One of the central decisions when forming a business is what type of business structure you want to operate under. If you have settled on a corporation, then you have to choose what type of corporation you want. You will also need to decide what type of tax treatment you want for the corporation. Many corporations opt for C corporation status over S corporation status. C corporations are favored by owners who want to maintain limited liability as well as having a more formal business structure. C corporation status also gives owners the ability to lower overall income taxes and gives more pathways to raising capital.
Forming a C Corporation in South Carolina
Forming a corporation in South Carolina all starts with choosing a corporate name. The name must include something like corporation, company, or incorporated. Additionally, it must be an original name, distinguishable from other business names registered with the South Carolina Secretary of State. To check the availability of a corporate name, you can search the business name database maintained by the South Carolina Secretary of State.
You must also establish and file Articles of Incorporation with the South Carolina Secretary of State. The Articles are required to include:
- Corporate name
- Corporate address
- The agent of service’s name, address, and signature
- Nature of the business
- Authorized number of shares for issuance
- Every incorporator’s name and address
- Effective date of the Articles
In addition to the Articles of Incorporation, but not required by law, you should also prepare corporate bylaws. The bylaws set forth the foundation of the corporation. They establish the operating rules and procedures of the corporation and can greatly help legitimize a corporation.
You must also appoint your board of directors. The initial corporate directors will serve until the first annual shareholder meeting is held. You should also hold your first board of directors meetings in order to do things like appoint corporate officers and review the bylaws prior to adopting them. At the initial board of directors meeting, you can also authorize the issuance of stock.
You will also need to be sure that the corporation is in compliance with all relevant tax and other regulatory requirements. This means that your corporation must do things like getting a federal employer identification number (EIN). To do so, you must simply complete the online application found on the IRS website.
As far as obtaining C corporation status, there is nothing, in particular, you will need to do. When chartering a corporation in South Carolina, it automatically starts as a C corporation. So, if you do not pursue anything further regarding tax treatment, the corporation will remain a C corporation. You may opt to make your corporation an S corporation but will need the consent of all corporate shareholders for this special tax treatment. You will also need to file Form 2553 with the IRS and comply with the requirements of Subchapter S of the Internal Revenue Code. S corporation status may be applied for any time after the corporation is formed.
Business Law Attorney
Starting a business is full of important choices. Choosing your corporate structure and electing or not electing for special tax treatment can have substantial impacts on your business. Get business counsel you can trust at Monk Law. We are committed to seeing your business succeed. Contact us today.