Types of Business Entities in SC – Corporations, Partnerships, LLCs
So, you’re starting a business. Congratulations!
You’ve probably already made a lot of decisions: What are you going to make or sell? How are you going to market your products or services? Are you going to have a physical location, and, if so, where will it be?
For these kinds of questions, your own entrepreneurial expertise may be enough.
But, when it comes to choosing what type of business entity to set up, you’re going to need some legal expertise.
Your Myrtle Beach business formation attorney at Coastal Law can help you choose which entity will work best for your business, set up operating procedures, and file the required documentation with the SC Secretary of State. Which entity you choose will play a big role in determining how much personal liability and tax liability you have.
So, what are your choices?
Sole Proprietorships in SC
This is almost certainly not the ideal entity for you. It’s easy – you don’t have to file any paperwork, and the accounting is simple because you don’t have to keep your personal funds separate from the business account.
But a sole proprietorship offers you no protection from lawsuits – if your business gets sued, you get sued. And you will probably have a much higher tax liability.
Corporations in SC
You can protect your personal assets from liability by incorporating, which creates a separate legal entity – the corporation. How much protection you get, as well as how you pay taxes, depends on what type of corporation you choose and how it is managed.
Corporations can raise capital by selling shares of stocks. Shareholders become owners, but they do not necessarily take part in running the business. State law requires that you have a licensed attorney review and sign your Articles of Incorporation before filing them with the state.
There are different types of corporations in South Carolina, and which type you choose can have a significant impact on your personal liability, how your income is taxed, and whether you have requirements such as annual meetings and reporting requirements. Types of SC corporations include:
- C-Corporations (C-Corp) – this is a “standard” corporation, where corporate profits and shareholder distributions are taxed, and there are strict requirements as to reporting and annual meetings;
- S-Corporations (S-Corp) – this is a “closely held corporation,” that does away with the C-Corp’s double taxation and relaxes the reporting and meeting requirements;
- Professional Corporations – limits the liability of each member for malpractice of the other members; and
- Non-Profit Corporations – when the requirements for a non-profit corporation are met, income is not taxed.
Partnerships in SC
If you are going into business with someone else, you need to decide which type of partnership works best for you.
- General partnerships are like a sole proprietorship and are generally not a good idea. Two or more owners share any profits and losses, and all owners are equally liable for debts. If the business gets sued, all owners are personally liable.
- Limited Partnerships have one or more general partners who are responsible for operating the business, and one or more limited partners who provide capital and receive a percentage of the profits. The limited partners, like shareholders in a corporation, do not take part in running the business, and they are protected from liability.
- Limited Liability Partnerships protect all partners from liability and from the actions of their fellow partners. There are no “limited” partners in this arrangement.
Limited Liability Companies (LLC) in SC
An LLC is a hybrid entity – like a corporation, it protects owners from liability, and it allows owners to choose whether the profits are taxed at an individual level or at the corporate level. If the business faces a lawsuit, the plaintiff would be suing the company, not you personally.
SC Business Attorneys in Myrtle Beach, Conway, Columbia, and Charleston
Coastal Law’s Myrtle Beach business lawyers will help you to choose the right type of SC business entity, fill out and file the appropriate forms, negotiate and draft contracts, vendor, and sale agreements, and handle any business-related litigation that arises.
Schedule a free consultation to discuss your new business by calling (843) 488-5000 or filling out our online form.
1104 North Oak Street
Myrtle Beach, SC 29577
1314 2nd Avenue
Conway, SC 29526
231 King Street
Charleston, SC 29401
1201 Main Street, Suite 1913
Columbia, SC 29201
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