How to Form a Professional Corporation in South Carolina


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in South Carolina

Are you considering starting a professional corporation in South Carolina? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in South Carolina can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in South Carolina, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in South Carolina!

What is a Professional Corporation in South Carolina?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in South Carolina. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in South Carolina.

– LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in South Carolina if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in South Carolina

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in South Carolina, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in South Carolina

After you have decided on the idea to form a professional corporation in South Carolina, deciding the name for your corporation is significant. There is a complete guide on South Carolina LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In South Carolina, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. To keep the name, you must file a name reservation application with South Carolina Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the South Carolina Registered Agent

The next step in forming a professional corporation is hiring the South Carolina Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in South Carolina. Forming a professional corporation for your service will be easier if you have Registered Agent in South Carolina.

Alternatively, you can serve as your own South Carolina Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from South Carolina.

Step 4: File the Articles of Incorporation in South Carolina

After you hire a South Carolina Registered Agent to form a professional corporation, the next step is to file the South Carolina Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in South Carolina may be done with two methods, online and by mail. The Articles of Incorporation fee may vary from different states. However, in South Carolina, it costs $110 for online and by mail filing. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to South Carolina Secretary of State’s Office, Attn: Corporate Fillings, 1205 Pendleton Street, Suite 525, Columbia, SC 29201.

Step 5: Write an Operating Agreement in South Carolina

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The South Carolina operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in South Carolina

The next step is to appoint the initial board of directors in your PC in South Carolina. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the South Carolina SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in South Carolina

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in South Carolina can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in South Carolina might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in South Carolina

Before your professional corporation operates in South Carolina, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In South Carolina, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in South Carolina

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the South Carolina classification of taxes for the taxes an LLC in South Carolina has to pay.

Important Information

Maintaining Professional and Business License in South Carolina

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in South Carolina

In South Carolina, you will be required to submit a report each year. The owners’ and Registered Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in South Carolina, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in South Carolina

