A limited liability company ("LLC") is defined as a business organization that shares the limited liability benefits of a corporation but the management and tax freedom of a partnership. LLCs are legal entities created only under state law. "Limited liability" simply means that everybody associated with the company is not liable for damages beyond their initial investment and cannot be held vicariously liable. In other words, a person who puts money in LLC only risks losing the amount of their investment and will not have to pay any more if the company is still in debt. It is a way of limiting the risk of investing in a company.
Business owners and organizations concerned with potential lawsuits or debts that could arise in the business should consider forming an LLC. If a business owner believes that the type of business insurance that they have on your business would not fully protect their assets, an LLC may be a good idea.
To form an LLC in South Carolina, you must complete the following requirements:
- Choose a name for your LLC: Under South Carolina law, an LLC name must have one of the following: "Limited Liability Company," "LLC," "L.L.C.," "Limited Company," "LC," or "L.C." The term "Limited" can be short like "Ltd." and "Company" or "Co." You may reserve a legal entity name for 120 days by filing a Application to Reserve Name with South Carolina Secretary of State and paying a filing fee.
- File Articles of Organization: In South Carolina, you must file an Article of Organization with the South Carolina Secretary of State and pay a filing fee.
- Appoint a Registered Agent: Every South Carolina LLC is required to have an appointed agent for service of process. The agent is an individual or business entity that agrees to accept legal documents on behalf of the LLC’s if it is sued. A registered agent can be an individual or business that is authorized to do business in South Carolina. The registered agent must have a South Carolina physical address.
- Prepare all Tax Requirements: If the South Carolina LLC has more than one individual, they must obtain its own IRS Employer Identification Number (EIN), even if there are no other employees. If you form a one-member LLC, you must obtain an EIN for it only if it will have employees. You also have to register with the Department of Revenue to file tax returns.
- File a Annual Report: Unlike most states, South Carolina does not require LLCs to file a annual report or pay a annual fee.
- Obtain all Business Permits and Insurance: If any business permits are required if necessary. Also if your business needs it, get the right type of insurance.
The documents that are required to form a LLC in South Carolina are the Articles of Organization and Transmittal Form. These documents would need to be filed with the Secretary of State before the formation of the LLC.
In South Carolina, there are many benefits offered for business owners who form an LLC. Owners of a LLC have the limited liability protection similar to a corporation. Also, having a LLC there is a lot more flexibility of distribution of profits and you don’t need to do a 50-50 split like partnerships. LLC’s are also very easy to operate unlike corporations. In addition, all your business losses, profits, and expenses flow through the company to the individuals. This way, you would avoid the double taxation of paying corporate tax and individual tax.
There are disadvantages to LLC’s in South Carolina. LLCs can be dissolved easily when a member of the LLC dies or goes bankrupt. Also, Running a sole-proprietorship or partnership will have less paperwork and complexity while LLCs have a bit more paperwork to deal with.
Starting a business is a very difficult but potentially lucrative option. To understand the distinctions and rights that attach to your business and its organization, it is a good idea to discuss your ideas with an experience local South Carolina business lawyer. A lawyer experienced with limited liability companies can help you incorporate your LLC and explain the tax and organizational benefits of the limited liability structure