How to Form a LLC in South Carolina

A limited liability company (“LLC”) is a business organization that shares the limited liability benefits of a corporation with the management and tax status of a partnership. LLCs are legal entities authorized by state law.

“Limited liability” simply means that the members and employees associated with the company are not liable for the obligations of the company beyond the value of their initial investment. Owners and managers cannot be held vicariously liable for the obligations of the company.

In other words, a person who invests money in an LLC risks losing the amount of their investment. They will never have to pay any more to satisfy the debts or other legal obligations of the company. It is a way of limiting the risk of investing in a company.

Business owners who are concerned about potential lawsuits, e.g. lawsuits for professional negligence, or debts that could arise in the business should consider forming an LLC. If a business owner believes that the type of business insurance coverage they have would not fully protect their assets, an LLC may be a good idea.

What Are the Requirements for an LLC?

To form an LLC in South Carolina, a person must meet the following requirements:

• Business Name: A name must be chosen for the LLC. Under South Carolina law, the name of an LLC must contain one of the following: “Limited Liability Company,” “LLC,” “L.L.C.,” “Limited Company,” “LC,” or “L.C.” The term “Limited” can be shortened to “Ltd.” and “Company” or “Co.”
  • The name should be reserved with the South Carolina Secretary of State to prevent another business from using it before the Articles of Organization have been filed. The name can be reserved for 120 days;
• File Articles of Organization: In South Carolina, a person must file an Articles of Organization form with the South Carolina Secretary of State and pay a filing fee;
• Appoint a Registered Agent: Every South Carolina LLC is required to have an appointed agent for service of process. The agent is a person who agrees to accept legal documents on behalf of the LLC’s if it is sued.
  • The agent can be an individual or a business that is authorized to operate in South Carolina. The registered agent must have a physical address in the state and be either a state resident or state business entity;
• Tax Requirements: If the South Carolina LLC has more than one owner, they must obtain an Employer Identification Number(EIN) for the LLC from the Internal Revenue Service (IRS). If a person forms a one-member LLC, they must obtain an EIN for it only if it will have employees.
  • An EIN is something like a social security number for a business. It is needed to pay income tax, file tax returns, open business bank accounts, and perform other functions. An EIN can be obtained for free online at the IRS website; without paying a filing fee. The person also has to register with the South Carolina Department of Revenue to file tax returns;
• File a Annual Report: Unlike most states, South Carolina does not require LLCs to file an annual report or pay an annual fee;
• Obtain all Business Permits, Licenses and Insurance: If any business permits or business licenses are required, they should be obtained from the appropriate authority. In addition, an LLC needs to obtain the right types of insurance coverage.

An LLC can file taxes as a sole proprietorship. An LLC with more than one member can file as a partnership. And any LLC, whether it has one member or several, can file taxes as a C corporation or an S corporation.

What Paperwork Do I Need to Form an LLC?

The documents that are required to form an LLC in South Carolina are the Articles of Organization and Transmittal Form. These documents would need to be filed with the Secretary of State in order to form an LLC.

The articles of incorporation should contain the following information:

• The LLC’s name and designation as an LLC;
• The principal office address of the LLC;
• The registered agent’s name and address;
• Whether the LLC is to be managed by a member or managed by a professional manager. If by a manger, then the managers’ names and addresses should be included;
• The effective date of the articles, but only if it is to be later date than the filing date;
• Whether the LLC is perpetual or if there is a date on which it will end;
• The name and address of one or more of the LLC’s organizers and their signatures.

While an LLC operating agreement is not required by law, it is recommended that an LLC have one drafted by an experienced business attorney. It is a document that is comparable to a partnership agreement for a partnership.

The members would want the operating agreement to do the following:

• Describe the LLC’s business structure;
• Establish the role, responsibilities and obligations of each of the LLC members;
• Specify in detail how the LLC will be run;
• Describe how a member can exit the LLC and what would happen to their ownership interest;
• Describe what would happen in the event of the death of a member;
• Who makes decisions for the company, especially who decides if members disagree;
• Who the members are and what their contributions are;
• How profits and losses are to be divided;
• Procedures for taking new members into the business and removing other members, if that is desired.

Without an operating agreement clarifying the specific duties of its members, an LLC could confront significant legal and operational difficulties.

What If a Foreign Corporation Wants to Do Business in South Carolina?

A foreign LLC that wants to do business in South Carolina should comply with South Carolina LLC naming rules. The foreign LLC must first confirm that the LLC name is available using the Secretary of State’s Business Name Search.

The LLC must then appoint a South Carolina registered agent, and file an Application for a Certificate of Authority to Transact Business with the South Carolina Secretary of State by mail. There is no online filing option.

The application must include either a Certificate of Good Standing or a Certificate of Existence from the LLC’s home state that is a maximum of 30 days old.

What Benefits Does South Carolina Offer an LLC?

In South Carolina, there are a few benefits offered to business owners who form an LLC. Owners of an LLC have the limited liability protection similar to that of a corporation. Also, with an LLC there is more flexibility in how profits are distributed. LLC’s are also relatively easy to operate, unlike corporations in some respects. LLCs can be dissolved easily when a member of the LLC dies or otherwise wishes to exit the business.

Another advantage of forming an LLC in South Carolina is the fact that the state does not require the filing of an annual report. This is required in most states.

What Disadvantages Are There for an LLC in South Carolina?

There are disadvantages to the LLC form of business in South Carolina. In some respects, operating as a sole-proprietorship or partnership could involve less paperwork and complexity. Arguably, forming and running an LLC may involve more bureaucracy, although in South Carolina, the bureaucracy is limited.

Do I Need the Help of a Lawyer to Form an LLC?

Starting a business can be challenging. Hopefully, if it is done right, it can prove to be profitable as well. To understand the distinctions and rights that attach to your business and its organization, it is a good idea to discuss your concept with an experienced local South Carolina corporate lawyer.

A lawyer experienced with LLCs can help you set up your LLC, ensure compliance with tax law and equip the business with an operating agreement that best suits your specific purposes.