An LLC, or “limited liability company,” is a type of business structure that is quite appealing to a business because of the many advantages it has.
A limited liability company protects its owner(s) from personal liability. If the LLC has certain debts or legal liabilities, the owner will not be held personally liable, and the creditors will not be able to reach the owner’s personal assets. The very narrow exceptions to this rule are if the owner acted unethically or negligently.
LLCs also require less paperwork than corporations. There are less rigid formalities when forming an LLC, and although it is still regulated by the state, the state does not require the LLC to do as much as a corporation.
To create an LLC in South Carolina, there are a few basic requirements that are easy enough for an individual to do on their own.
In short, to form an LLC in South Carolina you will need to file the Articles of Organization with the South Carolina Secretary of State, which costs $110. You can apply online or by mail. The Articles of Organization is the legal document that officially creates your South Carolina Limited Liability Company.
Choosing a Name for Your LLC
Choosing a company name is the first and most important step in forming an LLC in South Carolina.
Choosing a name for your LLC is probably one of the hardest steps in the formation process. First, you need to make sure that there is not already an existing business with the same name or a name that is substantially similar.
There are several rules you should have in mind when choosing a name for your LLC in South Carolina:
Your name must include the phrase “limited liability company,” or one of its abbreviations (LLC or L.L.C.).
Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your South Carolina LLC.
Next, you need to make sure your desired name is available. You can run a search through the South Carolina Secretary of State database.
The South Carolina Secretary of State’s Division of Corporations handles all LLC naming questions and requests. Business names can be reserved for a nonrenewable 120 days.
To reserve a business name, you must file an application by mail to “Secretary of State Attn: Corporate Filings 1205 Pendleton Street Suite 525 Columbia, SC 29201”. When reserving your name, you will have to pay a filing fee ($25).. Checks must be made out to the “Secretary of State.”
You should also think about securing a domain name. Even if you are not going to be creating a website right away, many businesses need to have an online presence to be successful. In addition, you will want to buy the domain name as soon as possible to prevent other competitors from buying it first. If the domain you want is available, you can reserve it for up to three months for a nominal fee of $25.
Once choose a name of your company, you need to protect it. There are three different ways to register your business name.
Entity name protects you at state level. The first step to forming an LLC in South Carolina is to search your desired LLC name and make sure it’s available for use. Your South Carolina LLC name must be unique and must follow certain state requirements. South Carolina LLC name requirements and restrictions are governed by the Uniform LLC Act. (See Section 33-44-105). Here you can check the availability of South Carolina business names.)
Trademark protects you at a federal level. Trademarks are type of intellectual property rights that prevent others in the same (or similar) industry in the U.S. from using your trademarked names. Trademark violation is subject to trademark infringement lawsuits, which are very costly in terms of legal fees and other expenses. That’s why you should check your prospective business, product, and service names against the official trademark database, maintained by the United States Patent and Trademark Office).
Doing Business As (DBA). South Carolina doesn’t require a company to register a secondary business name,but getting one is always a good idea. If a business wants to do business with a name that is different from the name used to form the business, it must file the new name (called a trade name). This is often called filing for a DBA, or doing business as. For example, if “ABC Company, LLC” wants to do business as “Best Hot Dogs in Town” then the owners may have to file a DBA. Filing for a DBA begins with a search to see if the name you want is available. Furthermore, corporate names must contain a corporate abbreviation of some kind, e.g. “Inc.” or “incorporated,” and must not imply a corporate purpose other than that found in the corporation’s articles of incorporation. There are a number of forms available on the Secretary of State website that relate to filing a DBA. There are separate forms for corporations, LLCs, not-for-profits, and foreign corporations, and filers should make sure they select the appropriate form.
Appointing a Registered Agent
To be a valid LLC in South Carolina, you must designate a registered agent. A registered agent can be an individual or another corporation, but they must be residents of the state. The purpose of a registered agent is to accept legal documents on the LLCs behalf, and thus, a physical street address must be on file with the South Carolina Secretary of State.
The South Carolina registered agent should be available, at an South Carolina physical address, during normal business hours to accept important legal and tax documents on behalf of the South Carolina LLC. The registered agent can either be (1) a domestic entity or a foreign entity that is registered to do business in South Carolina or (2) an individual resident of the state. A South Carolina LLC may not act as its own agent.
It is also possible to hire a professional registered agent service. Hiring a professional registered agent service is more expensive solution, but, on the other hand, it helps you avoid any fees or legal troubles caused by missing or misplacing an important document or notice.
Filing an LLC Formation Documents and Fees
To register your LLC in the state of South Carolina, you must file Articles of Organization. South Carolina provides a fillable form on its official website. Articles of Organization contain basic information about the LLC, such as the LLC’s name, address, owners, purpose, etc. To file the Articles of Organization, South Carolina requires a one-time $110 filing fee. You can expect your LLC filings to be processed typically within two business days.
Articles of Incorporation (Articles of Organization) are a set of formal documents that contain the basic information needed to form an incorporated business (or corporation).
Once the Articles of Incorporation are filed with the Secretary of State, the company becomes a registered business entity for legal and tax purposes within the state.
To register your South Carolina LLC, you’ll need to file the Articles of Organization with the Secretary of State of South Carolina.
There are two main options for filing an articles of organization:
Filing Online through the South Carolina Secretary of State Online Filing System, or
Filing by Mail to “South Carolina Secretary of State’s Office, Attn: Corporate Fillings, 1205 Pendleton Street, Suite 525, Columbia, SC 29201” – in which case you can download form here.
