More than 530,000 small businesses operate in the state of South Carolina, many as limited liability companies (LLCs). Forming an LLC in South Carolina takes several steps, which includes naming your business, designating a registered agent, and filing articles of organization with the Secretary of State. There are also optional but prudent tasks, such as drafting an operating agreement. With no state publication requirement or franchise tax, the whole process is relatively straightforward.

Below, we’ll cover how to form an LLC in South Carolina, what it costs, and how South Carolina taxes LLC income.

Key takeaways

• South Carolina has no franchise tax on LLCs and no publication requirement, which makes it an affordable state for formation and ongoing compliance.

• Forming an LLC in South Carolina requires filing articles of organization with the Secretary of State and paying a one-time $110 fee.

• LLC income passes through to members’ personal tax returns by default, and South Carolina taxes individual income at a graduated rate.

What is an LLC in South Carolina?

An LLC is a legal structure that separates your personal finances from your business. If the business is sued or can’t pay its debts, creditors generally can’t come after your personal bank account, home, or car. The state allows both single-member and multimember structures. Members can manage the LLC directly or appoint a manager to handle day-to-day operations, which is a distinction you’ll document in your operating agreement.

By default, the Internal Revenue Service (IRS) treats a single-member LLC as a disregarded entity and a multimember LLC as a partnership. In both cases, business income and deductions flow through to your personal tax return. In lieu of incorporating, you can also elect to be taxed as an S corp or C corp if your situation calls for it. It’s worth discussing with a certified public accountant (CPA) once you’re generating revenue.

Why is South Carolina a strong choice for LLC formation?

A few structural advantages make South Carolina a solid choice for LLC formation.

Consider the following:

• No franchise tax on LLCs: You’re not writing an annual check to the state just for existing as a business entity.

• Low cost of doing business: Low rates on various taxes and utilities make South Carolina a good home base for businesses.

• Active startup communities: Charleston, Greenville, Columbia, and other cities have burgeoning tech ecosystems.

• Credibility with banks and vendors: Unlike a sole proprietorship, an LLC signals you’re operating as a real business entity. This isn’t unique to South Carolina, but it’s worth considering when you choose a business structure.

How do you create an LLC in South Carolina?

Formation involves several steps. Skipping any one of them can create problems later.

1. Pick a business name

Your LLC’s name must include “Limited Liability Company,” “limited company,” or abbreviations such as “LLC” or “L.L.C.” It must also be distinguishable from existing South Carolina business names. Check availability through the Secretary of State’s business name search. You can reserve an LLC name for 120 days by filing a name reservation request and paying a fee if you’re not ready to file immediately.

2. Designate a registered agent

Every South Carolina LLC must have a registered agent: a person or entity with a physical street address in South Carolina who agrees to receive legal documents, tax notices, and official state correspondence on behalf of the business. PO Boxes don’t qualify. You can serve as your own registered agent if you have a South Carolina address and you’re available during business hours, but many founders use a registered agent service to keep their personal address off public filings.

3. File articles of organization

This is the document that formally creates your LLC in South Carolina’s records. You’ll file with the Secretary of State and pay a filing fee. Online filing is typically processed within 24 hours. Once approved, you’ll receive a certificate confirming your LLC exists as a legal entity.

4. Draft an operating agreement

South Carolina doesn’t legally require an operating agreement, but you might benefit from having one. It governs things such as how profits are split, how decisions get made, what happens if a member wants to leave, and how the business would be dissolved. Without one, South Carolina’s default LLC rules fill in the gaps, and those defaults aren’t always what founders want for their business.

5. Obtain an employer identification number and open a business bank account

An Employer Identification Number (EIN) is a federal tax ID for a business. You’ll need one to open a business bank account, hire employees, and file business taxes. The IRS issues EINs for free, and the online application takes only minutes.

Once you have your EIN, you can open a dedicated business bank account, which helps preserve your liability protection. Commingling personal and business funds gives a court grounds to find that your LLC is just an extension of you personally—a doctrine called piercing the corporate veil. Keep the accounts separate from day one.

What does it cost to start an LLC in South Carolina?

South Carolina’s formation costs aren’t the cheapest, but they’re on the lower end compared to many states.

Here are the main costs:

• Articles of organization filing fee: $110, paid once to the Secretary of State at formation.

• Name reservation: $25 for 120 days, if you need to hold a name before you’re ready to file.

• Registered agent service: Varies by provider, but typically around $50-$300 per year. It applies only if you’re not serving as your own agent.

How are South Carolina LLCs taxed?

Federal taxation works the same way regardless of which state you form in. A single-member LLC’s income and expenses land on Schedule C of your personal return. A multimember LLC files a Form 1065 informational return and issues K-1s to each member, who then reports their share on their personal returns. By default, the LLC itself doesn’t pay federal income tax.

At the state level, South Carolina taxes individual income on a graduated scale up to 6%. If your LLC elects to be taxed as a C corp, it’ll pay South Carolina’s corporate income tax rate of 5% on state taxable income, which is lower than the individual rate.

Members who actively work in the business owe self-employment tax—currently 15.3%—on top of income tax. Electing S-corp status can reduce that burden once you’re profitable enough to pay yourself a reasonable salary, but that decision should be discussed with a CPA.

If you’re selling taxable goods or certain services in South Carolina, you’ll likely need to register with the South Carolina Department of Revenue for a retail license. The state sales tax rate is 6%, and local option taxes push it higher in some counties. Registration is $50 for a retail license.

How Stripe Atlas can help

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