How to Form a Professional Corporation in South Carolina (2024 Guide)

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
Last updated: 
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Forming a Professional Corporation in South Carolina

If you would like to start and learn how to form a corporation in South Carolina, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in South Carolina are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in South Carolina or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

What is a Professional Corporation in South Carolina?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the South Carolina. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in South Carolina, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in South Carolina

To form a Professional Corporation in South Carolina for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an Annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in South Carolina, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in South Carolina

After you have decided to form a professional corporation in South Carolina, you must choose a name for your corporation. Here are some pointers to consider when naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • Limit of restricted words that need a license.
  • A unique name is needed with no match
  • No confusion with a government entity name.

In South Carolina, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. You must file a name reservation application in the South Carolina Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for South Carolina DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the South Carolina Registered Agent

The next step in forming a professional corporation is hiring a Registered Agent, who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in South Carolina. Forming a professional corporation for your service will be easier if you have Registered Agent in South Carolina.

Alternatively, you can serve as your own Registered Agent if you have the time. Usually, in South Carolina, a Registered Agent costs is ranging from $50 – $150. To make it easier, you can hire South Carolina Registered Agent Services for your professional corporation.

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Step 4: File the Articles of Incorporation in South Carolina

After you hire a Registered Agent to form a professional corporation, the next step is to file the South Carolina Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information, should be written. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

Filing the Articles of Incorporation in South Carolina may be done with two methods, online and by mail. The Articles of Incorporation fee may vary from different state. However, in South Carolina, it costs $110 for online and by mail filing. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to South Carolina Secretary of State’s Office, Attn: Corporate Fillings, 1205 Pendleton Street, Suite 525, Columbia, SC 29201.

Step 5: Write an Operating Agreement in South Carolina

An operating agreement in South Carolina is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

Step 6: Designate the PC Board of Directors in South Carolina

The next step is to form the first board of directors for your PC in South Carolina. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the South Carolina Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In South Carolina, you must have Three directors in forming your Professional Corporation.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with South Carolina Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

  • Name and Purpose of the Corporation
  • Registered Office and Agent
  • Shareholders
  • Board of Directors
  • Officers
  • Committees
  • Indemnification and Insurance
  • Conflict of Interest
  • Records and Reports
  • Amendments
  • Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in South Carolina.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in South Carolina. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

The application of an EIN in South Carolina can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in South Carolina for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in South Carolina easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in South Carolina

Before your professional corporation operates in South Carolina, you must have South Carolina Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in South Carolina ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in South Carolina

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the South Carolina tax classification for the taxes that an LLC in South Carolina must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in South Carolina.

  • Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
  • South Carolina Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
  • Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
  • Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
  • Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
  • Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in South Carolina

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in South Carolina

In South Carolina, you must submit a report. The owners’ and Registered Agent’s names and contact details are listed in the Annual Report. Also, it should include all of your yearly financial activity. You must submit the report every 1 year in the South Carolina Secretary of State.

