Starting an S-corporation (S-corp) in South Carolina can be a complex process, but it is not impossible. The benefits of creating an S-corp include pass-through taxation, limited liability protection, and the ability to raise capital through the sale of stocks. Whether you’re just getting started or you’re a seasoned business owner, follow these steps to launch your S-corporation in South Carolina.
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Step 1: Choose a Business Name
The first step in starting an S-corp in South Carolina is to choose a business name. The name must be unique and distinguishable from other business names registered with the South Carolina Secretary of State. You can check the availability of a business name through the South Carolina Business One Stop website.
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Once you have chosen a name, you may want to do some research to make sure that the name is available as a domain name and on social media platforms. You can then register your business name with the South Carolina Secretary of State by filing an Application for Reservation of Name form.
Step 2: Choose a Registered Agent
A registered agent is a person or a company who receives legal documents on behalf of your business. As per South Carolina law, every S-corporation must have a registered agent with a physical address in South Carolina. You can hire a registered agent service or appoint an individual to do this job.
Step 3: File Articles of Incorporation with the South Carolina Secretary of State
The first formal document you need to file with the South Carolina Secretary of State to start your S-corporation is the Articles of Incorporation. This document typically includes:
- The name and address of your corporation
- The name, address, and signature of your registered agent
- The business purpose or objectives of your corporation
- The number, classes, and par value of the shares you’re authorized to issue
- The name and address of the incorporator(s)
You can file the Articles of Incorporation online or by mail, along with the appropriate filing fee.
Step 4: Obtain Necessary Permits and Licenses
Depending on your type of business, you may need to obtain a business license from the city or county in which you operate. You may also need to obtain a professional license or permit from state or local agencies, depending on the nature of your business.
Step 5: Obtain an EIN Number
The Internal Revenue Service (IRS) requires every S-corporation to obtain an Employer Identification Number (EIN). You can apply for an EIN online through the IRS website, and you will receive your EIN immediately upon completion.
Step 6: Draft Bylaws and Appoint Directors
Bylaws are the rules that govern how your S-corporation operates. At a minimum, your bylaws should outline the responsibilities of your directors and officers and address how they will be elected and removed. You should also designate the date and time of your annual stockholders meeting.
You will need to appoint the first board of directors for your S-corporation. The board usually consists of three or more directors who help oversee the direction and policies of your S-corporation.
Step 7: Issue Stock Certificates
As an S-corporation, you can sell ownership in the form of stocks to raise capital. Before you can issue stock certificates, you must determine the total number of shares your corporation will issue and the value of each share. Stock certificates should be issued to each stockholder, and the books should be updated to reflect who owns what equity in the corporation.
Step 8: File for S-corp Tax Election with the IRS
As an S-corporation, your business structure enjoys various tax benefits such as pass-through taxation, but you need to file Form 2553 with the IRS to initiate the S-corp election. This document notifies the IRS of your corporations' intent. Filing requirements and regulations from the state and local levels may vary concerning taxes and entity requirements.
Conclusion
Starting an S-corp in South Carolina involves multiple detailed steps, but if you follow them correctly, this entity formation can give your business flexibility and expand that protects your assets and minimizes political red tape. Take your time and familiarize yourself with the state corporate statutes and regulations, and be prepared to commit several weeks in bringing your business idea to life. Engage trusted advisors, obtain legal advice and guidance, most importantly, delegate the busy work and legal responsibility to a trustworthy third-party government services partner.
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