How to Start a Business in South Carolina

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Aspiring business owners seeking an ideal destination to launch their venture should look no further than South Carolina. Boasting an impressive 463,549 active small businesses and 91,028 new businesses established in 2022 (according to the 2022 US Small Business Administration report), the Palmetto State has a vibrant entrepreneurial spirit. Part of this is likely due to the low costs for getting a business started. Unlike most states, South Carolina doesn’t require the filing of a DBA and forming an LLC costs only $110.

In our 12 step guide, we’ll cover everything from creating your business plan, coming up with a business name, getting registered, to hiring employees, to ensure you can get your South Carolina business started off on the right foot.

1. Research and Plan your Business

You have a compelling business idea, don’t you? That’s fantastic! However, before diving headfirst into it, it’s wise to take a step back and conduct thorough research. This involves delving into market analysis and meticulously outlining a business plan.

Market research entails identifying your target customers, evaluating your competition, and highlighting the unique aspects of your business. Next, transform all that valuable information into a comprehensive business plan. Now, don’t dismiss it as a tedious document. Think of it as your strategy, your roadmap, your secret weapon.

While you may be eager to get started, but trust me, this step is too crucial to overlook. In fact, according to Harvard Business Review, businesses with a well-defined, written plan are 16% more likely to achieve great success compared to those without one.

Now, don’t fret. Your plan doesn’t have to be a lengthy novel. Even a concise three-page plan can make a strong impact. Your plan will serve as the playbook that guides your business, addressing critical questions:

• What sets your business apart (your Unique Selling Point)?
• Who is your target market?
• What will drive your revenue?
• How will you execute your marketing strategy?
• What resources do you need to get started?

Now, you’re fully prepared to conquer the world. Best of luck!

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Want More Info?:Proven Strategies for Writing an Effective Business

2. Choose a Business Structure

After creating your business plan you’ll want to determine the legal structure for your business. Consider your comfort with personal liability risk, desired tax status, and source of capital. There are four common types of business structures to evaluate:

• Limited Liability Company (LLC)
• Corporation
• Sole Proprietorship
• Partnership

Limited Liability Company (LLC)

An LLC or limited liability company is a business structure that provides limited liability and pass-through taxation benefits. Think of it like incorporating a business without the extra formalities.

An LLC can help protect business owners from legal liability for company debts and other liabilities, just like a corporation. Because an LLC is treated as separate from its owners, individual owners don’t typically bear legal responsibility for business debts.

Pass-through taxation means that LLC income isn’t taxed separately but instead passed through to the owner(s). If the LLC has more than one owner, a tax return for the company must still be filed. The income or loss is shown on this return and passed through to the members. Members must report the income or loss on their personal tax returns and pay any necessary taxes.

Additional Information:What is an LLC and is it the right fit for your business?

In short, LLCs bring the benefits of both corporations and partnerships, along with easy maintenance and flexibility innownership arrangements.

Corporation

A C corp (corporation) is a separate legal entity that can earn profits, be taxed, and held legally liable. However, forming a C corp is more expensive and requires extensive record-keeping, operational processes, and reporting. Nevertheless, it provides robust protection from personal liability. C corps pay income tax on profits, not owners. In some cases, corporate profits may be subject to double taxation, both at the company level and on shareholder dividends. C corps have an independent life from shareholders. Even if a shareholder leaves or sells their shares, the business can continue with few interruptions. Raising capital is easier for C corps as they can sell stock, attracting top talent. It’s a good option for medium- to higher-risk businesses that need money, plan to go public, or aim to be sold eventually. Overall, C corps offer many benefits but require careful consideration for success.

Additional Information:Advantages and Disadvantages of a Corporation

Sole Proprietorship

A sole proprietorship is a business structure where the owner operates and manages the company independently. In a sole proprietorship, the owner is personally responsible for all aspects of the business, such as profits, losses, investments, and liabilities. The advantage of this type of structure is that it’s easy to set up and manage since everything goes through the owner. It also enables the owner to keep all the profits and ultimately control their business decisions.

However, there are some downsides to this structure as well. For example, sole proprietors are personally liable for any debts or obligations incurred by their business. This means that if a lawsuit is filed against them, they can be held responsible for any losses. Sole proprietorships tend to have difficulty raising money since banks hesitate to lend to them. Finally, tax regulations may be more complicated since all profits and losses are reported on the owner’s personal income tax return.

