An Alabama Limited Liability Company (LLC) must file an annual report and pay franchise tax quarterly. In addition, an LLC formed under the laws of South Carolina must file an annual return and pay franchise tax annually.
The filing requirements are set forth in Sections 278.1020(1)(a), 278.1030(1)(b), 278.1040(1)(c), and 278.1050(1)(d) of the Code of Alabama 1975. These provisions require that an LLC file an annual report within thirty days after its formation date, and pay franchise tax within ninety days after its formation date unless it elects to pay franchise tax annually. If an LLC does not make such election, it must pay franchise tax within three months after the close of each calendar year. Section 278.1020(2) provides that failure to comply with the annual reporting requirement shall subject the LLC to penalties. Section 278.1030(3) states that failure to comply with either the annual return or the franchise tax payment requirement shall subject the LLC and its members to administrative fines. Finally, Section 278.1050(4) requires that the annual return contain certain information including the name of the LLC, the names and addresses of its members, the address of its principal place of business, and the amount of franchise tax paid during the preceding fiscal year.
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The annual report includes information about the company’s financial condition, including balance sheet, income statement, and cash flow statements, along with other relevant data such as executive compensation and directors’ remuneration.
Form SC1120S will become effective starting January 1, 2020. This form replaces Form 1065, Application for Extension of Time To File Certain Forms.
State Business Tax
Most LLCs are passthrought entities, meaning that the corporation itself does not pay any income tax. If one of the members of an LLC files a return, however, he/she must report his/her share of the entity’s profits. This includes both passive and active income.
If you do not file an individual income tax return, you cannot claim an exemption based on being a member of an LLC. You can, however, claim an exemption based on having a low adjusted gross income.
The following states impose an income tax on LLC members: Alaska, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, Wyoming.
State Employer Taxes
Federal employers pay federal employee taxes such as Social Security, Medicare, Unemployment Insurance, etc. States also impose state employer taxes including Unemployment Compensation Tax (UCT). Some states also charge a franchise tax. If you are self-employed, you must file Form 1040 Schedule SE to report Self Employment Tax.
Most states require an EIN (Employee Identification Number) if you have any employees, even if it is just yourself.
Sales and Use Taxes
The South Carolina Department of Revenue collects sales and use taxes on behalf of the state. These are called “use taxes.” They’re collected on items sold in the state. This includes purchases made online, over the phone, or anywhere else.
If you sell something in South Carolina, you must collect and remit use taxes on it. You don’t pay the tax; the buyer does.
You register for sales tax collection by filing Form ST-1 with the department. If you do not file, you risk fines up to $10,000 per day.
Registering for sales tax collection isn’t hard. Just go to www.scdor.org/taxes and follow the instructions.
Registration in the Other States
State laws vary regarding how much physical activity must occur within a particular state’s boundaries before registering a limited liability company (LLC) there. For example, some states require that you physically conduct business in the state before you are allowed to form an LLC there. If you do not meet this requirement, you risk having your LLC dissolved because it does not qualify as a valid entity in the state.
Many states require that you file Annual a report with them every year if you maintain a South registered address or principal place of business within those borders. These reports include information about the members Permits of the organization, the location of the registered office, and the names and addresses of the managers of the corporation. You may be required to pay fees associated with maintaining this information.
Some states allow you to register Other your LLC online without Obtaining filing any forms with Changing the Secretary of State’s Office. However, you still must provide proof Reserving of identity and residency. This process typically involves providing a drivers license number or passport number.
Annual Report Requirements
An LLC will not have to submit an annual report if it is classified as an S corporation. This applies to both domestic and foreign companies. In addition, there are no reporting requirements for corporations whose tax status is set to “other,” unless they elect to be taxed as a partnership. If you want to know how much money your LLC makes, you’ll need to look into the IRS’ records.
Form SC1120S should always be filed with the Department Of Revenue each year. This form is used to file information about the income earned by the company and paid out to shareholders. You should use this form whenever you make payments to yourself or pay dividends to shareholders.
South Carolina Business License and Permit Requirements
A business license is required if your business wants to sell products or services within the state. You cannot operate without one. In addition to the business license, there are several types of permits that you might need depending on what type of business you run.
There are three main types of business licenses: general, occupation, and special. General licenses cover most businesses, while occupation licenses apply specifically to professions like doctors, lawyers, dentists, accountants, architects, engineers, etc. Special licenses are specific to certain industries including medical devices, funeral homes, real estate brokers, insurance agents, etc.
You do not need a permit to start a small business, but some activities require permits. For example, food trucks, mobile vendors, and temporary retail locations such as flea markets and farmers markets need permits.
Permits and licenses differ depending on:
An operating agreement is required if your company wants to incorporate under state law. There are many different kinds to choose from. Different states have different requirements. You might even need one if you plan to raise capital.
The most common type of operating agreement is called a Bylaws Agreement. This is what we use here at LegalZoom. A Bylaws Agreement is used to set up the rules and regulations for how your company operates. For example, it could include information about board members, officers, shareholders, voting procedures, etc.
There are three main types of Operating Agreements:
1. Shareholders’ Agreement – This is typically used for closely held companies where there is no formal separation between the owners.
2. Management Services Agreement – This is typically for larger businesses where there is some form of separation between management and ownership.
3. Partnership Agreement – This is for partnerships such as LLCs, LPs, LLP, LPPL, LLPs, PLLCs, etc.
In addition to setting up the basic structure of your company, an operating agreement can help protect your interests as a shareholder, officer, director, employee, creditor, or partner.
