Articles of Organization

The formation of a South Carolina LLC means that you have to file articles of organization (along with the $110 filing fee) with the Corporations Department of the South Carolina Secretary of State's office. The articles, which must be signed by at least two persons organizing the LLC, must include:

• The LLC's name
• The duration of the LLC and, if not perpetual, the date of its dissolution
• The address of the LLC's registered office
• The name of the LLC's initial registered agent there
• The name and address of each organizer
• Whether the LLC will be manager-managed or not; if so, the name and address of each initial manager
• Whether the LLC members will be liable for its debts and obligations

If a provision of the articles of organization dealing with persons other than managers, members, and members' transferees conflicts with the operating agreement, the articles of organization will take precedence.

If a provision of the operating agreement dealing with managers, members, and members' transferees conflicts with the articles of organization, the operating agreement takes precedence.

Your new LLC is officially deemed "organized" after the LLC's articles of organization and an exact copy are delivered to the Corporations Department with the filing fee. The filed document must be signed by a manager (of a manager-managed LLC), a member of a member-managed company, or an organizer. The filed articles must also indicate the name and title (i.e., organizational capacity within the LLC) of the signer.

A certificate of organization will be issued and delivered, along with the conformed copy, to the LLC's representative by the state. The original articles of organization will be filed with the Secretary of State.

Registered Agent and Office

All South Carolina LLCs must continuously maintain both a registered agent and registered office in the state-the person or office designated to receive official state legal and administrative correspondence. An LLC registered agent may be an individual who resides in South Carolina or a business entity authorized to conduct business in the state. The registered agent's business office must be the same as the corporation's registered office.

The registered office may be-but doesn't have to be-the LLC's place of business.

Operating Agreement

The LLC's next most critical document is its operating agreement. Having an operating agreement is not officially required by the state, but it's a very important internal document that sets forth how the LLC will run. The operating agreement should list the LLC's members, how much each one has invested, how any profits will be distributed, and how much relative weight each member has when voting.

The operating agreement can also include requirements for meetings (notice, quorum, voting rules, etc.) and similar functions, but it doesn't have to. Often, however, it does include operating constraints and allowances that are already contained in state law and regulations. It also may contain constraints on the members' authority to change or repeal the operating agreement or any provision thereof.

Membership in the LLC

A South Carolina LLC must have at least one member, who may be a natural person or a business entity or trust. Members may acquire an interest in the LLC either in proportion to their contribution or in some other way that is in accordance with the LLC's operating agreement.

The contributions of a member to the LLC may consist of cash, property (tangible or intangible), services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services.

A member always has the power-although not necessarily the right-to terminate his LLC membership by resigning or dissociating from the LLC at any time. An LLC member may not resign except in accordance with the operating agreement or articles of organization. A member resignation is wrongful if the member withdraws before the expiration of the LLC, if the member is expelled, or if he enters bankruptcy before the LLC expires-or, if the member is a business entity, if the entity willfully dissolves or terminates its existence before the LLC expires. If a wrongful dissociation causes harm to the LLC, the member is liable for those damages.

Ongoing Requirements

South Carolina LLCs submit an annual report to the state secretary of state that includes:

• The LLC's name and the state or country where it was initially organized
• The address of the LLC's principal office
• The address of the LLC's registered office in the state
• The name of the LLC's registered agent at that office
• The names and business addresses of any managers

It's also a good idea to keep copies of the minutes of the various proceedings and committees meetings of the members and managers.

Dissolution

A South Carolina LLC is dissolved when any one of the following events occurs:

• On the occurrence of an event or events specified in the articles of organization or operating agreement
• Expiration of the LLC's duration
• Agreement to dissolve by the number or percentage of members specified in the operating agreement
• An event that makes it unlawful for the LLC to continue, unless the LLC corrects the illegality within 90 days of notification
• Application by a member, dissociated member, or transferee of interest and a judicial order
• Administrative dissolution

Taxes

An LLC by its nature offers some particular tax advantages over a corporation's organizational structure, especially when it comes to taxes. This includes access to more deductions, since the LLC is not required to be a separate tax entity like a corporation. Instead, it is considered a "pass-through" entity for tax purposes, meaning that LLC owners report business profits and losses on their individual tax returns.

The tax rate for South Carolina LLCs, therefore, varies, based on the amount of South Carolina taxable net income per reporting period and the rest of the LLC owner/member's financial situation.

