How to Start a Business in SC in 6 Steps
Starting a business can be a uniquely rewarding—albeit challenging—endeavor. This is particularly true depending on where you look to set up shop. If you’re starting a business in South Carolina, you’ll want to know what the Palmetto State expects out of budding entrepreneurs.
Believe it or not, not all states are the same in terms of making it easy for new businesses to get off the ground. Some make the process easier than others. This can take the form of less paperwork, fewer required permits and licenses, or less stringent rules around registering a business entity. Starting a business in South Carolina is pretty similar to other states in terms of its rules and requirements, albeit with its own quirks and benefits. For starters, there’s no state property tax or local income tax, which saves budding businesses money.
Whether you’re looking at starting a new business in South Carolina, want to relocate, or open a new branch of your existing organization, there’s a lot to love about setting up shop in the state. Here’s what you need to know in order to get started.
Starting a Business in SC in 6 Steps
Step 1: Decide on a Business Entity
The first step toward starting a business has to begin with setting up a structure. By this, we’re not talking about a hierarchy and titles within the company. Rather, a business entity is the official entity that you’re using to register your business with local and state agencies. This can be a crucial decision for your business that affects how you file business taxes, run your company, and handle liability issues in the event of a lawsuit or bankruptcy.
This is the case whether you’re starting a business in South Carolina or anywhere across the 50 states. Thankfully, picking the right business entity doesn’t have to be a challenge. Most businesses choose from a handful of options: sole proprietorships, partnerships, limited liability companies, and corporations. You will have to file with state and local bodies, depending on which business entity you choose.
Sole Proprietorships in South Carolina
Sole proprietorships help individuals get down to business quickly and without a ton of paperwork. South Carolina makes the process easy, too. You can use your own given name for a sole proprietorship, or take on a trade name (also known as an assumed business name). South Carolina does not require sole proprietors to register with the state, but if you do decide to operate under an assumed business name, you will need to file a DBA.
One advantage of sole proprietorships is how simple they are to set up—both in terms of setting up a business as well as paying taxes on business income. You can file your business tax return through your personal return, since your business and personal finances are seen as the same in the eyes of the IRS. However, this also means your personal assets are not protected from legal action or bank repossession, which means that someone could come after your own property if there’s an issue related to your business.
Limited Liability Corporations in South Carolina
Limited liability corporations, also known as LLCs, are a perennial favorite among small business owners looking to pick a business entity that offers their personal assets some protection from financial and legal trouble that their business might encounter. LLCs offer tax flexibility and personal liability protection; you can file your LLC’s tax returns right from your personal income tax return, but still keep your personal assets out of contention in the event that your business encounters trouble. This makes LLCs a common choice for most entrepreneurs.
There are several kinds of LLCs from which you can choose. The most simple is a single-member LLC, which is similar to a sole proprietorship. The main difference is that an LLC provides liability protections that a standard sole proprietorship does not. This gives you a degree of security against having your personal assets seized if your business encounters problems.
If you’re starting a business with one or more partners, you may want to look into filing a partnership LLC. These offer all the same perks and protections as other LLCs, but are designed for businesses with more than one stakeholder. Each individual files taxes for the LLC through their personal return, which makes it easier to take care of the business’s tax tasks.
There are also limited liability partnerships and limited partnerships, which also provide some degree of personal asset protection for partners. Each of these additional partnership types are designed to account for different kinds of business operations, such as businesses with inactive partners or several partners of differing levels of decision-making capabilities. Be sure that the one you choose aligns with your intended operating structure, and contact a lawyer if you’re not sure which one makes sense for your business.
Partnerships in South Carolina
Generally speaking, business partnerships are official business entities that include two or more people. There are several kinds of partnerships available, each with different rules and tax requirements.
A general partnership is an unincorporated business between two or more individuals, and does not have to register with the state of South Carolina (although some local governments may require these businesses to have other forms on file). General partnerships are good when there’s no need for bigger, more concrete business entities, but provide less protections in the event of the business being sued or going insolvent.
Corporations in South Carolina
If you’re starting a business with more complex legal and tax needs, an LLC, partnership, or sole proprietorship may not be the right option for you. Instead, you may want to look into forming a corporation, which will create even more distance between a business owner and his or her company’s dealings.
