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.
This article will guide you through how to start a corporation in the state of South Carolina.
To start a corporation in South Carolina, you must file the Articles of Incorporation with the Secretary of State. However, before you get to that point, and afterward, there are several other steps to consider. To simplify the process of forming a corporation in South Carolina, we’ve put together 10 easy steps to form your business:
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.
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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.
Filing the Articles of Incorporation registers and establishes your business with the state. In this document, you will need to include:
If you’re ready to launch and don’t want to wait weeks for your paperwork to get processed, we can help. You can form your corporation in South Carolina in as little as one day with our rush filing services. With our rush filing service, we prioritize your formation paperwork so you can get it filed with the South Carolina Secretary of State within 1-3 business days for just $100 + state fees.
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.
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.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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