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South Carolina Corporation |
South Carolina Corporation - Articles of Incorporation must be drafted and submitted to the South Carolina Secretary of State, Corporations Division. Once articles of incorporation have been successfully filed, your South Carolina Corporation has been formed and this begins its existence as a South Carolina corporate entity.
Should I form a South Carolina Corporation?
A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.Advantages and Disadvantages
of a South Carolina Corporation
Advantages of a Corporation
- Shareholders have limited liability for the corporation's debts or judgments against the corporations.
- Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
- Corporations can raise additional funds through the sale of stock.
- A corporation may deduct the cost of benefits it provides to officers and employees.
- Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
- A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
- A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.
Disadvantages of a Corporation
- The process of incorporation requires more time and money than other forms of organization.
- Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
- Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.
Federal Tax Forms for Regular or "C" Corporations
- Form 1120 or 1120-A: Corporation Income Tax Return
- Form 1120-W Estimated Tax for Corporation
- Form 8109-B Deposit Coupon
- Form 4625 Depreciation
South Carolina’s Business Tax Climate Ranks 24th
South Carolina ranks 24th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Georgia (20th) and North Carolina (30th).
South Carolina’s State/Local Tax Burden among Nation’s Lowest
Taxes as a percentage of income fell from 9.9% in 1990 to 9.0% in 2004. This indicates that individual incomes in South Carolina have risen faster than state/local tax collections over the past decade. Estimated in 2004 at 9.0% of income, South Carolina’s state/local tax burden percentage is ranked 43rd nationally.
South Carolina’s Individual Income Tax Systems
South Carolina’s personal income tax system features six income brackets with a top rate of 7% kicking in at a relatively low income level of $12,000. South Carolina’s top rate of 7.0% is 16th highest among states levying personal income taxes. 2002 state individual income tax collections were $476 per person (36th nationally).
South Carolina’s Corporate Income Tax Collections Per Capita, Among Lowest Nationally
South Carolina’s corporate tax structure consists of simply a flat tax of 5.0% on all corporate income. This tax ranks the state 5th lowest among states levying corporate income taxes. In 2001, corporate tax collections reached $47 per capita.
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