How to create an LLC in South Carolina in 5 easy steps

Consider establishing a limited liability company if your business entity is just getting off the ground or if you have previously operated as a sole proprietor. The LLC business structure provides a great deal of freedom when it comes to ownership, management, and taxes of the business while providing personal liability protection by limiting an owner's personal liability for business debts and lawsuits.

Steps for forming an LLC in South Carolina

1. Decide on a name for your South Carolina LLC.

Be sure to include "Limited Liability Company" or "Limited Company," as well as the initials "L.L.C.," "LLC," "LC," or "L.C.," in the name of your LLC according to South Carolina state law. The words "Limited" and "Company" can both be shortened to "Ltd" and "Co," respectively.

How to select a name for your South Carolina LLC

Your South Carolina LLC’s name must be distinct from those of other business entities whose names are currently on record with the South Carolina Secretary of State. The South Carolina Secretary of State's business name database allows users to search for names and see if they are available. By submitting an Application to Reserve a Company Name to the Corporations Division of the South Carolina Secretary of State, you have the option to reserve a name for 120 days. Reservation requests must be mailed in.

2. Choose a South Carolina registered agent

Every LLC in South Carolina is required to have an agent who will take care of the service of process. An individual or another company can be appointed as the registered agent. In case your LLC is sued, then your LLC's registered agent will have to receive the legal documents on the LLC’s behalf.

Who can be a registered agent?

Your registered agent should be a South Carolina resident. If another company is your registered agent, then, in that case, they must have the proper authorizations or proper business licenses to conduct their business in the state. In addition to possessing required business licenses, your registered agent is required to be located in South Carolina, or in other words; they must have a physical street address in the state.

3. File articles of organization for your limited liability company.

In order to create an LLC in South Carolina, you'll have to submit your LLC articles of organization to the South Carolina Secretary of State. Your South Carolina LLC's articles of organization which you’ll file for your LLC, should contain the following information:

• The name and designation of your South Carolina LLC.
• Your registered agent’s name and address.
• The initial address of your LLC’s office.
• You'll have to specify In case your South Carolina LLC’s business will be run by a manager, i.e., if the business entity will be manager-managed, you must include the manager’s name and address in the document. You'll also need to mention if your LLC will be member-managed.
• It is rather uncommon, but in case your LLC will exist for a specific term, then you should mention the end date of your LLC on the articles of organization.
• In case your LLC is expected to become effective at a later date, then you should mention that in the documents. But if you want your LLC to become effective as soon as you file the articles of organization, then you don’t need to mention it in the document.
• At least one of your LLC’s organizer’s name and address should be included in the document.
• The document should be signed by each organizer of your LLC.

How to file online and the filing fee

The South Carolina articles of organization may be submitted electronically or by postal mail. You must register and make a username and password before you file the document online. The cost of submitting is $110.

4. Make an Operating Agreement

Although it is highly recommended, an operating agreement is not necessary for an LLC in South Carolina.

What is an operating agreement?

This internal document lays out how your limited liability company will operate. It isn't reported to the state. It outlines the duties and rights of the management and members, as well as how the LLC will be run. By demonstrating that your LLC is really a separate legal organization from other businesses, it can also aid in maintaining your restricted liability.

What to include in an operating agreement

While drafting a South Carolina LLC operating agreement, be sure to include the following points:

• The interest percentage of the LLC’s members.
• The rights and responsibilities of the members.
• The voting powers of the members.
• How the LLC’s profits and losses will be distributed.
• How voting will be conducted and the rules governing holding meetings.
• The buyout, or buy-sell, clauses of the operating agreement should specify what would happen in case a member wants to sell their investment, passes away, or becomes handicapped.

What happens if you don't form an operating agreement?

If your South Carolina LLC does not have an operating agreement, state LLC legislation will control its operations.

5. Get an IRS Employer Identification Number.

You will require an Employer Identification Number, also known as EIN, in case your LLC has multiple members. Even if you have no employees, you will still need to get an EIN. If you establish a one-member South Carolina LLC or a single-member LLC, you only need to get an EIN for it if it will employ people or if you want it to be taxed as a corporation rather than a sole proprietorship.

How to obtain an EIN?

In order to obtain an EIN for your LLC, you’ll need to submit an online application on the IRS website. You won’t need to pay anything to submit this application.

How to form a foreign LLC in South Carolina?

South Carolina Foreign LLCs are LLCs that were created in another state or jurisdiction but have been registered to conduct business in South Carolina. You must submit an Application for Certificate of Authority to the South Carolina Secretary of State To create a foreign LLC in South Carolina.

South Carolina foreign LLC filing fee

A $110 filing fee must be paid to the South Carolina Secretary of State if you submit an offline certificate of authority application. You must pay $125 if you file the document online.

