Benefits of a corporation
Forming a corporation can protect your house, car, and other personal assets if your business is sued or encounters financial difficulties. Because a corporation is a separate legal entity from its owners, the owners’ liability is limited to the amount they have invested in the corporation. Forming a corporation offers additional benefits, including tax savings and increased appeal to investors.
Requirements for incorporating in South Carolina
Preparing your articles of incorporation
To form a corporation, you must file articles of incorporation and an initial annual report (form CL-1) with the Secretary of State and pay a filing fee. The corporation’s existence begins when you file the articles. The articles must contain the following provisions:
- Name of the corporation
- Stock structure
- Names, addresses, and signatures of incorporators
- Registered agent and registered office
- Certificate signed by attorney
In regard to the stock structure, your articles of incorporation must include the total number of authorized shares, itemized by class. If more than one class of shares is authorized, the articles must list the number of shares in each class, provide a distinguishing designation for each class and, before any shares in a class are issued, state the limitations, preferences and relative rights of each class.
The articles of incorporation must also include a statement, signed by an attorney licensed to practice law in South Carolina, stating that the corporation has complied with the requirements of Chapter 2, Title 33 of the 1976 South Carolina Code of Laws, as amended, relating to the articles of incorporation.
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Naming your corporation
Before filing corporate formation documents, you should find out if the corporate name you have chosen is available. You can check the availability of a name by searching business filings online at the Secretary of State’s website.
A corporation name may be reserved for 120 days by filing an application with the Secretary of State.
Your corporation’s name must meet the following requirements:
- It must contain one of these words or abbreviations: “corporation,” “incorporated,” “company,” “limited,” “corp.,” “inc.,” “co.” or “ltd.”
- The name must be distinguishable from the name in the Secretary of State’s records of any corporation formed or authorized to do business in South Carolina, any out-of-state limited partnership authorized to do business in South Carolina, any fictitious name used by an out-of-state corporation or any corporate name that has been reserved or registered.
An incorporator signs the articles of incorporation and submits them to the Secretary of State for filing. The following requirements apply when specifying incorporators:
- Incorporators’ names and addresses must be listed in the articles of incorporation.
- Every corporation must have at least one incorporator.
- An incorporator may be a person or an entity.
- If initial directors are not named in the articles of incorporation, the incorporators must elect directors. They may also approve bylaws. After that, the incorporators have no further duties.
Corporate directors exercise corporate powers and oversee management of the corporation’s business. Although a corporation must have at least one director, there is no legal maximum on the number of directors, although the number should be set by either the articles of incorporation or bylaws. A director does not have to be a shareholder or a South Carolina resident. The articles of incorporation or bylaws may establish eligibility criteria for directors.
Specifying a registered agent and registered office
Every corporation must maintain a registered office in South Carolina and a registered agent at that office. A registered agent is the person designated to receive lawsuits, notices, and demands on behalf of the corporation.
The following requirements apply when specifying your corporation’s registered agent and office:
- The articles of incorporation must list a registered agent and registered office. The registered office address must be a street address in South Carolina, and it must be identical to the registered agent’s business office. It may be the same as the corporation’s place of business.
- A registered agent can be an individual who resides in South Carolina or a corporation formed or authorized to do business in South Carolina.
Stating a corporate purpose
It is not necessary to state a corporate purpose in the articles of incorporation. The purpose of every South Carolina corporation is to engage in any lawful business, unless the articles state a more limited purpose.
Determining incorporation bylaws
A corporation’s bylaws provide important guidelines for the corporation’s organization and operation. They do not need to be filed with the Secretary of State but should be kept at the corporation’s principal place of business. Bylaws include provisions for managing the business and regulating the affairs of the corporation. No specific content is required.
You must adhere to the following requirements when determining your corporation’s bylaws:
- The incorporators or directors must adopt initial bylaws for the corporation.
- Bylaws cannot include anything that is inconsistent with the law or the articles of incorporation.
Costs of incorporating in South Carolina
The South Carolina Secretary of State requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay state and federal income taxes.
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