Additional Information:What is a Sole Proprietorships and How Does it Work?

Partnership

A general partnership is a type of business where two or more people come together to make money. Unlike other types of businesses, like corporations, you don’t need to register a general partnership with the state. It’s a simple and easy way to start a business. When you’re in a general partnership, each person has unlimited liability for the business. If the company can’t pay its debts, you must pay them with your money. You also share the profits and losses of the business with the other partners.

Additional Information:Advantages and Disadvantages of General Partnerships

3. Choose your Business Name

Now that you’re up to speed on legal structures, it’s time to focus on the next step. Choosing a great business name is crucial to the success of your business. You might feel tempted to pick the first name that comes to mind, thinking the product or service matters more than anything else. But in reality, the name is what opens the door for you. Your choice of name can make or break your business, as it’s a crucial part of your marketing efforts once your business is established. Therefore, it’s best to take your time and develop a robust and memorable name. After all, it’s not just about getting started but about making your business thrive in the long run. If you feel like you’re lacking in the creativity department and can’t seem to come up with any good names, it might help to remember the three crucial ingredients of a great business name:

• Creates an Identity
• Memorable and Easy to Recall
• Easy to Search and Find

For a detailed deep dive into creating a great business name, check out our guide, Tips for creating a business name.

4. Register your Business

Once you have finalized the business structure and chosen a name for your venture, it is crucial to take the necessary steps to officially register your business in South Carolina. The process of registering a business name in South Carolina varies depending on the specific structure of your business.

• Register a South Carolina LLC
• Register a South Carolina Corporation
• Register a South Carolina Sole Proprietorship
• Register a South Carolina Partnership

Register a South Carolina LLC

To establish an LLC in South Carolina, you’ll need to submit a document known as Articles of Organization to the South Carolina Secretary of State. The filing fee for Articles of Organization in South Carolina amounts to 110. Before finalizing your LLC filing, it’s important to ensure that your desired business name is available by conducting a thorough search. Once you confirm its availability, you can proceed with filing the Articles of Organization. This filing should include the LLC’s legal name, address, contact information of the owner(s), and the designation of a registered agent in South Carolina. Although not legally required, it is advisable to create an operating agreement to establish essential guidelines for your LLC, including ownership percentages and voting rights.

Register a South Carolina Corporation

Corporations are formed in South Carolina by filing Articles of Incorporation with South Carolina Secretary of State. South Carolina charges 235 to file Articles of Incorporation. You will also need to appoint a registered agent to receive service of process documents. You will also want to create a corporate bylaws document to establish its internal operational rules.

Register a South Carolina Sole Proprietorship

The process of starting a sole proprietorship in South Carolina is a simpler process than forming an LLC or Corporation. You aren’t required to file any documents at the state level, but there are some formal steps that you might need to take. For your business name, the legal name for a sole proprietorship is your personal name. If you want to operate under another name you will need to file an Application for Registration of a Trademark or Service Mark with the South Carolina Secretary of State, to prevent other South Carolina businesses from using your name. You’ll also need to obtain any applicable business licenses/permits, which are outlined in steps below.

Register a South Carolina Partnership

When starting a general partnership in South Carolina, there is no requirement to file official documents. However, it is highly recommended to create a partnership agreement. This agreement helps establish decision-making rules and can be beneficial in resolving disputes between partners. If the partnership operates under a name that does not include the partners’ last names you’ll need to file an Application for Registration of a Trademark or Service Mark with the South Carolina Secretary of State to prevent other South Carolina businesses from using the name.

5. Get an EIN

An EIN is an Employer ID Number. This is used to identify your business to the IRS when you file your taxes, as well as for employment purposes. It’s a unique identification number given to each business, much like a social security number is given to each individual. You must acquire an EIN if you form your business as a Corporation, Partnership, or LLC. Other business owners should still strongly consider getting one. An EIN is necessary for many types of business filings and you can use it instead of your social security number.

6. Register for South Carolina Sales and Use Tax

In South Carolina, sales tax is levied on the sale of goods and certain services. The statewide sales and use tax rate is six percent (6%), with some counties imposing an additional one percent (1%) local sales tax. The sales tax applies to most retail transactions. Failing to fulfill this obligation can result in penalties and interest charges.

