Should I Incorporate My Business?
Many entrepreneurs in South Carolina wonder whether they should adopt a formal structure for their business. Some people imagine that incorporation will increase their cost of doing business or impose on them unnecessary paper work. Others worry that creating a formal entity will deprive them of control over the business. In truth, none of these concerns is valid. A review of South Carolina’s business formation laws will demonstrate why.
South Carolina law permits the creation of two different types of formal business entities: corporations and limited liability companies. Corporations are generally run by a board of directors and a hierarchy of corporate officers that report to the board. For small companies, this structure can be unwieldy. In order to provide small businesses with the benefits of incorporation without its burdens, the state legislature created an entity called a limited liability company, or LLC.
An LLC is composed of one or more members, one of whom is designated as the chief manager. Each member has a specified share of the profits and expenses. The LLC may also have a board of managers to oversee the decisions made by the chief manager. The main benefit of setting up an LLC to run a business is the shielding of personal assets of the members from unlimited liability. Like a corporation, only the assets paid into the LLC by its members are subject to attachment to pay debts of the LLC. Without the protection of the LLC form, a member’s assets may be totally subject to pay all or part of the entity’s obligations.
An LLC can be created by drafting articles of organization and filing the articles with the secretary of state. The members may also prepare a membership or operating agreement that allocates management responsibility among the members and sets forth the division of income and losses.
The creation of a basic LLC is not complex, but as the members ask for special features of management or ownership of specific assets, the services of an experienced business formation attorney may be required to complete the formation of the LLC.