CorporationSouth Carolina corporation is governed by the South Carolina Business Corporation Act of 1988. The rules and regulations provided by the SC Corporation Act ought to be followed in order to maintain the corporation in accordance with South Carolina State law. To form a South Carolina corporation, there are several statutory requirements that must be met. Our Charleston corporate lawyer know the law and handle all of the steps required to form and maintain a corporation to make sure your business is thoughtfully organized, properly incorporated, and recognized under South Carolina state law.

How to Form a South Carolina Corporation

First, a business must establish a corporate name. The name must contain the word “Corporation,” “Company,” “Incorporated,” “Limited” or an abbreviation of any of these. The corporate name must be distinguishable from other domestic or foreign corporations authorized to conduct business in South Carolina and the name cannot be one that is reserved, registered or is pending registration. Corporate names may be checked for availability at the South Carolina Secretary of State business name database. You may then reserve a name for 120 days by filing an Application to Reserve Name with the South Carolina Secretary of State Corporations Division.

The corporation is technically established by drafting and filing the Articles of Incorporation with the South Carolina Secretary of State. The Articles of Incorporation must include the corporate name and address; the purpose of the corporation; the name and address of an agent for service of process procedures; as well as the number of shares the corporation is authorized to issue, and the consideration the corporation will receive for these shares. The appointed registered agent agrees to accept legal papers on the corporation’s behalf if it is sued. The agent may be a person residing in South Carolina, or a domestic or foreign corporation that is authorized to do business in the state that agrees to accept service of process on the corporation’s behalf.

The next step is to develop and establish the corporate record book in which all of the corporation’s important records, agreements and documents are kept, such as minutes of director and shareholder meetings, stock certificates, corporate bylaws, shareholder agreement, shareholder management agreement, corporate buy-out agreement, subscription agreement, etc.

Additionally, an entrepreneur looking to incorporate a business corporation should prepare corporate bylaws, although not legally required. A South Carolina corporation’s bylaws are an internal document, not publicly filed with the Secretary of State, which sets out the operational rules and regulations for the corporation.

After forming a corporation, it is critical to abide by the corporate statutory requirements in order to maintain the limited liability status a corporation provides its owners. Our Charleston based corporate attorneys counsel our clients through the incorporation process and maintain the status of the corporation.
The “Incorporator” of a business, the individual that signed the articles of incorporation, appoints the corporate directors who will initially serve on the board until the first annual shareholders meeting – at which time the shareholders elect the next term’s board members. The “Incorporator” must fill out the “Incorporator’s Statement” disclosing names and addresses of the initial board of directors. The executed statement is kept in the corporate records book discussed above, and do not need to be filed with the State.

A South Carolina corporation must also appoint corporate officers during the first board of directors’ meeting. During this meeting, besides appointing corporate officers, the board adopts the bylaws, selects a corporate bank, authorizes the issuance of stock, sets the corporation’s fiscal year, and adopts an official stock certificate form and corporate seal. The Incorporator, or one of the directors, records these actions in the corporate minutes. If the corporation will be an S corporation, the directors should approve the S corporation status during this first meeting. An S corporation is a special type of corporation created through an IRS tax election that, if eligible, allows the corporation to avoid double taxation to the corporation itself and again to the shareholders.

The issuance of stock is an essential step in the formation of a corporation business entity. Each shareholder’s name and contact information are entered into the corporation’s stock transfer ledger. A corporation’s share of stock is classified as a security under South Carolina and federal securities laws. Securities laws regulate the offer and sale of stock. Small corporations, however, are usually exempt from these securities laws by the government. Corporations conducting business in South Carolina must also file an annual report with the Secretary of State. A South Carolina corporation must also comply with other tax and regulatory requirements.

Additional tax and regulatory requirements include:

  • EIN: the corporation must obtain a federal employer ID number for taxation purposes;
  • State tax identification number: South Carolina requires a state tax ID number as well.
  • S Corporate Filing: if eligible, the corporation may elect to be treated as an S corporation for tax purposes and must submit Form 2253 Election which must be signed by all of the shareholders;
  • Business licenses: depending on the type and nature of the business conducted as well as the location of the corporation, additional local and state business licenses are required.