How to Know if you need to collect Sales Tax in South Carolina?

Retailers selling tangible personal property for storage, use, or consumption must acquire a retail license from the SC Department of Revenue in the following instances:

• Retailer operates a business location in South Carolina.
• Retailer is eligible to conduct business in South Carolina.
• Retailer engages in solicitation and receives purchases or orders through agents or salesmen in South Carolina.

The same principles extend to individuals who establish an online business in South Carolina. If your online business offers taxable products or services, it is necessary to acquire a sales/use tax license and adhere to all relevant regulations that pertain to a brick-and-mortar establishment.

For more detailed information visit the SC Department of Revenue: Sales Tax page or contact a qualified South Carolina tax professional.

7. Apply for South Carolina Business Licenses and Permits

To ensure legal compliance with federal, state, and local laws, it is important for your business to obtain one or more business licenses and/or permits. The specific licenses and permits required will vary depending on various factors, such as the nature of your business, the products and services you offer, the data you collect, and your location. It is crucial to understand and adhere to these requirements to operate your business smoothly and within the bounds of the law.

Federal Licenses and Permits

Your business may need a license or permit to operate legally if your business is involved in an activity that is regulated at the federal level, such as:

• Agriculture
• Alcoholic beverages
• Aviation
• Firearms, ammunition, and explosives
• Fish and wildlife
• Commercial fisheries
• Maritime transportation
• Mining and drilling
• Nuclear energy
• Radio and television broadcasting
• Transportation and logistics

For more detailed information on federal business licenses and permits visit the Small Business Administration: Federal Licenses and Permits page.

State and Local Licenses and Permits

South Carolina does not have a general business license at the state level, but local licenses are often required.For more detailed information visit the State of South Carolina Business License page.

8. Open a Business Bank Account

Separating your personal finances from your business finances helps to protect you and keeps all of your money organized. Mixing them together, known as “co-mingling funds”, can lead to big issues, so it’s best to have a separate business bank account. If you don’t you could make bookkeeping and accounting more difficult and even lose your limited liability status (if your business is an LLC or Corporation). If your business is sued, it could be argued that your personal money and assets are fair game.

We have an in-depth guide to opening a business bank account to give you all of the details you need to get it done. It will help you to choose a bank and get all of your documents in order.

9. Set Up Credit Card Processing

Accepting payments via card is essential for most modern businesses. Most transactions over $10, around 60%, are now processed by card. This makes processing card payments essential if you want to compete in today’s market.

To get a more detailed breakdown on this topic you can check out our guide: a href=”https://stepstostartingabusiness.com/how-to-accept-credit-card-payments/” target=”blank”>How to Accept Credit Card Payments

10. Establish an Accounting System

Setting up an accounting system allows a business to track business expenditures and create reports to gain insight into your business’ performance. By establishing an accounting system, you can quickly and easily create budgets, manage cash flow and generate the required financial reports to know how your business is doing.

For a more in-depth breakdown, visit our Small Business Accounting 101 guide. Covered in the guide are the steps to do small business accounting, including how to choose between cash basis and accrual basis accounting methods.

11. Get Business Insurance

One of the most overlooked aspects of starting a new business in South Carolina is obtaining business insurance. Having the proper business insurance coverage helps to mitigate your risk so that you’re covered in the event of an accident, natural disaster, or lawsuit.

In our Small Business Insurance Guide, we go over the six types of business insurance so that you can make sure you’re covered.

12. Hire Employees and Set Up Payroll

If you want help running your business, you’ll want to consider hiring employees and setting up a payroll. Employers are responsible for reporting new hires and verifying their employment status.

There are two items that employers must complete to be federally compliant when hiring new employees. You must verify that any employee is eligible for employment in the US and obtain a signed IRS Form W-4 to ensure you are withholding the correct amount for federal taxes. For more detailed information, visit the IRS page for Businesses with Employees.

Since South Carolina has a state level income tax, you’ll need to withhold taxes from your employees and remit them to the state. In addition to this you’ll also need to register for unemployment insurance. Luckily in South Carolina both of these registrations are done with the South Carolina Department of Revenue. For more specific information about your requirements as an employer in South Carolina visit the SC.gov: Planning on Hiring or Adding New Employees? page for more info.