FAQs

What is a professional corporation in South Carolina?
A professional corporation in South Carolina is a type of corporation that is formed by individuals who are licensed to provide professional services.
Who can form a professional corporation in South Carolina?
Professionals who are licensed to provide services in South Carolina can form a professional corporation.
What types of professionals can form a professional corporation in South Carolina?
In South Carolina, professionals such as doctors, lawyers, dentists, architects, engineers and other professionals who require a license can form a professional corporation.
How is a professional corporation formed in South Carolina?
To form a professional corporation in South Carolina, you need to file Articles of Incorporation with the Secretary of State and follow certain other legal formalities.
What are the benefits of forming a professional corporation in South Carolina?
The benefits of forming a professional corporation in South Carolina include limited liability protection for the owners, tax benefits, and the ability to raise capital easily.
What is the organizational structure of a professional corporation in South Carolina?
The owners of professional corporations in South Carolina are either shareholders or officers, and they are subject to certain legal requirements and restrictions.
What are the tax benefits of forming a professional corporation in South Carolina?
One of the tax benefits of forming a professional corporation in South Carolina is the ability to deduct expenses related to professional services.
What are the legal formalities required to form a professional corporation in South Carolina?
To form a professional corporation in South Carolina, you need to file Articles of Incorporation with the Secretary of State, hold initial organizational meetings, adopt bylaws, and obtain all necessary licenses and permits to operate your business legally.
How many shareholders can a professional corporation have in South Carolina?
A professional corporation in South Carolina can have one or more shareholders.
How are shares of a professional corporation issued in South Carolina?
Shares of a professional corporation in South Carolina must be issued in compliance with the state’s securities laws.
Can non-licensed individuals own or invest in a professional corporation in South Carolina?
No, non-licensed individuals cannot own or invest in a professional corporation in South Carolina.
Can a professional corporation in South Carolina be managed by non-shareholders?
Yes, a professional corporation in South Carolina can be managed by non-shareholders, provided they are licensed to provide professional services.
Are professional corporations in South Carolina subject to any special taxation rules?
Yes, professional corporations in South Carolina are subject to certain taxation rules, including the corporate income tax.
Can a professional corporation in South Carolina own property and assets?
Yes, a professional corporation in South Carolina can own property and assets.
Are professional corporations in South Carolina required to obtain liability insurance?
Professional corporations in South Carolina are not required by law to obtain liability insurance, but it is recommended.
Can professionals from different fields form a professional corporation in South Carolina?
No, professionals from different fields cannot form a professional corporation and provide professional services unless otherwise permitted by law.
Can a professional corporation operate across state lines in South Carolina?
Yes, a professional corporation in South Carolina can operate in other states in compliance with applicable laws.
Are there any restrictions on the name of a professional corporation in South Carolina?
Yes, a professional corporation in South Carolina must use the word “professional corporation” or an abbreviation of this term in its name.
What is the registration fee for a professional corporation in South Carolina?
The registration fee for a professional corporation in South Carolina is $135.
How long does it take to form a professional corporation in South Carolina?
It takes approximately five to seven business days to form a professional corporation in South Carolina once all legal formalities have been completed.
Can a professional corporation in South Carolina be converted to another business entity such as an LLC or a partnership?
Yes, a professional corporation in South Carolina can be converted to another business entity such as an LLC or a partnership.
Are professional corporations in South Carolina subject to any special regulations?
Yes, professional corporations in South Carolina are subject to certain regulations, including those related to professional licensing requirements, business operations, and bylaws.
Can a professional corporation in South Carolina do business under a different name?
Yes, a professional corporation in South Carolina can do business under a different name provided it satisfies certain legal formalities.
Can an individual who provides professional services as an employee form a professional corporation in South Carolina?
In most cases, no, an individual who provides professional services as an employee cannot form a professional corporation in South Carolina.
Do professional corporations in South Carolina have to file annual reports?
Yes, professional corporations in South Carolina are required to file annual reports with the Secretary of State.
Can a professional corporation in South Carolina issue stock options to employees?
Yes, a professional corporation in South Carolina can issue stock options to employees.
Can a professional corporation in South Carolina issue dividends to shareholders?
Yes, a professional corporation in South Carolina can issue dividends to shareholders subject to certain legal requirements.
How can I dissolve a professional corporation in South Carolina?
A professional corporation in South Carolina can be dissolved by filing Articles of Dissolution with the Secretary of State and follow certain legal formalities.
What are the consequences of not complying with the legal requirements for a professional corporation in South Carolina?
Failure to comply with the legal requirements for a professional corporation in South Carolina can result in fines, legal penalties, and the loss of limited liability protection for the owners.
What is a professional corporation?
A professional corporation is a business entity formed by professionals, such as doctors and lawyers, for the purpose of practicing their profession.
How do I form a professional corporation in South Carolina?
You can form a professional corporation in South Carolina by filing the appropriate paperwork with the South Carolina Secretary of State.
Can professionals form a regular corporation in South Carolina?
No, professionals must form a professional corporation in South Carolina to engage in their professional practice.
What professions can form a professional corporation in South Carolina?
Professions that are allowed to form professional corporations in South Carolina include doctors, dentists, lawyers, accountants, and engineers.
Can professionals from different fields form a professional corporation together in South Carolina?
No, professionals in different fields must form separate professional corporations.
How many shareholders can a South Carolina professional corporation have?
A South Carolina professional corporation can have any number of shareholders, but all of them must be licensed in the profession.
Do professional corporations have limited liability in South Carolina?
Yes, professional corporations have limited liability protection in South Carolina, meaning that the corporation is responsible for its debts and liabilities, not the individual shareholders.
Do I need to have a registered agent for my South Carolina professional corporation?
Yes, all South Carolina corporations must have a registered agent with a physical address in South Carolina.
Can a non-professional own part of a professional corporation in South Carolina?
No, all shareholders of a South Carolina professional corporation must be licensed professionals.
How do the shareholders of a professional corporation in South Carolina pay taxes?
The shareholders of a South Carolina professional corporation pay taxes on their share of the corporation’s profits through their personal income tax returns.
Can a South Carolina professional corporation own property?
Yes, a South Carolina professional corporation can own and hold property in the state.
Can a South Carolina professional corporation be sued?
Yes, a South Carolina professional corporation can be sued, but only its assets are at risk, not the personal assets of the shareholders.
Can a professional corporation be dissolved in South Carolina?
Yes, a professional corporation can be dissolved in South Carolina as long as all of the necessary paperwork is filed with the Secretary of State.
Are South Carolina professional corporations subject to annual reporting requirements?
Yes, South Carolina professional corporations must file annual reports with the Secretary of State.
Can a professional corporation change its name in South Carolina?
Yes, a professional corporation can change its name by filing the appropriate paperwork with the South Carolina Secretary of State.
How much does it cost to form a professional corporation in South Carolina?
The cost to form a professional corporation in South Carolina varies depending on factors such as filing fees and legal fees.
Can a South Carolina professional corporation sell shares to the public?
No, South Carolina professional corporations cannot offer their shares for sale to the public.
Must a South Carolina professional corporation have a specific purpose stated in its articles of incorporation?
Yes, the articles of incorporation for a South Carolina professional corporation must state the specific professional purpose of the corporation.
Can a South Carolina professional corporation provide services in other states?
Yes, a South Carolina professional corporation can provide services in other states as long as it registers to do business in those states.
Is a South Carolina professional corporation required to hold annual meetings?
Yes, South Carolina professional corporations must hold annual meetings of shareholders.
How can a professional corporation in South Carolina survive its shareholders?
A professional corporation can survive its shareholders through perpetual existence, which means that it is not affected by shareholder deaths or transfers.
Can a South Carolina professional corporation be used to provide services to the public sector?
Yes, a South Carolina professional corporation can provide services to the public sector as long as it registers to do business with the appropriate agency.
Can a South Carolina professional corporation be converted into another type of business entity?
Yes, a South Carolina professional corporation can be converted into another type of business entity, such as a limited liability company or a partnership.
Can a professional corporation in South Carolina raise capital through the sale of its shares?
No, South Carolina professional corporations cannot raise capital through the sale of their shares.
Can a professional corporation in South Carolina enter into partnerships with non-corporate entities?
Yes, South Carolina professional corporations can enter into partnerships with non-corporate entities as long as they maintain their professional identity.
Can a South Carolina professional corporation file for bankruptcy?
Yes, a South Carolina professional corporation can file for bankruptcy if it meets the necessary requirements.
Can a professional corporation in South Carolina issue non-voting shares?
Yes, a South Carolina professional corporation can issue non-voting shares to its shareholders.
Can a South Carolina professional corporation provide goods and services outside of its professional practice?
Yes, a South Carolina professional corporation can provide goods and services outside of its professional practice as long as they are incidental and related to its primary professional function.

