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The fact that corporations can be treated as independent legal entities, limiting the liabilities of the owners and managers and allowing the corporation to enter into contracts and maintain stability over time, makes them a popular business type.
Corporations fall into the following three categories:
This article will guide you through how to start a corporation in the state of South Carolina.
1Name Your Corporation
2
Appoint Directors
6Draft a Shareholder Agreement
7
Issue Shares of Stock
When it comes to naming your corporation, you need to comply with South Carolina’s business naming laws. There are many factors to consider during the process. These include making sure your business name is unique, suits your business well, aligns with all regulations, and includes a corporation designator.
You also don’t want to overlook the importance of choosing a name for which you can reserve a matching website domain name that has not been taken. Additionally, you can consider any “doing business as” (DBA) names or trademarks you may want.
Here are some guidelines to help you through the naming process:
Once you have settled on a business name, you can reserve the name if you are not ready to register it. You can do this by submitting an Application to Reserve Corporate Name to the Secretary of State and paying a $10 filing fee. This will hold your name for a renewable 120 days.
When you reserve your name or register your business, you can also reserve the domain name you plan to use.
The board of directors for a corporation oversees the operations of the business. For your business to get off the ground, a board of directors will need to be appointed.
The board of directors is often appointed by the initial incorporators — those involved in filing the initial paperwork for starting the business and who may or may not become shareholders. Note that only one incorporator is required, and only one member on the board is needed, although more is recommended.
Incorporators may be directors and also shareholders. But the three titles are distinct roles within the company. The incorporators are responsible for starting the business and filing the paperwork; the board of directors oversees the business; and the shareholders finance the business by owning shares in the company.
It’s a good idea for all incorporators to meet and elect an initial board of directors before filing the Articles of Incorporation. This board can then begin creating the corporate bylaws (described in a later section).
A registered agent is a person or entity that agrees to receive legal documents, court summons, and important state correspondence on behalf of the corporation.
When filing your Articles of Incorporation, you must list a registered agent who is an individual residing in the state or a corporation with an office in the state that is authorized to do business in South Carolina. You must include a South Carolina street address for the registered office and not a P.O. box.
While someone in the corporation can serve as the corporation’s registered agent, this is generally not advisable. Having a separate registered agent helps give space between your business and business activities and any legal issues.
We highly recommend going with a registered agent service for simplicity and protection. ZenBusiness can connect you with a registered agent service in the state of South Carolina.
Filing the Articles of Incorporation registers and establishes your business with the state. In this document, you will need to include:
In South Carolina, corporations are additionally required to file a form CL-1 Initial Annual Report of Corporations with their Articles of Incorporation. Forms may be filed online or by mail and must be accompanied by a filing fee of $135 (which includes $25 for the form CL-1). If filing by mail, you’ll need to provide both the original form and a copy.
The next step is to have the incorporators or the board of directors create the corporate bylaws. The bylaws establish all of the rules and day-to-day activities of your business. The creation of corporate bylaws is required for all corporations in South Carolina.
Your corporate bylaws may include:
Since the bylaws are a legally binding document, it is good to seek assistance when creating them. You can find templates online from ZenBusiness to get yourself started.
While you are not required to file your bylaws anywhere, you are required to keep them in a safe place with any other corporate records. It’s good to set up a corporate records book where you can keep all of your corporation’s important papers, including bylaws, minutes from meetings, and stock certificates.
Next on the list of things to tackle is the shareholder agreement. This is a document that outlines the rights and responsibilities of all shareholders and may include:
Again, this agreement can be drafted from a template, but you may want to utilize professional assistance. Your shareholder agreement should be kept with your other important corporate records.
Once your business is registered, and rules are in place, it’s time to issue stock. When you filed the Articles of Incorporation, you stated the number of stock shares authorized. The number of shares you issue should always be less than or equal to this number.
You’ll need to estimate how much capital you require before issuing shares of stock to determine a reasonable value for each share. Shares of stock may also be issued in exchange for services or other noncash value and capital contributions.
