How to Start a Business in South Carolina

If you sell something, you are in business as a sole proprietor. If you’re selling products or providing a service alongside a partner, you’re a general partnership. There is a downside to being a sole proprietor or general partner. You are not legally distinct from these business types, so your business’s debts are your debts. If someone sues your business, your home, car, and savings may be at risk.

Many people who’d like to become business owners and enjoy limited liability asset protection choose to form a Limited Liability Company (LLC) or corporation.

South Carolina Limited Liability Company (LLC)

LLCs are less rigid and more flexible than corporations. For example, LLC members can run the business themselves, appoint someone within the business or hire an outside manager. You may also choose to be taxed as a C or S corporation. To start a South Carolina LLC, you’ll need to file paperwork with the South Carolina Secretary of State.

South Carolina Corporation

Corporations are not as flexible as LLCs. In a corporation, shareholders appoint a board of directors, who then hire officers to run the company’s daily affairs. Corporations must hold annual meetings, keep records, and create bylaws. However, these strict rules, and the option to buy, sell, and trade stock options, are attractive to investors. To form a South Carolina corporation, you must file paperwork with the South Carolina Secretary of State.

You should have a business name in mind before you file formation paperwork with the South Carolina Secretary of State. Your business’s name is automatically your name if you’re a sole proprietor (ex: Sally Smith) or general partnership (Smith and Jones) unless you register a DBA (which you can do if you want to be known as Sally’s Spa instead of just Sally Smith).

If you want your LLC or corporation to meet South Carolina’s naming requirements, you must include:

• A business identifier like L.L.C. for a limited liability company or Corp. for a corporation
• A business name that is not identical or similar to another South Carolina business
• Not include words like bank or credit union unless you have approval from the appropriate board
• Not use words that describe a professional service unless you’re licensed to perform that service

Find out if your desired name is available in South Carolina by searching South Carolina’s Business Name Search.

Sole proprietors and general partnerships don’t need to file formation paperwork because they aren’t separate entities from yourself. However, LLCs and corporations are entities separate from yourself, so you’ll need to file some key documents with the South Carolina Secretary of State.

• To form a South Carolina LLC, file South Carolina Articles of Organization.
• To start a South Carolina corporation, file South Carolina Articles of Incorporation.

You must appoint a South Carolina registered agent before you fill out formation paperwork. A registered agent is someone who accepts your business’s legal mail. In addition, the information you list on this form will become part of the public record. This means that the names and addresses you provide will be posted on the South Carolina Secretary of State website for anyone to find.

Corporations and LLCs taxed as a C-corporation must file an initial report along with their Articles of Incorporation, which costs $135 (the $25 initial report License Fee is included in the filing fee). After your initial report, all corporations must file an annual Corporation Income Tax Return—which includes an annual report. Most LLCs won’t need to file a tax return—unless you elect to be taxed as a C-corp.

Read more about How to File a South Carolina Annual Report.

So far in this guide, we’ve dealt with public forms that you’ve had to file with the South Carolina Secretary of State. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.

Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.

Here are the major internal documents you need to organize for LLCs and corporations:

South Carolina LLC Operating Agreement

This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.

Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a South Carolina LLC operating agreement template that you can use as a solid foundation.

South Carolina Corporate Bylaws

Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in S.C. Code § 33-2-106.

As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a South Carolina corporate bylaws template you can use to get started.

Starting a nonprofit? Learn about South Carolina nonprofit bylaws.

South Carolina doesn’t require a generalized state business license. However, most counties and cities require businesses to have some sort of local license. For example, if your business is physically located in Clinton and conducts business in Greenwood, you’ll likely need to file a New Business License Application with both jurisdictions. To see if you need a license, you can check with the city or county where your company is located and conducts business.

South Carolina State Business License

Each city is different, so speak with your local County Clerk to see which license(s) you might need. For example, in Richland, you’ll likely need to file two forms: the Business License Application and the Clearance Form. Your total fee will be based on your projected annual revenue and the type of business you own.

Professional Business Licenses

You will need a professional license to offer services that require extensive training and education. A professional service is something like dermatology, acupuncture, or law. Most professional licenses are obtained through the Department of Labor, License, and Regulation Department and the specific board for your profession. In addition, you may need to obtain an additional license depending on where your business is located.

