How To Start A Business In South Carolina

Starting your own business is a big decision, and it might feel like a lot to handle. But don’t worry, we’re here to help you figure it out, step by step. Our guide covers the basics of starting a business in South Carolina, from making a business plan to choosing a business structure, getting the right licenses, and more.

Steps To Start A Business In South Carolina

Step 1: Choose a Business Idea

Starting a business in South Carolina begins with choosing the right kind of business.

The right business is different for every person and can depend on factors such as personal interests, skills, experience, financial resources, customer demand, and overall economic conditions. Some people choose industries they are passionate about, while others focus more on profitable sectors with less competition, but ultimately, the key to finding a winning business idea is to persistently seek knowledge, embrace change, and remain committed to delivering value to customers.

To help research which type of business is right for you, be sure to check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.

Step 2: Write a Business Plan

After honing in on an idea, the next step should be writing a business plan. The plan not only serves as a blueprint to clarify your vision and guide you through each stage of your entrepreneurial journey, but it will be used to calculate the startup costs and validate whether the business is feasible.

Related: How to write a business plan

Step 3: Find the Money

With the idea locked down and the business plan completed, the next step is to make sure the money is available to continue. It’s important to know the various funding options available to new companies and choose the one that best fits the specific needs of the business. Here are some of the most common ways to finance a small business:

Personal funds: Tapping into savings represents the most straightforward approach to acquiring start-up money. This can include savings, retirement funds, and obtaining a home equity loan.

Conventional bank loans: Small business owners can apply for a bank loan, providing a lump sum of cash at a fixed interest rate. However, qualifying for a traditional bank loan can be difficult for new businesses, as they may require a business plan, personal investment, collateral, and a good credit history.

SBA loan guarantees: The Small Business Administration (SBA) offers loan guarantee programs to help small businesses access capital. These loans are backed by the government, making them less risky for lenders and easier for small businesses to qualify for.

Microloan programs: Microloan programs offer small loans, typically between $5,000 and $150,000, to small businesses that cannot qualify for traditional bank loans. These loans typically have more relaxed qualification criteria and may include additional benefits, such as business training and mentoring.

Investors: Startups can attract angel investors, venture capitalists, or private equity firms that provide funding in exchange for equity in the company. This allows entrepreneurs to fund their businesses without taking on debt, but it also means giving up partial ownership of their companies. Investors typically seek high-growth potential businesses and may offer valuable expertise and connections.

Small business grants: Federal, state, and local government agencies, as well as private organizations, offer various grants for small businesses. Grants are funds that don’t have to be repaid and may sound like the best option, but in reality, there are very few grants for startups, and the available ones are very competitive.

Step 4: Select a Business Structure

The next step to starting a South Carolina business is to select and form a business structure (also called a business entity). A business structure refers to the form of organization that a particular business takes. Different forms offer varying degrees of asset protection, tax benefits, and compliance responsibilities for business owners.

The most popular legal structures for small businesses are sole proprietorships, general partnerships, corporations, and Limited Liability Companies (LLCs).

Sole proprietorship: The easiest and least expensive entity to start, a sole proprietorship requires little paperwork (if any) to get started. You own and operate the business entirely and keep all profits after expenses are paid. However, there is a significant drawback as the owner faces unlimited personal liability for any debts or legal issues the business might incur.

General partnership: Similar to a sole proprietorship, a general partnership is when two or more individuals co-own a business. General partnerships are relatively easy to establish, but partners face unlimited liability and potential disagreements over business decisions.

Corporation: A corporation is a separate legal entity owned by shareholders, providing them with limited liability protection. Corporations have more complex requirements such as annual report filings, board of director meetings, and issuing shares of stock. However, they offer benefits like limited liability, more avenues to raise capital, and increased credibility.

Limited Liability Company (LLC): An LLC combines the limited liability of a corporation with the tax benefits and flexibility of a sole proprietorship and partnership. Owners, known as members, are protected from personal liability for business debts, while profits and losses can be passed through to their personal income tax returns. LLCs have fewer corporate formalities compared to corporations, but even though the setup process is easier than a corporation, it is more complex than a sole proprietorship or general partnership.

Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.

Some popular formation services include:

IncFile - Great service and free registered agent the first year.

Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!

ZenBusiness - Easy to use and free registered agent for 1 year!

Step 5: Register the Business

After getting the funds in place and the business structure set up, the next phase is getting the business registered. Each business will have different requirements, but there are potentially several federal, state, and local registrations for South Carolina businesses. Some common registrations include:

Business licenses: While the state of South Carolina doesn’t have a general business license, most businesses in South Carolina will need to obtain a business license from the local government where the business is located.