Other South Carolina LLC Fees and Requirements
There are many additional fees that a limited liability company (LLC) must pay throughout its existence, including filing fees, annual reports, and tax payments. However, some states require that all members acknowledge that they understand the fee structures. These requirements vary by state, but most of the following fees apply to both a single-member LLC and a multi-member LLC.
Filing Fee: This is the cost of registering the LLC with the secretary of state. In addition, each state sets its own filing fee. For example, California charges $200 for initial registration.
Annual Reports: Every LLC must file an annual report with the Secretary of State. Each state requires different information, but generally includes basic financial information about the company, such as gross revenue, net income, total assets, liabilities, and equity. Many states also require the LLC to disclose whether it has been dissolved or terminated.
Taxes: All LLCs must pay taxes based on their profits. Most states charge a flat rate per year. If you make no profit, you don’t owe anything. Other states charge a percentage of your profits. Some states also impose penalties for late filings.
Membership Dues: A membership dues system is often used to fund certain expenses associated with operating the LLC. Membership dues usually include a monthly fee plus a one-time initiation fee.
Management Services Agreement: An agreement between the manager and the owners of the LLC outlines how much management services the manager will provide to the LLC. Management agreements can range from simple hourly contracts to full-service contracts that provide everything needed to operate the LLC.
Shareholder Agreements: Shareholders typically agree to certain terms regarding dividends, voting, liquidation preferences, distributions, etc.
Obtaining a Name or DBA
To register a fictitious name, one must complete a form and file a $25 application fee. You are required to provide a physical address where mail will be delivered. If you do not have a physical address, you must provide a mailing address where mail will be sent.
A fictitious name cannot be registered unless it includes a word that identifies the business type being conducted. For example, a fictitious name cannot include the word “lawyer,” even if it is used as part of the legal practice name.
When establishing a new company, one should consider registering a trade mark rather than a fictitious name because there are fewer restrictions on what can be included in a trade name. Trade names are generally easier to obtain than fictitious names.
The following types of businesses are eligible to use a fictitious name:
• Sole proprietorships
• General partnerships
• Limited liability companies
Changing the Registered Agent
A registered agent is someone you appoint to represent your interests in case something goes wrong. For example, if your LLC gets sued, it could end up losing money because no one knows about the lawsuit. If you are appointed as the registered agent, you will receive notice of the suit and take action accordingly. You can find out whether you are required to register a foreign corporation here.
If you don’t want to pay the fee to maintain a registered agent, you can change the registered agent yourself. Here’s how:
1. Go to www.scbizfile.com/registeragent.
2. Enter your information into the form.
3. Click on “Register Now.”
4. After you submit the registration request, you will be redirected to a confirmation screen.
5. Check off the box next to “I am the sole owner of the entity I am representing.”
Reserving a Name for Your LLC
Registering a company name is one of the most important steps in starting a business. You want to make sure that no one else uses it. If someone already owns the domain name, you’ll need to pay a hefty sum to buy it from them. But there’s another way: you can reserve your company name before opening a bank or credit card account. This allows you to use the same name for both purposes without having to worry about paying extra fees. And it’s free!
There are two ways to do this. One is online; the other is by mail. For either option, you must complete a form and submit it to the state where you plan to incorporate it. Then, you wait. The process could take months depending on how many companies are reserved in your area. You might even have to wait until the end of the year in some states.
The Online Way
To reserve a name online, go to www.dol.state.tx.us/businessregistration and select “Corporation.” Click on “Search Corporate Names,” enter your desired name, and press Search. You’ll see a list of names that are registered in Texas. Choose the one you like best and fill out the information requested. After submitting the form, you’ll receive an email confirmation.
If you prefer to mail in your application, you’ll need to send a check for $25.00 along with your completed form to the address listed above. Be sure to include your full mailing address. Once we’ve received your payment, we’ll immediately start processing your request. We’ll notify you via email once your name is officially reserved.
Frequently Asked Questions
How Much Does It Cost to Start an LLC in South Carolina?
Starting a legal entity like an S Corporation, Limited Liability Company or Partnership requires several steps. To begin, you must file a Certificate of Formation with your local county clerk. This document establishes the existence of your business and provides it with protection under law. You must pay a filing fee in addition to any other required documents.
The next step is to open a bank account for your business. Most banks require you to provide proof of sufficient funds to cover operating expenses. Once establishing your business account, you must register with the South Carolina Secretary of States’ office. There are annual renewal fees associated with registering your business and fees for each type of business entity you choose.
Once your business is registered, you must obtain a Business License and Tax Identification Number. These are separate transactions, although there is a relationship between the two. A Business License allows you to operate legally within the boundaries of South Carolina, while a Tax ID number ensures that the state receives tax revenue based on your sales.
Finally, you must comply with certain regulations regarding your business activities. For example, you cannot sell alcohol without a special permit. Additionally, you must maintain records of your business activity, including invoices, receipts, and employee payroll information. Failure to do so could lead to fines and even jail time.
Does South Carolina tax LLCs?
South Carolina imposes no franchise tax on LLCs. This is because LLCs are often treated like pass-through business entities — meaning that they don’t owe taxes on their profits unless they elect to become corporations. They do, however, still pay state income tax on their earnings.
Unlike most states, South Carolina doesn’t require LLCs to file annual reports with the Secretary of State’s office. Instead, it’s up to each member to track how much money they owe. If you want to know whether you owe any money, check out our guide to filing your South Carolina LLC’s federal return.
James Rourke is a business and legal writer. He has written extensively on subjects such as contract law, company law, and intellectual property. His work has been featured in publications such as The Times, The Guardian, and Forbes. When he’s not writing, James enjoys spending time with his family and playing golf.