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Why consult with a South Carolina corporate lawyer?
I assist startup and on-going businesses with their incorporation needs. In contrast to online start-up services, I advise clients on the particular options and subtleties of state incorporation law. Common formations include statutory close corporations, standard corporations, professional corporations, and professional associations. Tax options include the default tax provisions under Subchapter “C” of the IRS tax code, as well as the Subchapter “S” (“S-
Corporations”) or under Subchapter “C” (“C-Corporations”), as they compare to both each other and with regard to other business enitity choices, such as partnerships and limited liability companies (“LLCs”). Where required, we provided corporate record books, subscription agreements, by-laws, stock certificates, annual and special meeting notices and minutes, and a host of related documents.
In many circumstances, we generally recommend to clients that have decided to incorporate to consider electing to be treated as a statutory close corporation, which may offer greater flexibility in management of the corporation, such as the elimination for any need to have a board of directors separate from the shareholders, and freedom from certain corporate formalities, such as annual meetings.
The formation of corporations in South Carolina, whether for-profit, public benefit, or non-profit, is governed by a combination of state and federal laws. This guide outlines the legal framework for establishing these types of corporations in South Carolina, focusing on the necessary statutory provisions, formation procedures, taxation, and applicable case law.
1. Overview of Corporate Structures in South Carolina
For-Profit Corporations (C-Corporations and S-Corporations)
For-profit corporations are established to engage in business activities with the goal of generating profit for shareholders. The two main types of for-profit corporations in South Carolina are:
C-Corporations (C-Corp): A traditional corporation where the business is taxed separately from its owners (double taxation).
S-Corporations (S-Corp): A corporation that elects to be taxed under Subchapter S of the Internal Revenue Code, allowing profits and losses to pass through to shareholders, avoiding double taxation.
Public Benefit Corporations
A public benefit corporation (PBC) is a type of for-profit corporation specifically designed to create a positive impact on society and the environment. These corporations combine the profit motive with social or environmental goals and must meet certain reporting requirements to demonstrate their public benefits.
Non-Profit Corporations
A non-profit corporation is formed for purposes other than profit generation, such as charitable, religious, educational, or social causes. These corporations are exempt from paying taxes on income related to their charitable activities, provided they meet IRS criteria.
2. South Carolina Statutory Framework for Corporate Formation
For-Profit Corporations
The formation of for-profit corporations in South Carolina is governed by the South Carolina Business Corporation Act, which is part of the South Carolina Code of Laws, codified at S.C. Code Ann. § 33-1-101 et seq.
Key Steps for Forming a For-Profit Corporation in South Carolina:
Choose a Name for the Corporation
The name must be distinguishable from other businesses registered in South Carolina and should include “Corporation,” “Incorporated,” or “Limited” (or abbreviations such as “Corp.,” “Inc.,” or “Ltd.”).
The name must also comply with the naming rules established by the South Carolina Secretary of State.
Designate a Registered Agent
Every South Carolina corporation must designate a registered agent who is authorized to receive legal documents on behalf of the corporation. The agent must have a physical address in South Carolina (S.C. Code Ann. § 33-5-101).
File Articles of Incorporation
To formally create a corporation, the incorporators must file the Articles of Incorporation with the South Carolina Secretary of State (S.C. Code Ann. § 33-6-101).
Contents of Articles of Incorporation:
- Corporate name.
- Registered office address.
- Registered agent name and address.
- The number of authorized shares and their par value.
- The corporation’s duration (perpetual or for a specific time).
- The names and addresses of the incorporators.
- Adopt Bylaws
The corporation must adopt bylaws, which govern its internal management, including how meetings are conducted, how directors are elected, and how profits are distributed.
Hold Organizational Meeting
The initial board of directors must hold an organizational meeting to adopt the bylaws, appoint officers, and carry out other corporate formalities.
Obtain Employer Identification Number (EIN)
The corporation must apply for an EIN from the IRS to be recognized for federal tax purposes. This is required for tax filings and hiring employees.
File Biennial Reports
South Carolina corporations are required to file biennial reports with the Secretary of State. The filing fee is $25 (S.C. Code Ann. § 33-14-102).
