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Types of Business Entities

Understanding the Types of Legal Business Entities in the Myrtle Beach Area

If you are planning to open a business in South Carolina, one of the first major decisions you must make is the legal form or “choice of entity” your business will take. In South Carolina, you may operate as a sole proprietorship, partnership, corporation, or limited liability company.

Your “choice of entity” selection will depend on many factors, including the

  • Type of business
  • Number of owners
  • State and federal tax considerations
  • Number of employees
  • Expected revenues
  • Desire to limit personal liability

In selecting and forming the appropriate legal entity to do business in South Carolina, a Myrtle Beach attorney from Joye, Nappier, Risher, & Hardin can help.

Let us help you select the appropriate business entity. Give our Myrtle Beach office a call at (843) 203-0637 today!

Sole Proprietorship

A sole proprietorship is the simplest business form under which a business can operate. It is not a legal entity but simply refers to a person who owns a business and is personally responsible for its debts and liabilities. A sole proprietorship is not taxed separately and any income of the sole proprietorship is considered to be the income of the owner.

Business Partnership

A business partnership entity is a business that is composed of two or more owners who have legally agreed to share management and profits through written agreements. There are two types of partnerships in South Carolina: A general partnership and a limited partnership.

  • General Partnership - This is a type of unincorporated business entity where two or more individuals own and manage the business and are personally liable, both jointly and severally, for the debts and liabilities of the business. Like a sole proprietorship, a general partnership does not pay tax on its income but its profits and losses are passed through to the partners and reported on the individual partner’s tax returns. The specific terms of the partnership are governed by a partnership agreement. Unless noted in the partnership agreement to the contrary, any general partner can act on behalf of the partnership and make decisions that are binding on all partners in the partnership.
  • Limited Partnership - This type is similar to a general partnership, however, it has two classes of partners: It has at least one general partner and one or more limited partners. Limited partners do not participate in the management of the partnership, however, a limited partner’s liability is limited to the amount of their investment in the partnership. In South Carolina, limited partnerships are governed by a limited partnership agreement and must be registered with the South Carolina Secretary of State’s office.

Corporation

A corporation is a legal entity that exists under authority granted by state law. A corporation has its own identity, separate from its shareholders or owners, and as such can be sued, enter into contracts, and buy or sell real estate or property.

A corporation is responsible for its debts as well as the business debt liability of its shareholders, officers, and directors. Liabilities are generally limited to the assets of the corporation. A corporation has perpetual existence and is not affected by the death of shareholders, directors, or officers.

Corporations are taxable entities that pay taxes on whatever profits exist after salaries and other expenses are paid. Regular corporations or “C” corporations pay taxes at a special corporate rate. Corporations whose shareholders are eligible to make a “Subchapter S” election by filing Form 2553 with the Internal Revenue Service can elect to be classified as an “S-Corporation” and business profits and losses will be reported to the IRS on a Schedule K-1 resulting in any profits and losses passing through to shareholders individual tax returns. Certain restrictions exist, however, on whether a corporation can be an “S-Corporation”.

To form a corporation in South Carolina, Articles of Incorporation must be signed by a licensed attorney and filed with the South Carolina Secretary of State’s office. In addition to filing articles of incorporation, corporate bylaws must be created stating the terms and conditions for the governance of the corporation.

An attorney from Joye, Nappier, Risher, & Hardin can guide you through this process and help ensure that your corporation has been set up properly and all necessary documents have been created.

Limited Liability Company

A limited liability company, similar to a corporation, is a legal entity created pursuant to state law. It has the limited liability advantages of a corporation and the “pass-through” taxation advantages of a partnership.

A limited liability company is created by filing Articles of Organization with the Secretary of State’s Office. It may be “member-managed” or it may be “manager-managed.” It may be filed to exist perpetually or for a term of years. In addition to filing the Articles of Organization, an Operating Agreement is generally created outlining the terms and conditions for management and governance of the limited liability company.

The Operating Agreement offers great flexibility in allocating profits and losses to the members (shareholders) of the company and it often sets out buyout and transfer of membership terms and conditions. Joye, Nappier, Risher, & Hardin is experienced in organizing limited liability companies and drafting Operating Agreements.

Contact us at (843) 203-0637 if you have any questions about choosing an entity for your business.

Joye, Nappier, Risher, & Hardin LLC

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