Local Business Licenses

The local license(s) your business may need depends on the service or product you offer and where you’ll operate. For example, if you run a home-based in Charleston, you must file a Home Occupation Application and a New Business License Application. In Darlington, you must submit a Business License Application if you’re a commercial enterprise or conduct business within the county.

If your business is based in one town but conducts business in another town, you’ll need a local business from both towns. If your business is located or does business in an unincorporated town, you will likely need a county business license. You can check with your local municipality for additional information.

Learn more about How to Get a Business License.

The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.

Open a Business Bank Account

To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.

Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.

Set up Payroll

Your employees or independent contractors expect to be paid, right? Well, that means you’ll need to set up payroll. To set up payroll, you’ll need to:

• Get an EIN and set up an Electronic Federal Tax Payment System (EFTPS)
• Register with the South Carolina Department of Revenue
• Get an unemployment tax account with South Carolina Department of Employment and Workforce
• Decide whether you’ll use a payroll software program or do it manually and whether you want direct deposit
• Decide your pay out schedule
• Get W-4s or I-9s from your employees or independent contractors
• File payroll taxes

Keeping track of your workers’ hours, overtime, and missed days can be tedious. That’s why many employers prefer using a payroll software system rather than keeping track of payments by hand.

Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.

Some business owners buy coverage, and some don’t. Ultimately, the choice is yours. But you should know that any work-related injuries or lawsuits will then be covered by your pockets if you don’t have business insurance.

Here’s a breakdown of the most commonly purchased business insurance:

Workers’ Compensation Insurance

South Carolina businesses that have four or more employees must carry workers’ compensation insurance. In South Carolina, this statutory law includes part-time employees and employees who are your family members. But there are some exceptions to this generalized rule. For example, neither agricultural nor federal workers count as employees. You also won’t need to buy workers’ comp if you only have casual employees.

If you think you already have coverage, you can verify your status via the Workers’ Compensation Coverage Verification website. If you’re uncertain about whether your worker qualifies as an employee, consult an attorney.

Liability Insurance

This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t.

Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.

Corporations, and LLCs that are taxed as an S and C corporation, must pay a 5% corporate income tax. The state also assesses a Business Personal Property Tax at 10.5% (BPP). However, the state doesn’t determine your tax burden alone. You’ll likely have to pay federal and local taxes, too.

Federal Taxes

• LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns.

  Note: You’re responsible for your self-employment tax, which is 15.3%. An LLC can file paperwork with the IRS to be taxed as an S-corp or C-corp instead.

• Corporations. Corporations are taxed as C-corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable South Carolina corporate tax rate.To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.

To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.

Local South Carolina Business Taxes

Local counties’ may impose additional sales and use taxes that are up to 3% higher than the state’s 6% sales and use tax. For example, Dillon’s local sales and use tax is 8%, whereas Charleston’s local sales and use tax ranges from 8-9%. Your business may also have to pay taxes on local food storage requirements, lodging, and property taxes on personal property that’s used in the interest of your business.

If customers can’t find your business online, they can’t buy from you. That’s why it’s important to build your business identity— how customers see and recognize your business—starting on day one. A good business identity builds trust instantly.

• Domain. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble. Use our domain search tool to see if yours is available.
• Website. Get a website perfectly tailored to your business, web hosting included. Our open-source software gives you control over your website, allowing you to manage (or transfer) your site as you see fit.
• Email address. We’ll set you up with a business email address that uses your custom domain—like [email protected]—instead of a generic one like Gmail. It makes your business look more professional and builds trust with every message.
• Phone number. A secondary phone line helps keep your business and personal life separate. Our app-based phone service looks and acts like an ordinary local number—you’ll be able to call, text, check your voicemail, save contacts and more.
• Business address. Get a business mailing address in a real commercial building in Charleston. Your business address comes with a unique suite number. Use our mailing address, and keep your home address out of the public eye.
• SSL security. An SSL certificate keeps your website secure and shows visitors it’s safe to use. It’s especially important if you have forms like sign-ups or contact pages. Even without forms, it helps protect user data. You can usually get one from your domain provider.

When you hire Northwest to form your business (or use us as your South Carolina Registered Agent) you get a domain name, free for a year. You’ll also get free website hosting, email, and phone service for 90 days. After that, each service costs just $9/month (cost of renewing your domain name will vary depending on the domain name). You can keep, cancel, or stop any service at anytime with one click in your account.

A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.

You can apply to register your trademark with the State of South Carolina or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in South Carolina is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in South Carolina.

You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.

Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.