
The biggest step in forming your LLC is filing its articles of organization. Your articles are the birth certificate for your company. Under South Carolina Code section 33-44-202, your LLC doesn’t exist until you deliver these articles to the Secretary of State for filing.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my South Carolina Articles of Organization?
South Carolina Code section 33-44-203 requires the following things in your articles:
- Your LLC’s name
- The LLC’s designated office
- The name and address of the LLC’s registered agent
- The name and address of each person organizing the LLC (usually the members, but it may include someone like your lawyer)
- Whether the LLC will end after a certain amount of time, and if so, when
- Whether the LLC will be managed by its members or a non-member manager
- If the LLC is managed by a non-member manager, the name and address of that person
- Whether any of the LLC members have agreed to be liable for the debts and obligations of the LLC
The statute also allows you to set forth other items in the articles, as long as they otherwise comply with state law. If you like, you can also include things that would normally go in an operating agreement. As we will explain in Step 4 below, though, it is not a good idea to put operating agreement items in your articles.
If you want to keep things as simple as possible, you can download a form for your articles of organization, or file an online form, from the Secretary of State’s website.
South Carolina LLC Filing Fee
The fee schedule on the Secretary of State’s website quotes a filing fee of $110.
Read More: How Much Does It Cost to Form an LLC in South Carolina
South Carolina LLC Processing Time
If you mail your articles for filing, the Secretary of State estimates that your filing will be processed two to three business days after it is received. That means that mail filing can take a week or longer to complete.
If you file your articles online, you can usually get same-day or next-day service. For this reason, expedited service is unnecessary in South Carolina.
Step 4: Draft your South Carolina LLC Operating Agreement
Operating agreements are contracts between you and the other members of your LLC.
You are not legally required to have an operating agreement for your LLC, but it’s a good idea. A contract stating your company’s rules is important when you have business disputes, new people want to join your company, or something else unexpected happens.
Your operating agreement should have all the key facts about the LLC. For example, your company might have multiple members, each with a different job. The operating agreement says what’s expected of each person and what happens if they fail to do their job.
South Carolina’s operating agreement statute (section 33-44-103) is fairly broad. It says that, with some specific exceptions, you can use the contract to handle the following things for your LLC:
- How the business should be run
- How the contracts and other affairs of the LLC should be managed
- The relationships between the LLC members, managers, and the company itself
These broad principles are usually expressed by operating agreements in a few concrete ways:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- They say what the manager has the right to do. Managers also have special duties to the company and the members. The operating agreement should state these.
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
As we mentioned in Step 3 above, South Carolina law does allow your LLC to use its articles of organization as an operating agreement if you wish. We strongly recommend, however, that you not do this and prepare a separate operating agreement instead.
The point of an operating agreement is that it is the sole document listing the rules of your company. If there is a conflict between the articles and the contract, the law decides which document to use. Then, you’ve lost control of the situation, and your business might suffer as a result.
Simply put: if you have all your rules in one contract, you stay in control. That control is one of the most compelling reasons to draft an operating agreement.
Also, keep in mind that, if you put your LLC’s rules in your articles, you will have to amend those articles every time you change the rules and pay another filing fee. An operating agreement, on the other hand, is a private contract that you don’t have to file with the state.
Step 5: Get an EIN (Employer Identification Number) for Your South Carolina LLC
When you file your personal tax return with the Internal Revenue Service, you need a social security number so the IRS can keep track of your documents. LLCs don’t have social security numbers, but the IRS still needs a way to organize the paperwork. Therefore, it uses EINs as ID numbers for companies.
Not all LLCs need an EIN. To see whether your LLC needs an EIN, ask yourself these three questions:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you will need an EIN. When you open up a bank account for your company, you’ll probably also need an EIN.
The good news is that it’s not hard to get an EIN. The IRS has a detailed website on the topic and allows you to apply online. The whole application process takes about five minutes. Alternatively, you can also file IRS form SS-4 via mail or fax.
Because it’s so simple, you should never pay anyone to get an EIN for you unless they are throwing it in as an added benefit to a bigger service package.
Read More: How to Get an Employer Identification Number in South Carolina
First Tasks After Registering your South Carolina LLC
Once you’re done forming the LLC, you still have a couple of things to do before you open your doors to the public.
Open a Business Bank Account
At the top of your list of tasks should be going to the bank and setting up an account for your LLC. Your LLC needs its own bank account for a few reasons:
- Accounting: You’re in business to make money. You can’t tell if you’re making money unless you know exactly how much your company spends and deposits every month.
- Credit: Even successful companies need to borrow money. You don’t want to use your personal credit, though, for a business expense. Keeping your company’s money separate helps build up company credit that it can use for business purposes.
