Boasting one of the strongest economies in the region, South Carolina offers a promising environment for entrepreneurs in the south. In fact, small businesses created nearly 31,000 new jobs in the state in 2016, with firms with 20 employees or fewer accounting for 59% of those jobs.
In order to help you make your mark in the Palmetto State’s growing startup scene, we’ve put together the definitive guide to starting a business in South Carolina. Whether you are pioneering a new biomedical technology, or planning to open a restaurant, we’ll walk you through all of the key steps of making your dream a reality, while providing links to vital entrepreneurial resources and organizations based in the state.
South Carolina small business statistics at-a-glance
- 418,031 small businesses are based out of South Carolina, accounting for 99.4% of the state’s total businesses.
- 794,711 South Carolina residents work for small businesses in the state, which is 46.3% of the state’s workforce.
- The median income for South Carolina entrepreneurs self-employed at their own incorporated business was $45,564 in 2017.
- Accommodation and food services is the leading small business employer industry in South Carolina, followed by health care and social assistance, and retail trade.
- 79.68% of South Carolina startups survive their first year of existence, which is above the national average.
- South Carolina startups create an average of 4.89 new jobs in their first year.
- Tax Foundation ranked South Carolina’s corporate tax rate 4th in the nation in its 2020 Business Tax Climate Index.
Starting a business in South Carolina in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in South Carolina?
- Who is your target market?
- Do existing businesses in South Carolina offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the South Carolina market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in South Carolina.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. Plenty of both types of investors are operating in South Carolina.
South Carolina Angel Investors and VCs
- VentureSouth – A funder of early-stage businesses in South Carolina and the entire Southeast region. Funds and groups that are part of the VentureSouth team have invested more than $35 million in over 65 companies.
- Charleston Angel Partners – Founded in 2001, Charleston Angel Partners is one of the longest-running angel groups in the state. The group has invested over $9 million in its portfolio companies in its 18 years of activity.
- Alerion Ventures – An evergreen venture capital firm with a focus on funding scalable South Carolina startups. So far, the group has invested in nearly 20 companies.
Additional Investor Resources
- Charleston Angel Conference – An annual conference where entrepreneurs can pitch to a wide audience of investors, with the opportunity to win a significant amount of financing in the conference’s competition.
- AngelList: South Carolina Angel Investors – A directory of nearly 5,000 angel investors seeking the opportunity to fund South Carolina startups with high growth potential.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
Once you decide which structure your business will take, you can register it with the state of South Carolina. This process varies depending on whether you establish a sole proprietorship, LLC, or corporation.
For sole proprietorships
Sole proprietors using their own name in the state do not need to make any special filing with the state government, however, if you plan to use a business name different from your legal name, it is a good idea to file a DBA name (“doing business as” name). While not legally required, filing will allow you to open a bank account under your DBA name, and take payments in business transactions using the name.
First, use the South Carolina Secretary of State Business Name Search to make sure your DBA name is available for use in the state. Then, click “Start a New Business Filing” at the SC SoS website, create a login, and follow the steps to file your DBA name.
For LLCs and corporations
The process of creating either of these two entities is similar in the state of South Carolina. First, you must appoint a registered agent to handle process notices and other government correspondence on your business’s behalf. The registered agent must have a physical address in the state.
Next, perform a search to confirm that your chosen business name is available for use in the state. If your name is distinguishable from the names of other South Carolina businesses, you are ready to file the necessary documents to create your business.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. Visit the South Carolina Department of Revenue, Taxes & Insurance portal to learn about applicable state-administered business taxes, and register an account to file taxes online.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in South Carolina good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
South Carolina entrepreneurs can handle all of their business license requirements in one place: the state hosts a License, Permits, & Registration page where you can get informed on licensing requirements, depending on the nature of your business, and get in touch with the state agencies responsible for issuing the licenses you need. In many cases, the application may be done online.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
The Charleston metropolitan area is one of the fastest-growing regions in the United States, which means Charleston and its surrounding communities (such as Mount Pleasant, considered by some to be the 2nd fastest growing city in the nation) are ripe with opportunity for entrepreneurs looking to fill economic niches opened up by the rapid population growth. With a declining crime rate and a reasonable cost of living for a city its size, the city offers a promising environment for aspiring small business owners.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
South Carolina small business resources
- South Carolina Secretary of State: Business Entities Online – Follow the steps to file documents for your new business online.
- SC.gov: Taxes & Insurance – Your online tax portal. Learn about state business taxes and unemployment insurance regulations in South Carolina, and register your business to file taxes online.
- SC.gov: Licenses, Permits, & Registration – Get filled in on the specialty licenses, permits, and certifications to operate legally in the state of South Carolina, and apply for them online.
- South Carolina Small Business Development Center – A statewide organization dedicated to helping small business owners in the state through free consulting, training workshops, and providing access to funding sources.
- NFIB: South Carolina – The South Carolina page of the nation’s principal small business advocacy group. Get local news and learn about pressing issues concerning entrepreneurs in the state.
- South Carolina Research Authority (SCRA) – A non-profit corporation chartered by the state government that provides loans to South Carolina tech companies that participate in the SC Launch Program, a state-sponsored accelerator program for tech startups.
- The Harbor – A coworking space and incubator in Charleston with an excellent reputation that has supported over 170 local companies through its various programs in its five years of existence.
- NEXT Space Greenville – An organization that runs two coworking and startup incubation spaces in Greenville, SC: the NEXT Innovation Center, and NEXT on Main.
- SOCO – A hip, yet affordable coworking environment located in Columbia. Those interested in becoming a member can book a tour of the space before making a decision.
- SCORE South Carolina Chapters and Resources – A directory of the nation’s leading business mentoring network’s 6 South Carolina chapters.