corporationsSouth Carolina Corporation

A South Carolina corporation is a separate business entity from its owners.  It can sue or be sued and can hold title to real property in its own name. The owners of a South Carolina corporation are called “shareholders.”  The corporate form shields its owners from liability and provides for centralized management, freely transferable interests, and continuity of existence.  The liability of the shareholders is limited in that only the assets contributed to the corporation are usually at risk for the corporation’s obligations.  The limited liability may be lost in certain instances, such as inadequate capitalization of the corporation or the failure to maintain appropriate formalities in the operation of the corporation.  It also may be lost if the corporation’s activities are not maintained as separate and distinct from other activities of the owners.  For example, the commingling of funds of a corporation in an account in which other funds of the business owners are deposited might result in the elimination of limited liability.  This must be avoided at all costs to prevent unnecessary commercial litigation.

The South Carolina corporation, if incorporated and structured properly, may shield its directors and/or shareholders from liability and provides for centralized management, freely transferable interests, and continuity of existence.

Overview of Advantages and Disadvantages

A South Carolina corporation can have greater flexibility over other business entities in the types of investment vehicles it can offer and therefore may be more attractive to investors.  The relative ease with which corporate ownership interests can be transferred, unless restricted, when compared to partnership interests, further enhances the desirability of the corporate form if the need to attract investors is a factor in selecting the business form.

Corporate Bylaws will constitute an additional documentation burden if the corporate form is selected. However, they also serve to provide a method for the resolution of disputes with regard to certain issues that may arise between and among shareholders and/or directors and a means by which shareholders may obtain a voice in the day-to-day operation of the corporation without becoming personally liable for its debts. Furthermore, if multiple transfers of ownership interests are anticipated or if perpetual operation of the business is desired, the corporate form makes it possible to easily satisfy these requirements. The corporation also lends itself to the issuance of stock options as a means of attracting, providing incentives for, and rewarding employees.

A major disadvantage of the corporate form is that it requires observance of many formalities, thereby necessitating greater administrative expense than noncorporate forms. Also, because the corporation exists only as provided for in the South Carolina Business Corporation Act, there are some limitations on the flexibility of the structure when compared to the general partnership, limited partnership, or limited liability company, which can be structured by contractual agreement in virtually any manner agreed to by the partners or members.