Each share is only issued once. However, after being issued, it can be traded and sold. All issued shares must be documented in the company’s annual report. Although it is not typically required, most corporations issue certificates to shareholders, indicating their shares.
Stock may be issued publicly or privately. Privately issued stock is usually issued to the founders, managers, employees, or a private group of investors. A public corporation makes a portion of its stock shares available for public purchase.
Each share is only issued once, but after issuance, shares can be traded and sold. All issued shares must be documented in the company’s annual report. Companies issuing public stock need to file quarterly statements with the Securities and Exchange Commission (SEC). They must also track how many shares are issued and to whom. You should check with the South Carolina Securities Division to see what might be required at the state level.
South Carolina’s Business One Stop website has a great tool for determining what business licenses you may need. Take a look at their Licensing Quick Chart to see if your county requires a business license and how you can go about filing for one.
In addition, your business may need a variety of other licenses or permits depending on your industry. Licensing happens at the federal, state, and local level, so you’ll need to do some research to determine what your corporation needs.
You may also need to register with the Department of Revenue for a retail sales tax license if you will sell any tangible goods at retail. Also, check with the city you plan on doing business with to determine if anything is required at the city level.
Since corporations are treated as distinct entities separate from the people involved, they require an Employer Identification Number (EIN). This number acts like the corporation’s Social Security number for tax purposes.
To apply for an EIN, you need to visit the IRS website. The application is simple and can be completed online in just a few minutes for free, after which you will receive your EIN. You should keep this number safe, as you will need it for future documentation and filing your business’s tax returns.
Remember that corporations must pay their own taxes separate from any taxes paid on shareholder earnings. This must be done at the federal and state levels by submitting the appropriate return each year. You may also be responsible for sales tax, employee withholdings, and other local taxes.
In South Carolina, corporations are required to file annual reports. These are completed and filed simultaneously with the corporation’s tax return. Information required in the report includes:
You must also pay a license fee, which is 0.1% of the corporation’s capital stock and surplus plus $15 (minimum fee of $25). The corporate tax return includes both the annual report form and information for determining the license fee. You’ll find the forms for both the C corporation Income Tax Return (SC1120) and the S corporation Income Tax Return (SC1120S) here, along with instructions for completing the forms. You can also file online.
The cost of starting a South Carolina corporation can vary considerably, depending on the size and type of business and location. At a minimum, you will need to pay the $135 fee for filing the Articles of Incorporation and form CL-1. Additional fees may include:
ZenBusiness can help alleviate any stress of getting your corporation off the ground by assisting with many of the required steps for a low annual fee..
Let us take care of the unpleasant paperwork, allowing you to stay focused on your business’s future. With our business formation services, you won’t have to worry about mailing in documents: We’ll handle each step with the state, and let you know when your corporation becomes official. Our work is quick and affordable, saving you a lot of headaches at an extremely low price.
Many benefits come with starting a corporation in South Carolina. As a business type, the benefits of a corporation include:
There are disadvantages you should be aware of, however. Among these are the tax structure (profits are taxed at both the corporation and personal income tax levels), and there’s a lot more red tape and paperwork involved than with other structures, such as limited liability companies (LLCs).
How your corporation is taxed in South Carolina will depend on its designation as a C corporation, an S corporation, or a nonprofit.
Keep in mind that you may be responsible for additional taxes, depending on your corporation’s operations and whether you have employees. You can learn more about taxes on the South Carolina Department of Revenue webpage.
Corporations are known for requiring a lot more paperwork and record-keeping. This is not surprising, considering they tend to have more laws to comply with and more people involved. Consider bylaws, shareholder agreements, keeping track of all stock issuances, meeting notes, etc., and the paperwork can add up pretty quickly.
You can change the name of your corporation in South Carolina by filing the Articles of Amendment and paying a $110 filing fee.
A single person can form a corporation in South Carolina.
Yes. You can use the South Carolina Business One Stop website to form your South Carolina corporation online.
To dissolve your corporation, you will need to file the Articles of Dissolution with the Secretary of State.
Are you looking to incorporate in the state of South Carolina? ZenBusiness can assist you through every step of running and growing your South Carolina business from the ground up.
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