A professional corporation takes a lot of time to process and pursue. However, with the help of the South Carolina Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in South Carolina.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a professional corporation in South Carolina?
A professional corporation in South Carolina is a type of business entity formed by individuals who are licensed in a particular profession, such as lawyers, accountants, physicians, architects, engineers, and other professionals.
What are the benefits of forming a professional corporation in South Carolina?
Forming a professional corporation in South Carolina provides a number of benefits, including limited liability protection for the owners, the ability to issue stock, and the ability to attract investors. It also offers the potential for tax savings and a more organized management structure.
What are the requirements for forming a professional corporation in South Carolina?
In order to form a professional corporation in South Carolina, you must obtain a Certificate of Authority from the Secretary of State, and you must register the business with the South Carolina Department of Revenue and the South Carolina Secretary of State. You must also form a board of directors, designate a registered agent, and adopt bylaws.
What documents are required to form a professional corporation in South Carolina?
To form a professional corporation in South Carolina, you must submit a Certificate of Authority, Articles of Incorporation, bylaws, and a corporate resolution, as well as other documents as required by the Secretary of State.
What is the filing fee for forming a professional corporation in South Carolina?
The filing fee for forming a professional corporation in South Carolina is $110.
What taxes must a professional corporation in South Carolina pay?
A professional corporation in South Carolina must pay income, franchise, and sales taxes. The corporation must also file annual reports with the Secretary of State and pay annual filing fees.
Is a professional corporation in South Carolina subject to double taxation?
No, a professional corporation in South Carolina is not subject to double taxation. The taxes paid by the corporation are only paid once, by the shareholders when they file their personal income tax returns.
Are there any special regulations that apply to professional corporations in South Carolina?
Yes, professional corporations in South Carolina must follow the regulations set forth in the South Carolina Professional Corporation Act. The Act outlines the formation requirements, management structure, and other requirements for professional corporations in South Carolina.
What type of insurance is required for a professional corporation in South Carolina?
Professional corporations in South Carolina must obtain Professional Liability Insurance in order to protect against claims of professional negligence. The amount of coverage required will depend on the nature of the professional services provided by the corporation.
Is there a minimum number of shareholders required for a professional corporation in South Carolina?
No, there is no minimum number of shareholders required for a professional corporation in South Carolina. However, the corporation must have at least one director.
Can a professional corporation in South Carolina issue stock?
Yes, a professional corporation in South Carolina can issue stock to its shareholders.
What are the recordkeeping requirements for a professional corporation in South Carolina?
Professional corporations in South Carolina must maintain accurate financial records, including a corporate ledger, minutes of meetings, and other documents. The corporation must also file an annual report with the Secretary of State.
Is there a deadline for filing taxes for a professional corporation in South Carolina?
Yes, professional corporations in South Carolina must file their taxes by April 15th of each year.
What is a Professional Corporation in South Carolina?
A Professional Corporation in South Carolina is a business entity that is regulated by the South Carolina Department of Revenue, enabling professionals such as doctors, lawyers, and accounting firms to incorporate and protect their personal assets from potential liabilities.
What are the benefits of forming a Professional Corporation in South Carolina?
Forming a Professional Corporation in South Carolina offers a range of benefits, such as protecting the personal assets of the owners, tax advantages, and limited liability protection.
What are the requirements for forming a Professional Corporation in South Carolina?
In order to form a Professional Corporation in South Carolina, you must register with the South Carolina Secretary of State, choose an official name, obtain a federal tax ID number, and obtain a South Carolina business license.
What paperwork is required to form a Professional Corporation in South Carolina?
To form a Professional Corporation in South Carolina, you must complete the Articles of Incorporation, which must be filed with the South Carolina Secretary of State, as well as the annual report required by the state.
How much does it cost to form a Professional Corporation in South Carolina?
The cost to form a Professional Corporation in South Carolina is $110 for the Articles of Incorporation filing fee and $25 for the annual report filing fee.
How long does it take to form a Professional Corporation in South Carolina?
It usually takes 2-3 weeks to form a Professional Corporation in South Carolina, depending on the processing times of the Secretary of State.
What legal restrictions apply to a Professional Corporation in South Carolina?
Professional Corporations in South Carolina must include the phrase “professional corporation” or “P.C.” in their official name, and they may only offer services that are allowed by the South Carolina Professional Corporation Act.
Is it necessary to hire a lawyer when forming a Professional Corporation in South Carolina?
It is not necessary to hire a lawyer when forming a Professional Corporation in South Carolina, but it is recommended that you consult a lawyer for advice and assistance in filing the required paperwork.
Do I need to register my Professional Corporation in South Carolina with the IRS?
Yes, you must obtain a federal tax ID number from the IRS in order to register your Professional Corporation in South Carolina.
Do I need to obtain a South Carolina business license for my Professional Corporation?
Yes, you must obtain a South Carolina business license in order to operate a Professional Corporation in South Carolina.
How do I obtain a federal tax ID number for my Professional Corporation in South Carolina?
You can obtain a federal tax ID number for your Professional Corporation in South Carolina by filling out Form SS-4 and submitting it to the IRS.
Are there any annual reporting requirements for a Professional Corporation in South Carolina?
Yes, Professional Corporations in South Carolina must file an annual report with the South Carolina Secretary of State.
Are there any additional taxes that I need to pay when forming a Professional Corporation in South Carolina?
Yes, Professional Corporations in South Carolina may be subject to additional taxes, such as the corporate income tax, the franchise tax, and the sales and use tax.
Are there any other regulations that I should be aware of when forming a Professional Corporation in South Carolina?
Yes, Professional Corporations in South Carolina must comply with all applicable federal and state laws, as well as any additional regulations imposed by the South Carolina Professional Corporation Act.
Is there a certain amount of capital that I must have in order to form a Professional Corporation in South Carolina?
No, there is no minimum amount of capital required to form a Professional Corporation in South Carolina.
Can I form a Professional Corporation in South Carolina remotely?
Yes, you can form a Professional Corporation in South Carolina remotely by filing the necessary paperwork with the South Carolina Secretary of State.
What is the best way to get started on forming a Professional Corporation in South Carolina?
The best way to get started on forming a Professional Corporation in South Carolina is to research the necessary paperwork and filing requirements, consult a lawyer for advice, and obtain the necessary permits and licenses.

Also Read

Why South Carolina Professional Corporation is So Important

One of the key reasons why a South Carolina Professional Corporation is so important is liability protection. Professionals, such as doctors, lawyers, accountants, and architects, are at a higher risk of being sued for malpractice or negligence due to the nature of their work. By setting up a professional corporation, these individuals create a legal separation between their personal assets and business liabilities. This separation means that in the event of a lawsuit, only the assets owned by the corporation are at risk, shielding the personal assets of the individual professionals.

In addition to liability protection, a South Carolina Professional Corporation offers tax benefits. When professionals operate as sole proprietors or in partnerships, they are required to pay self-employment taxes on their income. However, by forming a professional corporation, individuals can take advantage of tax deductions and benefits that are not available to small business owners operating as sole proprietors. This can lead to significant tax savings and increased profitability for the professionals.

Furthermore, establishing a professional corporation can enhance the credibility and professionalism of a business. When clients see that a professional operates under a corporation, they are more likely to trust the services being offered. This increased credibility can lead to more clients and opportunities for the business to grow and expand. Additionally, having a professional corporation demonstrates a commitment to excellence and adhering to industry standards, which can set the business apart from competitors.

Moreover, a South Carolina Professional Corporation can provide continuity and security for the professionals and their families. In the event of the death or retirement of a professional, the corporation can continue to operate, ensuring that the business remains stable and employees are taken care of. Additionally, if a professional chooses to sell the business or bring in partners, having a professional corporation in place can make the transition smoother and more structured.

Overall, the benefits of establishing a South Carolina Professional Corporation are clear. From liability protection and tax benefits to credibility and continuity, a professional corporation is an essential tool for professionals looking to thrive in their respective industries. By taking the time to set up a professional corporation, individuals can protect themselves and their businesses while also positioning themselves for long-term success in the competitive business world.

Conclusion

In forming a professional corporation in South Carolina, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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