How to Start a Sole Proprietorship in South Carolina
Starting a new business can be an exciting journey for entrepreneurs who have specific interests. Learning the steps it takes to start up a sole proprietorship in South Carolina may be overwhelming, but it can be rewarding. Keep reading to learn the steps you need to follow.
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What is a sole proprietorship?
A sole prop is an unincorporated business structure for small business owners that does not require a lot of paperwork. This type of business is for those who wish to own and operate their company with little oversight from others.
Examples of a sole proprietorship
- Freelancers working on a platform or on their own
- A small bakery
- A pet grooming company
- A contractor
- A virtual assistant
What qualifies your business as a sole proprietorship?
A business typically qualifies as a sole proprietorship if it only has one owner who not only manages but also operates the business. This means that an individual begins to sell goods or services and chooses to do so under their own name or a trade name.
Sole prop vs LLC
A sole prop is a business structure that is established to be owned and operated by one person. While this type of business may have employees, it is typically known for only having one business owner.
An LLC is a business entity that refers to a limited liability company for individuals who want a little more legal protection. In this type of structure, an individual owner is given liability protection for anything that has to do with the company.
Who is it best for?
Establishing a sole proprietorship in the state of South Carolina may be an easy structure to form; however, it may not be for everyone. This type of business entity works best for entrepreneurs who have the desire to own and operate a small business themselves.
For those individuals who have goods or services to offer customers that aren’t in a high-risk industry, a sole proprietorship is one of the best ways to get your business up and running in no time at all. Business ideas requiring lots of risks, however, are better suited for starting a different type of business structure.
How to set up a sole proprietorship in South Carolina
For those who choose to set up a sole proprietorship in the state of South Carolina, it may be much easier than you think. While there are several steps you should consider, there are not as many for this type of business structure as there would be if you were setting up an S Corp, LLC, or general partnership.
By following a few simple steps, you can set up your sole proprietorship in the state of South Carolina in no time at all. If you’re wondering which steps you need to follow, keep reading below.
Is there any formal paperwork filed to establish this type of business?
In most states, including South Carolina, a sole proprietorship is not required to file any formal paperwork to establish the business. If you choose to set up a DBA, or Doing Business As, you do need to file that document with county officials. Contact your county clerk.
Name your business
One of the biggest steps you need to take when establishing a sole proprietorship in the state of South Carolina is naming your business. As in most states, you have the choice to either use your own business name or set up a trade name for your company.
Keep in mind that as you are making this decision, you should know that using your name may not require you to file any paperwork. However, if you choose to use a fictitious name for your business you will likely have to file a doing business as or DBA in the county in which you live.
Using your own name
As with most States in the country, if you choose to use your own name for your small business, you will not have to file any formal paperwork with your county or state. This is because the name is already assigned to you and can be used as your business name.
Since the business taxes you file for your business go under your personal income tax, the IRS does not view this as a separate legal entity. Because of this, there is nothing formal that you need to do to use your own name as your business name.
Setting up a DBA
For sole proprietors who choose to use a trade name for their company, they will need to file for a DBA or a fictitious name through their county. This allows the name to be filed as a name that you are ‘Doing Business As’ but still establishes you as the responsible party.
Most counties have a department that handles this type of transaction which usually comes with a small fee. If you are interested in using a trade name for your sole proprietorship, you may want to contact the County in which you live to find out the details. Note that sole proprietors in South Carolina are not required to file their DBA with the Secretary of State.
How to Check if a Business Name is Taken
State licenses
Depending on the type of business you are establishing, you may be required to apply for state licenses that may apply. Some of these may be licenses that are required by the state, county, or city in which you live. These businesses are frequently those which sell food and alcohol such as bars, restaurants, or coffee shops.
You can determine this by contacting the South Carolina Department of Business and Professional Regulations. The state of South Carolina requires that sole proprietors who sell goods or services have a seller’s permit. This can be obtained through the Department of Revenue for the state of South Carolina.
Request an EIN
Another important detail to keep in mind if you are establishing a sole proprietorship in the state of South Carolina is if you plan to have employees in your business. if you do, you need to also apply for an EIN, or employer identification, which allows you to take out Medicare and Social Security taxes for employees.
South Carolina taxes
Entrepreneurs who establish a sole proprietorship in most states do so with the understanding that for tax purposes, the business will be paid through the individual’s personal income taxes. This means that when yearly taxes are filed, they will have to consider their business taxes as well.
In most cases, this is done by filling out a Schedule C tax form which includes any business income that is earned throughout the year. The form allows individuals to calculate their business profits and any expenses that were paid through the business to determine how much taxes need to be paid on their personal assets.
Keep in mind as a sole proprietor in the state of South Carolina, you are required to pay self-employment taxes. With this type of legal entity, any tax payments are made to the IRS through your individual taxes through your separate business bank account.
Pros
- Transitioning to LLC, General partnership, or Corporation is simple
- The process of establishing a sole proprietorship is much easier than other methods
- As a sole proprietor, you have complete control and do not have to rely on others to make decisions
Cons
- The owner of a sole proprietorship has the personal liability for any business activity that the company has without any business asset protection.
- In most cases, funding is not as readily available as it would be with other business structures.
- If you decide down the road to sell your business it may be more difficult to find a buyer due to the fact they would have to assume any liabilities of the business.
FAQs
Do you have to file business forms for a sole proprietorship in South Carolina?
Do you need a business license or a seller’s permit for a sole proprietorship in South Carolina?
Will I have to pay for my seller’s permit to be renewed in South Carolina?
Do I have to file for a DBA or trade name in South Carolina?
Do I have to file state income tax in the state of South Carolina?
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