Corporations primarily deal with how businesses pay taxes. LLCs and proprietorships all require business owners to file tax returns through their own personal returns, whereas corporations allow businesses to pay taxes independently from their owners. A C-corporation is an incorporated business, which comes with a more comprehensive set of constituents (such as shareholders, directors, and company officers). C-corps pay taxes independently from any officers or owners of the business. On the other hand, S-corporations function similarly to C-corps, but use pass-through taxation like LLCs. Lastly, there are professional corporations, which are designed for professionals such as doctors, accountants, and attorneys.
Step 2: Choose a Name for your Business
Once you’ve determined what kind of business entity works best for your new company, you’ll need to land on a name. Deciding on a business name can be delightful or dreadful, depending on the circumstances. In South Carolina and elsewhere, you’ll want to make sure your business name is distinguishable from other existing companies within the state. You can’t pick a name that’s already been registered, nor can you choose a name that is similar enough to cause confusion for prospective customers.
Thankfully, South Carolina makes it easy to check out business names that are already registered in the state. All you need to do is check out the South Carolina Business Entities Portal in order to search for all existing businesses registered with the state. We also recommend a Google and U.S. Patent and Trademark search as an additional step to ensure you won’t run into any legal issues.
Step 3: Get an Employer Identification Number from the IRS
You’re almost ready to file your business with the state, but you’ll first want to get an employer identification number (EIN) from the IRS. An EIN allows you to legally hire employees, helps provide W9 forms to clients, and aids you significantly when opening a business bank account. Plus, you’ll need an EIN if you want to seek small business financing, as this number is instrumental in tracking your business’s credit history.
Getting an EIN is simple. All you need to do is go to the IRS homepage, enter details about your business, and you’re on your way. Filing for an EIN is free of charge and easy to do through the IRS directly. There’s rarely ever a need to go through a filing service, as the process is so straightforward that it only takes a few minutes to complete.
With your EIN in tow, you’re ready to register your business in South Carolina. More on that below.
Step 4: Register Your Business in South Carolina
You’ve picked out the right kind of business entity for your new company, and you’ve come up with a unique and clever name. Now you’re ready to get down and dirty with the details that come with registering a business in South Carolina.
Thankfully, the state-run South Carolina Business One Stop website makes it easy to cover all of the steps that registering your business entails. You can browse through existing business names on file, determine which business entity works best for you, file paperwork, and tackle all of the big and little details that come with registering your business with the state.
Step 5: Get Business Permits and Licenses (as Necessary)
You may need to get certain business permits and licenses if you’re starting a business in South Carolina. Some industries, such as contracting and construction, need permits before they can legally work on client property. Other businesses, like bars and restaurants, will need liquor licenses before they can serve customers.
Each county in South Carolina has different requirements for licensure, and there are no blanket licenses to operate throughout the entire state. Thus, there are too many license types and industries to cover in just one article. To find out whether your new business needs to secure specific licenses and permits, you’ll again want to check out the South Carolina Business One Stop portal.
Step 6: Set up a Business Bank Account
You’ve made it through the hardest part of starting a business in South Carolina. Congratulations! Onto the last—but crucial—part of getting set up. Before you start your business, you’ll want to get a separate bank account for your business. This should take the form of a business checking account, as you’ll want a place to store your income, pay invoices, and withdraw operating cash.
No matter what business entity you’re operating—even a sole proprietorship—separating personal and business finances is crucial. A business bank account makes it easier for you to keep an eye on your cash flow, pay for business expenses, pay employees, and even gives you more of a buffer between your own finances and that of your business. Plus, if you ever want to pursue small business financing, having business bank accounts will help demonstrate your ability to handle business finances professionally and accurately.
Opening a business bank account in South Carolina isn’t difficult, either. Most banks will ask you for some basic information about your company. Be sure to have your EIN at the ready, as well as the name and address of your business. You will also want to have your social security number at the ready (and that of any business partners, too), as banks will need this information as part of the approval process as well.
Once you have a business checking account set up, you can begin to think about other banking needs. There are a ton of great savings accounts for small businesses, be they liquid savings accounts or certificates of deposit. Each of these account types pays you interest on your balance, which means you’ll get paid just for storing your extra business cash in an account. You may also want to think about small business financing at this point as well, as well as open a business credit card to help with everyday and large-scale purchases.
Starting a Business in South Carolina: The Bottom Line
It can feel daunting to start a business in South Carolina, or any other state for that matter. But with a little bit of preparation, patience while wading through paperwork, and the follow-through required to get to the end of the process, you can get your company set up with relative ease. Be sure to pay attention to the details, don’t be afraid to move slowly when required, and stay patient. The payoff is worth it in the end.