Articles of Incorporation

Before it can legitimately commence operations in the state, a new South Carolina corporation must file articles of incorporation with the Corporations Department of the state Secretary of State's office. The articles must be executed (signed) and delivered by at least one incorporator, who is not required to be an officer, director, or shareholder of the corporation. An incorporator may be any natural person or legal entity.

The articles must be accompanied by a filing fee of $135, an Initial Annual Report form (with a $25 fee), and a certificate signed by a South Carolina attorney that all requirements of applicable state law have been met. The attorney's signature certifies that your articles contain the required information listed in Section 33-2-102 of the South Carolina Business Corporation Act.

The following information must be included in the articles of incorporation:

• The name and address of each incorporator
• The number of shares that the corporation is authorized to issue, itemized by class
• The street address of the corporation's initial registered office
• The name of the corporation's initial registered agent at that office
• Signed acceptance by the registered agent of appointment as such

South Carolina law also allows (but does not require) optional items to be included in the articles of incorporation for those corporations who wish to formally specify additional information, such as:

• The names and addresses of the initial directors
• The purpose for which the corporation is being formed
• Specific provisions for managing the business and regulating the corporation's affairs
• Defining, limiting, and regulating the powers of the corporation, its board of directors, and shareholders
• A par value for authorized shares or classes of shares
• The imposition of personal liability on shareholders for the debts of the corporation, usually to a specified extent and under certain conditions
• The limitation or elimination of directors' personal liability to the corporation or its shareholders for monetary damages in certain situations

Some types of corporations, such as real estate and health care, are also required to obtain a license and pay an additional fee to operate in the Palmetto State.

Registered Agent and Office

Every South Carolina corporation must have a registered agent in the state-the person or office designated to receive official state correspondence, both administrative and legal. The registered agent is required to sign the articles of incorporation, indicating acceptance of the appointment as registered agent.

The registered agent must be either a South Carolina resident whose business office is the same as the registered office, or a corporation authorized to conduct business in the Palmetto State that has a business office identical to the registered office.

The registered office may be any of the corporation's places of business in South Carolina.

Bylaws

Bylaws lay out the corporation's basic managerial and legal operating principles that manage their internal affairs. South Carolina corporations must keep a copy of their bylaws at their principal executive office, but are not required to file them with the state. At its initial meeting, the incorporators or the board of directors should adopt corporate bylaws, and then keep them updated as time goes on.

The board of directors of a corporation may adopt, amend, or repeal bylaws, unless the articles reserve this right to the shareholders. Bylaws normally address:

• Shareholders and directors meetings
• The authority, number, and tenure of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Directors and Officers

A corporation's board of directors consists of one or more individuals in accordance with the articles of incorporation or bylaws. The number of directors may be increased or decreased by amending the articles of incorporation or the bylaws, but no decrease in the number of directors can have the effect of shortening the term of any incumbent director.

Officers are listed in the initial bylaws or elected by the board of directors, and may appoint other officers in accordance with the bylaws. At least one officer has the responsibility of preparing minutes of director and shareholder meetings, and for maintaining and authenticating corporate records.

It is permissible for an officer to hold more than one office in the corporation unless otherwise prohibited by law or by the corporation's bylaws.

Required Reports

South Carolina corporations must file a report with the South Carolina Department of Revenue each year by the 15th day of the third month after the end of the corporation's fiscal year. This report may be made public by the state, and must specify:

• The corporation's name and its state or country of incorporation
• The address of the principal corporate office
• The address of the corporation's registered office in the state
• The name of the corporation's registered agent there
• The names and addresses of the directors and principal officers
• A brief description of the nature of the corporation's business
• The total number of authorized, issued, and outstanding shares of stock, itemized by class and series (if any) within each class

Within 120 days after the close of the fiscal year, the corporation must send its shareholders a financial report that includes a year-end balance sheet, an income statement, and a statement of changes in shareholders' equity for the year.

The corporation must also report in writing to the shareholders if it issues or authorizes promissory notes or other future obligations. If these promises consist of shares of corporate stock, the report must specify the number of shares issued or authorized, and the benefit received by the corporation, either with or before notice of the next shareholders' meeting.

Taxes

South Carolina corporations are subject to a corporate income tax of five percent on all corporate income. Additionally, they must pay an annual license tax of $15 plus 0.001 times their capital stock and paid-in surplus. The minimum annual license tax is $25.

"S corporation" status is recognized by the South Carolina Secretary of State. A "subchapter S" corporation (frequently referred to as an "S corp") is treated as a pass-through entity for tax purposes in the same way as a sole proprietorship or partnership. The S corp does not file a tax return on its own behalf; instead, all tax-related data for the S corp is filed as part of the owner's individual income tax.