Public Benefit Corporations (PBCs)
Public Benefit Corporations in South Carolina are formed under S.C. Code Ann. § 33-1-180 et seq., which provides specific requirements for corporations that pursue both profit and a public benefit.
Key Provisions for Public Benefit Corporations:
Purpose Statement
A PBC must include a specific statement in its Articles of Incorporation indicating that the corporation will operate for the public benefit, which could include goals related to social, environmental, or charitable purposes.
Incorporation Process
Similar to for-profit corporations, PBCs must file Articles of Incorporation but must include a public benefit purpose. The Articles must specify one or more public benefits the corporation seeks to promote.
Accountability and Reporting
PBCs must provide an annual benefit report to their shareholders, describing the corporation’s public benefits and how they are being advanced. This report must also be made available to the public.
Directors’ Duties
Directors of a PBC must consider both the financial interests of the shareholders and the public benefits when making decisions.
Non-Profit Corporations
Non-profit corporations in South Carolina are governed by the South Carolina Nonprofit Corporation Act, codified at S.C. Code Ann. § 33-31-101 et seq.
Key Steps for Forming a Non-Profit Corporation in South Carolina:
Choose a Name for the Non-Profit
The name must be distinguishable from other business entities and comply with South Carolina naming rules. It must also include a term such as “Corporation,” “Incorporated,” or “Limited” (or abbreviations).
Designate a Registered Agent
A non-profit must also designate a registered agent with a physical address in South Carolina to receive legal documents (S.C. Code Ann. § 33-31-301).
File Articles of Incorporation
Non-profit corporations must file Articles of Incorporation with the South Carolina Secretary of State (S.C. Code Ann. § 33-31-202). The Articles must include the following:
- Corporate name.
- Registered agent and office.
- Statement of purpose (must be charitable or for another tax-exempt purpose).
- A statement indicating that the corporation is not organized for profit.
- Obtain IRS 501(c)(3) Status (If Applicable)
Most non-profit corporations seeking tax-exempt status must apply for recognition under Section 501(c)(3) of the Internal Revenue Code by filing Form 1023 with the IRS.
Draft Bylaws
The bylaws of a non-profit corporation outline how it will operate, including governance, voting procedures, and roles of directors and officers.
Hold Initial Board Meeting
The initial board of directors must hold an organizational meeting to adopt the bylaws and carry out other necessary actions.
Non-profit corporations in South Carolina must also file a biennial report with the Secretary of State to maintain good standing.
3. Federal Law Considerations for Corporations
Taxation of For-Profit Corporations (C-Corporations and S-Corporations)
C-Corporations (C-Corp): C-Corporations are subject to double taxation. They are taxed at the corporate level, and shareholders are taxed again on dividends they receive. The federal corporate tax rate is currently 21% (as of 2026).
S-Corporations (S-Corp): S-Corporations are pass-through entities, meaning that profits and losses are passed through to shareholders and reported on their personal income tax returns. An S-Corp must meet specific requirements, including having no more than 100 shareholders, and all shareholders must be U.S. citizens or residents.
Taxation of Non-Profit Corporations
Non-profit corporations are generally exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code, provided they are organized and operated for charitable, educational, religious, or other qualifying purposes. Non-profits must apply to the IRS for tax-exempt status, which requires filing Form 1023 or Form 1023-EZ (for smaller organizations).
Employment Taxes
Corporations of all types are required to withhold federal income taxes from employee wages, pay Social Security and Medicare taxes, and file Form 941 (Quarterly Federal Tax Return). Non-profit corporations may be eligible for some exemptions from certain payroll taxes but still must comply with federal tax obligations.
4. State Taxation in South Carolina
South Carolina Corporate Income Tax
C-Corporations are subject to South Carolina’s corporate income tax rate of 5% (as of 2026). This tax is imposed on the corporation’s net income.
S-Corporations are not taxed at the corporate level in South Carolina, as income is passed through to the shareholders and taxed on their individual returns.
Sales and Use Tax
Corporations conducting sales of tangible personal property or taxable services in South Carolina must collect sales tax and remit it to the South Carolina Department of Revenue (SCDOR).
Franchise Tax
South Carolina does not impose a franchise tax on