What are the benefits of forming a South Carolina LLC?

The South Carolina LLC Act safeguards the membership rights of both majority and minority members and permits members to retain control over an LLC. The business structure also grants members the contractual freedom to alter the obligations that each party to the LLC agreement owes to the other parties.

1. An LLC agreement regulates the relationships among members, subject to certain limited exceptions. As a result, members have the contractual freedom to modify their revenue sources and loss risks in order to advance their larger asset management strategies.
2. The South Carolina LLC Act does not mandate that member names be filed. By submitting its articles of incorporation, a "person," who is defined as "nearly any type of company or legal body," may create an LLC. Therefore, the members of an LLC may authorize the filing of the LLC's governing documents with the South Carolina Secretary of State by a body or individual who is not a member.
3. An LLC is granted an unlimited life under the Act. It makes a distinction between "at-will" and "term" LLCs. The duration of a term LLC is specified in the articles of organization. An at-will LLC has no specified duration, and its existence may be perpetual. Therefore, an LLC's existence may last longer than the lives of its members.
4. Members are contractually free to alter the obligations that each party to the LLC agreement has to the other parties under the South Carolina LLC Act. As a result, both majority and minority members are protected under the Act. Minority members are protected since an LLC agreement may not totally abolish fiduciary duties, even though it may specify what actions are not in violation of them and how they should be measured. Minority interests have become safer investments as a result of these provisions, increasing their value.
5. The South Carolina LLC Act offers a "safe harbor," protecting majority members. If the contracts or transactions satisfy the minimal disclosure, approval, or fairness standards, this facilitates contracts and transactions between an LLC and one or more of its management, members, or a business in which they have an interest. With the help of these regulations, the LLCs and their majority members can plan their operations with confidence and seize chances that will benefit both parties.

More than 23,000 new LLCs are created each year in South Carolina due to the benefits of doing so.

Should you hire a lawyer to form your LLC?

Making your freelance or small business idea into a legitimate business organization involves creating a limited liability corporation. Your LLC will provide you with tax advantages and protect you from liabilities should something happen to your firm. Although, legal counsel is not mandatory in order to create an LLC.

What are the pros of hiring a lawyer for forming an LLC?

The majority of states permit the creation of LLCs by registering the company entity with the Internal Revenue Service and on the website of the South Carolina secretary of state. However, there are quite a few advantages to hiring an attorney for the process. They are as follows:

1. You can construct an LLC operating agreement with the assistance of a lawyer, outlining the who, what, when, where, why, and how of your business. Members' rights and obligations, corporate policies, etc., can be specified in the operating agreements.
2. It can be incredibly helpful if you hire a lawyer as the registered agent for your LLC. For your business, legal papers, tax forms, and service of process are delivered to a registered agent. The mechanism used to inform the defendant that they are being sued is called the service of process. As a part of their assistance with business creation, certain law firms will serve as your agent. At their physical address, the registered agent service you'll hire will accept your legal correspondence in their capacity as your agent. As a result, you won't lose any crucial documents whether you move or utilize a post office box.
3. A lawyer can also help you create articles of organization for your LLC.
4. They can help you keep accurate and detailed records in case you get sued.
5. They can help you file the required fees and also register properly with the proper entities.
6. They can help you check if the name you’ve chosen for your LLC is available and assist you in the process of registering the name.
7. A lawyer who is a licensed professional can help you draft and file any and all legal documents pertaining to the formation of your LLC.

How much is the South Carolina LLC filing fee?

The fee for South Carolina LLC filing is $110.

Is a local business license required in South Carolina?

Although a state-wide business license is not necessary, almost all counties and towns require businesses to have a local business license.

To file for an LLC online, visit the South Carolina Secretary of State's website by clicking the following link:

https://sos.sc.gov/

Conclusion

You must create and submit several pieces of paperwork to the state in order to establish and operate an LLC in South Carolina. In this state, it is not mandatory for LLCs to submit an annual report, in contrast to the majority of other states. The majority of LLCs are what are known as pass-through tax companies when it comes to income taxes.

In other words, the individual LLC members will have to pay federal income taxes, not the LLC as a whole. By default, only the members of LLCs are required to pay income taxes.

Does your LLC employ people? If this is the case, you must pay employer taxes. This taxation is paid in part to the IRS. Employers in South Carolina must, however, also pay taxes to the state. You must first withhold employee income taxes and pay them to the South Carolina department of revenue.

Additionally, it's likely that you'll have to register in order to pay state unemployment insurance taxes. The Department of Employment & Workforce in South Carolina is in charge of these taxes. You must gather and remit sales tax if your LLC sells goods to customers. You must send sales tax returns to the department of revenue on a regular basis, often monthly or quarterly.