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2022 Guide to Starting an LLC in South Carolina

South Carolina LLC Quick Facts

South Carolina LLC Costs

Initial Cost:
– State LLC Filing Fee: $110

 

Recurring Cost:
– Only LLCs taxed as a C-corp or S-corp will file the Initial Report of Corporations: $25

South Carolina LLC Processing Time

– Filing Online: 1-2 business days
– Filing by Mail: 2 weeks

Not sure about filing an LLC yourself?

Want an LLC, but not sure about filing the paperwork yourself? Let Zenbusiness, IncFile, or IncAuthority help guide you through the LLC formation process, so you know everything was done right.

IncFile and IncAuthority are both currently running a special where you only pay state fees for your LLC formation!

Overview

Guide to Starting an LLC in South Carolina

An LLC or Limited Liability Company is a business structure that can combine the best features of a corporation and a partnership. LLCs are perfect for small businesses because they offer the limited liability of a corporation but have the flexibility and tax advantages of a partnership. In an LLC, the owners are not personally liable for the debts and obligations of the business. This means that if the LLC goes bankrupt, the owners will not be held responsible for paying back creditors. The LLC also has flexibility when it comes to taxes. The owners can choose to be taxed as a corporation or as a partnership, depending on what is best for their business.

Overall, an LLC is a great choice for small businesses that want the limited liability of a corporation but with the flexibility and tax advantages of a partnership. If you are thinking about starting an LLC, be sure to consult with an experienced business attorney to ensure that you are doing everything correctly.

Related: Guide to starting a business in South Carolina

Steps to Form a South Carolina LLC

Let’s break down the steps to complete the South Carolina LLC formation process.

Total Time: 10 minutes

Step 1: Choose a Name for the LLC

The first step in forming a South Carolina Limited Liability Company is to make sure the name you want is available.  

It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of South Carolina. The South Carolina Secretary of State makes it easy to search and verify if your LLC name is available.  Here is more information on doing a South Carolina LLC name search.
 
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
– Limited Company
– LLC
– L.L.C.
– LC
– L.C.
– Ltd. Co.

A comma may be used after the business name and before the corporate ending.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

If there is an LLC name you want to use, but are not ready to register the LLC, you can file the Application to Reserve a Limited Liability Company Name. The LLC name reservation filing fee is $25 and will hold a name for up to 180 days.

Before settling on a name, you may want to do a domain name (sometimes referred to as a URL) search to try and match your business name and website address.

Step 2: Appoint a South Carolina Registered Agent

Every LLC in South Carolina is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

The basic requirements to be a Registered Agent in South Carolina include:
– The agent must be a South Carolina resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.

Learn more about the requirements for a Registered Agent in South Carolina

Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publically listed.

Step 3: File the South Carolina Articles of Organization

The paperwork to officially create an LLC in South Carolina is called the Articles of Organization. To submit the paperwork, either file online through the South Carolina Secretary of State’s website.  If you prefer to fill out and mail the application, download the Articles of Organization Form

Related: How to fill out the South Carolina Articles of Organization

When filling out the Articles of Organization, a few sections and terms can be confusing. Let’s go over a few of these sections to help get your LLC started right.

Initial Designated Office – Enter the street address, city, state, and zip code of the initial designated office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  The initial office has to be an address in South Carolina but can not be a PO Box.

Management – This section asks whether the LLC is Member-Managed or Manager-Managed.
– Member-Managed LLCs have an active involvement in the management of the LLC.
– Manager-Managed LLCs are hired by the members to run the LLC, similar to a CEO of a corporation.

Most LLCs are member-managed.

Member(s) Liable for its Debts? – Most filers skip this step, but if one or more of the members will be liable for the debts and obligations of the LLC, check the box.

Company Term – In this section, you can indicate how long the LLC will remain in existence.  Most LLCs will choose a Perpetual duration and skip this step; however, some businesses (usually investment-related) will have a specific closure date.  If you have a specific end date in mind, click the “Term Company” box and enter the date.

