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South Carolina LLC |
Advantages and Disadvantages
of a South Carolina LLC
Advantages of Limited Liability Company
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of Limited Liability Company
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
By South Carolina and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial South Carolina LLC members, the name and address of your South Carolina registered agent, the details of which will be introduced into the body of your LLC operating agreement and related South Carolina LLC formation documents assembled for application to the state of South Carolina.
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. (See the Excel chart and table).
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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