- Personal Asset Protection: Keeping your company’s money separate from your own is the whole point of even forming an LLC. Without a business bank account, you risk losing that protection.
You can’t run a business well without precise accounting. That means keeping detailed financial records about expenses and income. Doing that is impossible if you are mixing your own information and money with that of the business. For the sake of simplicity and correct bookkeeping, getting a bank account is the answer.
The second reason for getting an account, credit, may not have occurred to you yet. In the future, though, it could become important. One day, you might need to make improvements, sign a new lease, or invest in new technology. When that time comes, the LLC should do the borrowing, not you.
The third point, legal liability protection, is perhaps the most important. The main idea of having an LLC for your business is that if someone sues it or it fails, your own assets are not at risk. This company/individual separation is called the corporate veil. (Even though an LLC is not a corporation, it’s still called a “corporate” veil.)
If you treat your company’s assets like your own, the veil can be pierced, and you can lose all personal liability protection. So, for example, if you are taking the company’s money and using it to pay your household bills, you could lose all the legal protection that you got by forming your LLC!
Mixing assets is a risk you should not take. Getting a separate bank account for your company is an easy way to sidestep the issue. Get that bank account as soon as possible.
Get Business Insurance For Your South Carolina LLC
You don’t expect to get sick or have a car accident, but you buy insurance so that if the worst happens, it won’t wipe out your finances. Business insurance works the same way. It’s a preventative measure you can take to save your company if and when something unpleasant happens.
Here are some types of insurance you should think about for your LLC:
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers compensation insurance: In most cases, if your LLC has four or more employees, South Carolina requires you to have a workers’ compensation policy to protect against on-the-job injuries. LLC members don’t have to count for this purpose, though they can if you wish.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your South Carolina Company Compliant
Now that you’ve got the big stuff out of the way, you can get started. Keep in mind, though, that your LLC will have ongoing legal obligations to federal, state, and local governments. Here are some things to remember as you continue to do business.
South Carolina Business Permits and Licenses
South Carolina does not require a statewide business license. You will, though, need to check with your county and/or city governments about their business license rules. The state does provide a helpful chart of the counties and what they require.
Also, remember that many types of businesses will need professional licenses. Check with South Carolina Business One Stop for more information on this topic.
South Carolina Tax Requirements
By default, South Carolina treats LLCs as pass-through entities, meaning that the LLC itself is not taxed on income. Rather, that income is taxed when it is paid to the individual members.
You can opt for different treatment if you wish, and your LLC can pay the corporate income tax instead. If you think that you may want to do this, you should speak with a South Carolina lawyer or accountant.
If your LLC has employees, you will need to pay employer taxes (including uninsurance) and withhold taxes as well. Visit the Department of Revenue website for more information regarding employer taxes.
While you’re there, you should also get information about sales and use tax, which you will have to pay if your LLC sells any goods or services.
Federal LLC Tax Filing Requirements
Your LLC is considered a pass-through business entity for federal tax purposes. Profits or losses from your LLC should be on Schedule C of your personal tax return.
Annual Report and Other Filing Requirements
Unlike LLCs in most other states, South Carolina LLCs do not have to file annual reports unless they have elected different tax treatment. Again, if you want to explore different kinds of tax treatment and their consequences, you should speak with a South Carolina lawyer or accountant.
South Carolina Business Formation Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Richland County Government — Information About DBAs
- South Carolina Business One Stop — County Business License Quick Chart
- South Carolina Business One Stop — Professional Licensing
- South Carolina Code Title 33, Chapter 44 — Uniform Limited Liability Company Act of 1996
- South Carolina Department of Revenue — Sales
- South Carolina Department of Revenue — Withholding
- South Carolina Secretary of State — Business Name Search
- South Carolina Secretary of State — Downloadable Paper Forms and Fee Schedule
- South Carolina Secretary of State — FAQs About Business Entities
- South Carolina Secretary of State — Online Filings
- South Carolina Workers’ Compensation Commission — Coverage and Compliance FAQs
South Carolina LLC FAQs
How much does it cost to start a South Carolina LLC?
The filing fee for your articles of organization is $110.
What is the processing time to form my South Carolina LLC?
If you file your articles of organization online, they will be processed either the same day or the next business day. If you file your articles by mail, they will be processed two to three business days after they are received.
What are the benefits of a South Carolina LLC?
A South Carolina LLC protects your personal assets while giving you favorable tax treatment. You can also use an operating agreement to customize your business structure so it best serves the needs of you and the other LLC members.
Where do I check if my South Carolina LLC name is available?
Use the Secretary of State’s free online Business Name Search. Make sure you check multiple words and phrases from your proposed name to distinguish it from the names of other companies doing business in South Carolina.