Delayed Effective Date – If you want the LLC to start immediately as most filers will, leave this step blank.  If you want the LLC to start later, enter a date less than 90 days in the future to start.  The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business isn’t going to have any activity until the start of the year.  You can eliminate the need to file a partial-year business tax return by delaying the start date until the following year.

Organizer Information – An LLC Organizer is someone involved with the formation of the Articles of Organization.  The Organizer may or may not become a member, such as a mentor, attorney, or accountant, but any LLC member can be listed as an organizer.

Only one organizer is required, but more can be listed if desired.

Summary of Forms – An LLC that plans to elect corporation tax status will need to file form CL-1.  If the LLC plans to be taxed like a disregarded entity (sole proprietorship) or partnership can continue.  The tax status will be filed with the IRS when the EIN is filed.  By default, single-member LLCs are taxed like a sole proprietorship, while multi-member LLCs are taxed like partnerships.

Turnaround Time: It normally takes 1-2 business days when filing online or about two weeks when filing by mail for the state to process the LLC paperwork.

Consider using an LLC formation service like Zenbusiness, IncAuthority, Northwest, or IncFile to guide you through the LLC formation process, so you know everything was done right.

IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!

You have a South Carolina! Now what??

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a South Carolina LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: South Carolina operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corp, may be detrimental for some people due to double taxation.

Also, note that while there is no annual report, if your LLC elects to be taxed as a C corp or S corp, Form CL-1 (Initial Report of Corporations will be due within 60 days of the LLC being formed and will have an annual fee of $25. Every year after that, on the 15th day of the third month after the close of the taxable year (March 15 for most LLCs), Form SC 1120 or Form SC 1120 will be due.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original LLC formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Depending on the age of the LLC, a South Carolina Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start. More information about city, county, and state business licenses is available on the South Carolina Business One Stop website.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Retail License – In order to sell products and certain services and collect sales tax, registration with the South Carolina Department of Revenue will be necessary.
  • Unemployment Insurance Registration – Businesses with employees will need to register with the South Carolina Department of Employment and Workforce to register for unemployment insurance.

Related: What Business Licenses are Needed in South Carolina?

Common Questions To Starting An LLC In South Carolina

How much does it cost to start an LLC in South Carolina?

The cost to form an LLC in South Carolina is $110.

How long does it take to start an LLC in South Carolina?

LLCs formed online in South Carolina are processed within 1-2 business days, while mailed in forms can take up to two weeks.

Is there a yearly fee for an LLC in South Carolina?

LLCs that are taxed as a sole proprietorship or partnership will not file an annual report, LLCs taxed as a C-corp or S-corp will file the Initial Report of Corporations (Form CL-1) and pay the $25 annual fee each year with the South Carolina Secretary of State.

Do I have to pay to hire a registered agent?

No. Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.

Does an LLC need a business license in South Carolina?

It’s sometimes thought that the LLC and business license are the same in South Carolina, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.

Related: What business licenses are needed in South Carolina?

What is a Foreign Limited Liability Company?

A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state that wants to physically operate in South Carolina. Physically operating means having a presence, such as having an office or hiring an employee.

Registration with the Secretary of State is required before an out-of-state LLC can transact business.

Related: What is a foreign LLC?

Is an LLC the same as a corporation?

The LLC is one of four main types of business entities. You can learn more about each here:
What is a sole proprietorship?
What is a general partnership?
How to form a South Carolina corporation

Should I use an LLC formation service or do it myself?

Following our guide, most people will be able to form an LLC on their own, however, LLC formation services like IncFile and IncAuthority will guide you through the process and guarantee it’s done right – and it doesn’t cost any extra to do so!

Where do you check if your South Carolina LLC name is available?

One of the first steps in forming an LLC is to choose a name for your business. But before you can register your LLC with the state of South Carolina, you need to make sure that your chosen name is available. The best way to do a business name search is by visiting the South Carolina Secretary of State’s website.

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