SC Business Formation Attorneys in Myrtle Beach
Your Myrtle Beach business formation attorney at Axelrod and Associates will help you choose the right type of SC business entity for your company, file your incorporation documents with the SC Secretary of State, and draft operating agreements or by-laws that meet your company’s unique needs.
Your choice of business entity, the terms of your operating agreement or by-laws, and the steps that you take to avoid future litigation can all have a significant impact on your tax liability, your personal liability in connection with your business, and whether your business is profitable.
Your choice of business entity and effective use of operating agreements or partnership agreements are also an important part of asset protection and business succession planning.
What are the Types of Business Entities in SC?
SC law provides for a wide range of corporate or partnership structures – one of them is ideal for your situation. Examples include:
SC Sole Proprietorships:
Sole proprietorship is the default business type in SC. Although it is not the ideal business entity for most people, it is what you get if you do not choose another type of business entity and file the appropriate documents.
A sole proprietorship does not require you to file anything or keep the owner’s funds separate from the business accounts, but you could have a significantly higher tax liability and you can be sued personally with no corporate shield from liability.
When you incorporate your business, you create a separate legal entity. The type of corporation that you choose (and how it is managed) will determine how taxes are paid and how much protection you have from liability and civil lawsuits against the company.
New corporations must file what is called the Articles of Incorporation which specify the classes of stock, how shares are issued, voting rights of shareholders, and how distributions will be made. SC law requires that a licensed attorney review and sign the document before it is filed.
An “ordinary,” or C-Corporation, also has formalities that must be observed which include:
- By-laws or an operating agreement must be drafted at the outset;
- Yearly filings;
- A plan for potential dissolution;
- Annual shareholder meetings;
- Communication with shareholders; and
- Separation of corporate and personal funds.
A C-Corp is taxed at the corporate level – the corporation is taxed for corporate income, but the shareholders are not. When distributions are made to shareholders, however, the money is taxed a second time.
In the alternative, a business can incorporate as an “S-Corporation,” or “closely held corporation,” which avoids the problem of double taxation. The corporate income is not taxed until it “passes through” to shareholders. An S-Corp also allows the owner to dispense with many of the formalities of the C-Corp. Many small businesses choose the S-Corp for these reasons.
Although a corporate structure does not relieve professionals of malpractice liability for services that they provide, a SC professional corporation (or SC professional association) will shield each professional from malpractice liability for the actions of the other members.
SC non-profit corporations are also available for companies that are limited to charitable, educational, religious, literary, or scientific purposes and may allow the company to avoid state and federal income taxes.
Partnerships are another common form of business entity in SC – if you are entering into a business arrangement with another person, it is critical that you understand SC partnership laws and that you plan for your tax liability, protection from liability, and potential dissolution. SC partnerships allow for taxes to “pass through” to the partners like the taxation of an S-Corp.
General Partnerships are the partnership equivalent of the sole proprietorship – they are the default structure, they do not provide protection from liability for the company’s obligations or actions of your partner, and they are generally a bad idea.
Limited Partnerships usually consist of: 1) One or more general partners who are responsible for running the company; and 2) One or more limited partners who provide investment capital but who are protected from liability for the debts and obligations of the company.
Limited Liability Partnerships do not have “limited partners” or silent investors – each partner is treated the same unless otherwise specified in the partnership agreement, but the partners are shielded from liability for the obligations of the company and the actions of the other partners.
A detailed partnership agreement which describes the rights and obligations of each partner, how the day-to-day business will be run, and how the partnership will be dissolved is essential to the success of any partnership in SC.
SC Limited Liability Companies (LLC):
A limited liability company is SC may offer more flexibility for business owners. An LLC shields its members from liability like a corporation, and it allows the owners to choose whether they will be taxed as a “pass through” S-Corp or at the corporate level as a C-Corp.
Like corporations and partnerships, a well-drafted operating agreement is critical to the survival and smooth operation of an LLC in SC – the operating agreement can be used to determine:
- How the company is managed;
- What type of equity or shares the members have;
- How members will take distributions;
- How the company will be dissolved;
- What happens if a member chooses to leave or “disassociate;” and
- Under what circumstances a member can transfer their interest in the company.
SC Asset Protection and Business Succession Planning Attorneys
One more consideration for many of our clients is: What happens to the business if I pass away? Through the use of the proper business entity, operating or partnership agreements, and trusts, your business and estate planning attorney can help you to protect your business assets and retain some control over what happens to the business and assets after your death.
No matter your situation or type of business, there is an SC business entity that is designed for you. With the right planning, SC corporations, partnerships, and LLCs allow you to control your tax liability, shield you from liability, and forestall future litigation with detailed by-laws, partnership agreements, or operating agreements.
Your SC business formation attorney at Axelrod and Associates will help you to determine what type of business entity best meets your needs. Call today at 843-353-3449 or complete our contact form to set up an initial consultation to find out how we can help.