Employer Identification Number: An EIN is required for most businesses (partnerships, corporations, multi-member LLCs, or any business with employees) as it is used to identify your business for tax and reporting purposes. You can apply for an EIN online through the Internal Revenue Service’s (IRS) website.

Retail License: Businesses selling products and certain services will need to register for a Retail License (also referred to as a sales tax license) from the South Carolina Department of Revenue.

Professional licensing: Some occupations, such as barbers, massage therapists, and landscapers, require licensing through the South Carolina Department of Labor. While this isn’t a license on the business, licensing is required to provide certain services.

Step 6: Open a Business Bank Account

Maintaining a clear separation of business and personal finances is an important step when starting a new business. While it may sound cumbersome to manage dual bank accounts and credit cards, doing so can provide numerous benefits, including improved financial protection, simplified bookkeeping, easier tax preparation, and improved transparency.

Step 7: Hire Employees

Some businesses will be able to skip this step, but if you plan to hire employees, there are some challenges that come with hiring in South Carolina. To ensure a smooth process, there are several agencies to register with, such as the Internal Revenue Service, the South Carolina Department of Employment, and the South Carolina Workforce.

Additionally, employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.

Step 8: Obtain Business Insurance

Running a small business comes with a lot of risks, and even with the best precautions, accidents can happen. Just a few of the common risks that small businesses may face include:

Property damage: Your business property, equipment, or inventory could be damaged or destroyed by natural disasters, fires, or vandalism.
Theft: Your business property or inventory could be stolen by a burglar or employee.
Legal liabilities: Your business could be sued by a customer, employee, or other party for claims of negligence, injury, or discrimination.
Workplace injuries: Your employees could be injured on the job, leading to medical expenses and legal liabilities. In South Carolina, businesses with four or more employees (including part-time, temporary, and seasonal workers) are required to carry workers’ compensation insurance. This coverage provides medical and wage replacement benefits to employees who suffer work-related injuries or illnesses.

Each business has unique needs, and having the right insurance coverage is useful in protecting your small business.

Step 9: Set Up Bookkeeping

The last step we will cover is establishing an accounting system. Whether you opt for a simple pen-and-paper method, a spreadsheet, accounting software, or hiring a bookkeeper, having a system in place to accurately track your income and expenses is necessary.

To maintain accurate financial records, you need to keep track of various types of financial documents such as sales receipts, accounts payable and receivable, bank statements, and credit card statements. Proper financial recordkeeping not only keeps you informed about your business’s financial health but also helps you avoid potential problems. Inaccurate or incomplete financial records can attract unwanted attention from tax authorities, leading to penalties or fines.

This material is property of StartingYourBusiness.com

Common questions when starting a business in South Carolina

What are the steps to starting an LLC in South Carolina?

There are three main steps to starting an LLC in South Carolina. These include:

1. Making sure the LLC name is available
2. Appointing a South Carolina Registered Agent
3. Filing the Articles of Organization

How much does it cost to start an LLC in South Carolina?

The state filing fee to start an LLC in South Carolina is $110 to file the Articles of Organization with the South Carolina Secretary of State.

Does a sole proprietor need a business license in South Carolina?

In South Carolina, whether a business needs licensing depends on the type of business and its location, not the type of business structure. Business licensing requirements can vary based on the city or county where the business operates. Some types of businesses may not need a license at all, while others might need one or more licenses from different government agencies.

South Carolina Small Business Resources

There are 479,314 small businesses in South Carolina, which is 99.4% of all businesses in the state,¹ and 42.2% of South Carolina employees work for small businesses.² Because of the economic impact of small businesses, the state of South Carolina has invested in several small business programs to help South Carolina businesses start and grow. Some of these resources include:

SCORE South Carolina: A nonprofit association, SCORE aids small businesses in their inception, growth, and achievement of goals through education and mentorship programs.
South Carolina Department of Commerce: This state department focuses on fostering economic opportunities for individuals and businesses to advance the state’s economic development.
South Carolina Division of Small & Minority Business Contracting and Certification: The SMBCC helps minority- and women-owned small businesses connect with State contracting and procurement opportunities through the Material Management Office (MMO).
South Carolina Internal Trade Coalition: This group assists businesses in identifying potential markets for export goods and assisting businesses with the export process.
South Carolina Research Authority: SCRA is a non-profit corporation chartered by the state government that offers loans to tech companies participating in the SC Launch Program, a state-sponsored accelerator for tech startups.
South Carolina Small Business Chamber of Commerce: A statewide advocacy organization that represents the needs of South Carolina small businesses.
South Carolina Small Business Development Centers: The SBDC was established to support small business start-ups and assist in the growth of small businesses throughout the state.