Also Read

How to Save Money While Forming South Carolina Professional Corporation

Firstly, it is crucial to conduct thorough research before diving into the process of forming a professional corporation. Understanding the specific requirements, regulations, and necessary permits, as well as potential pitfalls and shortcuts, can be immensely helpful. By investing time upfront in gathering information, individuals can ensure that they make informed decisions and avoid unnecessary expenses in the long run.

To save money, aspiring professionals should consider tackling certain administrative tasks themselves instead of hiring external help. While it may be tempting to delegate everything to legal advisers and professionals, taking an active role in the formation process can significantly reduce costs. From obtaining and filing the necessary documents to completing often standard paperwork, investing time and effort can lead to substantial financial savings.

Collaborating with trusted colleagues or industry peers is another fantastic way to cut down on expenses. By pooling resources, individuals can benefit from shared expertise, reduce individual costs, and even negotiate lower fees with attorneys or other professionals. Additionally, forming professional associations or collectives may allow members to share certain responsibilities, such as insurance costs or office space, considerably reducing financial burdens.

Considering the right legal support is crucial. While starting a professional corporation may appear daunting, identifying attorneys or legal advisors experienced in business formation can make the process more efficient and ultimately save valuable funds. Seeking referrals from trusted sources or tapping into industry networks can lead to finding legal experts who understand the specific needs of professionals in South Carolina, minimizing wasted time and resources.

Moreover, it is important to focus on necessary expenses and prioritize wisely. Although a new professional corporation requires financial investment, individuals should avoid overspending on non-essential items or services. By being mindful of where funds are allocated, aspiring professionals can keep their expenditure in check and ensure that each expense supports the essential foundation of their corporation.

Considering shared office spaces is one highly practical solution. Renting or subletting office spaces is a common and often unnecessary expense, especially for newly-formed corporations. Instead, exploring co-working spaces or shared office arrangements can significantly reduce both short-term and long-term costs while still providing professionals with a suitable and professional working environment.

Lastly, ongoing and proactive expense management is vital for individuals forming a South Carolina professional corporation. By continuously reassessing expenses and evaluating their necessity, professionals can identify areas where further optimization or cost-saving measures can be implemented. Such periodic evaluations allow for necessary adjustments and help in utilizing available resources more efficiently.

Forming a professional corporation in South Carolina is undoubtedly a significant undertaking. Yet, by implementing cost-saving strategies such as conducting thorough research, taking an active role in administrative tasks, collaborating with colleagues, and mindful expense management, individuals can successfully establish their corporation while keeping financial burdens to a minimum. Saving money during this formative phase frees up resources to be utilized in the growth and operations of the professional corporation, setting the stage for long-term success and sustainability.

Conclusion

In conclusion, forming a professional corporation in South Carolina is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.

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