How to Start a Business in South Carolina
Looking to start a business in South Carolina? With some of the lowest state property and corporate income taxes, the Palmetto State is an ideal location for your new business. But how do you start your business? Sell something. Selling a product or service without filing paperwork with the state makes you a sole proprietor, but that won’t give you asset protection. If you’re looking to protect your personal assets, you’ll need to follow the steps in our comprehensive guide.
Ready to Start a Business in South Carolina?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
File a South Carolina Initial Report
Draft Internal Records
Get South Carolina Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
Apply for Trademarks
1. Pick a Business Structure
You’re a business owner (sole proprietor) if you’re selling something, like homemade skincare products, and you haven’t filed formation paperwork with the state. 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.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a South Carolina nonprofit?
Nonprofit corporations aren’t about making money. Rather, nonprofits are about providing aid to a societal issue or group of people. For example, a nonprofit organization might help formerly incarcerated individuals get employed or raise awareness about rare diseases. If you want to help a societal issue or aid a specific cause, start a South Carolina nonprofit corporation.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
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 or general partnership unless you register a DBA (which you can do if you want to be known as “Paola’s Fantastic Spa” instead of “Paola Moretti”).
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.
Can I reserve a business name in South Carolina?
Absolutely! You can reserve a business name for 120 days if you submit the Application to Reserve a Name form to the Secretary of State. The filing fee varies between entity types—$10 for a corporation and $25 for an LLC.
What's a DBA?
“DBA” stands for “doing business as.” A DBA is a name you use in place of your business’s legal name. Your business’s legal name is whatever you listed on your business’s formation documents.
Sole proprietors and general partnerships are automatically named after the people forming them, so a DBA might be a good choice if you’d like more privacy. LLCs and corporations might get a DBA if they’re revamping their business’s brand or moving their business to another state where their legal business name is already in use.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
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.
Note: 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 online on the South Carolina Secretary of State website for anyone to find.
What is a registered agent?
A registered agent is an individual or service that receives legal mail on behalf of your business. For this reason, your registered agent must have a South Carolina street address (P.O. boxes are not allowed) and be available during standard business hours. Of course, you can be your own registered agent, but this also means you’d have to be available during standard business hours, which can interfere with your vacation plans. You can avoid this potential issue by appointing another person or agency to be your registered agent instead.
How can I keep my information off the public record?
You can keep your personal information off public records by paying for a registered agent service like Northwest Registered Agent. We will use our name and address on formation paperwork so that you can enjoy greater privacy.
4. File a South Carolina Initial Report
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.
What if I don’t file an annual report in South Carolina?
Corporations and LLCs that are taxed as a C-corporation that file late may be penalized at 5% of their unpaid tax for every month their annual report is late. The 5% penalty caps at 25%.
If you file but don’t pay your annual report taxes on time, a mandatory .5% penalty of your tax amount is assessed. The penalty for failure to pay starts to accrue after you’re one month late. Then, it will continue to accrue at an increase of .5% each month. The penalty caps at 25%.
5. Draft Internal Records
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.
6. Get South Carolina Business Licenses
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.
How do I get a South Carolina business license?
To obtain a business license in South Carolina, you must apply through the local department that issues the specific license you need. For example, if you’re a contractor in Abbeville County, you’ll need to file a Contractor Business License Application with City Hall. But, if you’re conducting business in Fairfield County, you’ll file a Business Registration Application with the Fairfield County Council.
How much does it cost to get a South Carolina state business license?
The cost varies to obtain a local business license within the state. For example, in Charleston, you’ll pay a base fee of $64 to obtain a business license. You’ll also pay $3.90 per every additional $1000 of anticipated income. However, for Anderson, the cost of your local business license depends on what your business needs (e.g., zoning permit, building inspection, specialized equipment), so you must contact the Anderson Municipal Business Center for them to assess how you much your local business license fee will cost.
How do I get a professional license in South Carolina?
How you’ll get a professional license varies from license to license. For example, business owners seeking a professional engineer and surveyor license must download and complete the Application For Licensure By Comity and submit it to the Department of Labor, Licensing, and Regulation. However, a business owner seeking a professional agricultural license must first speak with the Environmental Affairs Regional Office and submit a preliminary site inspection form. Then, you’ll turn in your Agricultural License Application to the Department of Health and Environmental Control.
How do I get a local business license?
To obtain a local business license, you’ll need to contact your local municipality because licensing processes will vary. In McCormick County, you’ll likely contact the Town Hall to get a local business license or permit. However, for Columbia City, you can get the Application For A New Business License from the City of Columbia Business License Division.
7. Organize Your Money
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.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
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 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.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn more about hiring independent contractors.
How do I get a South Carolina Employer Account Number?
Register online with South Carolina Department of Employment and Workforce to get your employer account number (EAN). In approximately 2-3 weeks, you’ll receive your EAN, which you may know as a “state tax ID.” If your EAN begins with a zero, you’ll leave it out when setting up your payroll.
8. Get Business Insurance
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.
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.
Do business owners need workers' compensation insurance in South Carolina?
No. You don’t need to buy workers’ compensation for themselves. You also won’t need to buy workers’ compensation insurance if your total annual payroll is less than $3,000. However, if you’re not covered under your workers’ compensation plan, your personal insurance could deny any claim made for a business-related injury.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
9. Understand Your Tax Burden
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.
- 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. 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.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in South Carolina, there’s a 5% corporate tax rate). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
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.
10. Build Your Business Website
If you want the people of South Carolina to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. 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.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
11. Apply for Trademarks
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.
How do I register for a trademark in South Carolina?
You’ll register your trademark by submitting the Application for Registration of a Trademark or Service Mark to the Secretary of State. It costs $15 to register one trademark (so if you want to register two trademarks, it’ll cost $30). You must attach three identical specimens showing that your trademark is already in use, such as on a tag or label, or affixed to the product.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.