As already mentioned, when it comes to fees, State Filing Cost is $110, payable to the South Carolina Secretary of State, and it is nonrefundable.
Creating an Operating Agreement
An LLC Operating Agreement is an internal, written document among members of a Limited Liability Company (“LLC”).
An operating agreement lays out the LLC’s rules and procedures. For instance, it can include things such as each manager’s financial obligations, daily responsibilities, the procedures for adding new owners, etc. While the formation of an operating agreement is not required by state law, it is highly advised and a seen as a matter of professionalism to do so. In fact, if an LLC has an operating agreement, South Carolina will recognize it as a governing legal document.
In general, an LLC Operating Agreement should include the following aspects of your business:
Ownership of the company
Procedures in case one member passes away or leaves the company.
Company’s principal place of business
Authority of certain individual members to sign contracts on behalf of the company.
Time of regular members meetings.
Distribution of profits and losses among members.
As already noted, it is important to know that an operating agreement is not required for an LLC in South Carolina, but, as it’s definitely a good practice to have one.
Obtaining an Employer Identification Number (EIN)
The federal tax ID number is a unique nine-digit number that the Internal Revenue Service (IRS) will assign to a business entity operating in the United States for tax purposes under the Internal Revenue Code and other tax laws, depending on the type of structure being used.
The federal tax ID number is also called an employer identification number when a business hires employees and is using the number to pay employment taxes. On top of identifying the tax obligations of a business, the employer identification number must be used to open accounts, to get credit for the business, and possibly to get licenses or permits, depending on the state, the form of the business, and the nature of the business.
An Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is like a Social Security number (SSN) for your business. The unique nine-digit EIN number allows the Internal Revenue Service (IRS) to identify businesses for tax reporting.
It’s free to apply for an EIN, and the business owners should do it right after you register your business.
Every business owner can apply for an EIN online, or by mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999 , or by fax: (855) 641-6935.
An application is free of charge, and your nine-digit federal tax ID becomes available immediately upon verification.
Other important information related to LLC formation in South Carolina
Opening a business bank account
The benefits of a business bank account for South Carolina businesses can be summarized as follows:
Taxes. Keeping your business and personal finances separate will allow you — and the IRS — to more easily distinguish your business costs from your personal expenses. Filing taxes on behalf of your business will be easier and you’ll have greater protection in the event of an audit.
Personal asset protection. If a business is tied to a personal bank account, you could risk losing your personal assets too if the business is sued or faces outstanding debt, even your business runs as a limited liability company.
Customer satisfaction. Customers are given more payment options with a business account, and being able to receive payments will help keep your business afloat. Business accounts allow for debit and credit card transactions, mobile payments and other customer-friendly features that a personal account fails to offer.
Employee satisfaction. Business bank accounts allow for direct deposits and payroll processing.
Brand. Customers don’t take a business as seriously when they’re asked to make a check out to your personal name or they can’t pay with a debit or credit card. A business bank account gives your company credibility and brand awareness.
Hiring a business accountant
Professional business accountant makes sure you don’t overpay taxes (and also, to pay them duly and accurately). At the same time, your accountant will help you avoid paying penalties due to possible tax errors.
Furthermore, business accountant manages your bookkeeping and ensures that payroll process to go smoothly and without delay.
Your accountant will also recognize unforeseen losses and extra profit, when they emerge over the course of your business.
Getting Business Insurance for Your LLC
Business insurance for South Carolina Limited Liability Company protects from the unexpected costs of running a business. Accidents, natural disasters, and lawsuits could run you out of business if you’re not protected with the right insurance.
These insurance policies are required for South Carolina businesses.
Workers’ compensation insurance. With some exceptions, South Carolina state law requires businesses with four or more employees, full-time or part-time, to carry workers’ compensation insurance. This policy covers medical bills for work injuries and illnesses.
Commercial auto insurance. All business-owned vehicles in South Carolina must be covered by commercial auto insurance. Though it’s not required, personal vehicles driven for work purposes should be covered by hired and non-owned auto insurance, as personal auto policies usually exclude business use. It can be added to general liability insurance or a business owner’s policy.
These insurance policies are recommended for South Carolina businesses:
General liability insurance covers common business risks like customer injury, customer property damage, and advertising injury. It protects your small business from the high costs of lawsuits and helps you qualify for leases and contracts.
Professional liability insurance, also called errors and omissions insurance, protects small businesses against the costs of client lawsuits over unsatisfactory work.
Cyber liability insurance protects small businesses from the high costs of a data breach or malicious software attack. It covers expenses such as customer notification, credit monitoring, legal fees, and fines.
A business owner’s policy (BOP) bundles general liability insurance with commercial property insurance. It typically costs less than if the policies were bought separately.
Website and Marketing
Every business needs a website, no matter how small it is.
The benefits of creating a functional and professional-looking website are multiple and among them is the fact that using social media accounts on platforms such as Facebook or Instagram is not a replacement for a business website that you own and control. The aforementioned platforms are run and generated by AI algorithms, and their content is largely out of your control, unlike when you use your own website.
Marketing, on the other hand, takes time, money, and preparation. One of the best ways to stay on schedule and on budget is to make a marketing plan. It describes the actions you’ll take to persuade potential customers to buy your products or services.
In order to make a good marketing plan, you need to:
Describe your audience in detail,
Describe what gives your product or service an advantage over the competition.
Describe how you’ll literally sell your service or product to your customers.
Describe your marketing and sales goals for the next year, and
Describe how you’ll achieve your marketing and sales goals.