Create Business Name
For businesses that choose to create a legal entity in South Carolina, such as a corporation, the state requires the formation documents to include a unique business name – meaning that no other business registered in South Carolina can use it. However, South Carolina allows sole proprietors to operate the business under any name, regardless of whether a business is registered with the same name or not. As a result, creating a name for your sole proprietorship requires nothing more than your creativity. But if you want to ensure that no other business uses the same name, you might consider registering your business name as a federal trademark with the U.S. Patent and Trademark Office.
South Carolina Licenses
South Carolina requires all businesses, including unregistered sole proprietors, to obtain a license for certain types of business operations. If you sell goods to consumers, the state requires that you obtain a retail license. However, there are additional types of business licenses that are necessary for other business activities your sole proprietorship engages in, such as the Alcoholic Beverage License, for example. It isn’t necessary for you to submit separate documentation for each license. Instead, you can file a single Form SCTC-111, Business Tax Application, with the South Carolina Department of Revenue for all necessary licenses.
State Business Taxes
There is an array of state taxes you may have an obligation to remit to the Department of Revenue for your sole proprietorship. When operating a retail business, you are then personally liable to collect the tax from each customer. Because many counties charge different rates of sales tax in addition to the state rate, the amount you must collect from each customer depends on the county in which you operate your sole proprietorship. If you have any employees, the state requires that you register with the Department of Revenue as a withholding agent; you have an obligation to withhold state income taxes from your employees’ wages. The state also collects income tax on your business earnings, but because you don’t have a separate legal entity, you report the income on your federal income tax return, which you then use to prepare your state income tax return.
Sole Proprietor Liability
Choosing to create a sole proprietorship can eliminate the costs and delays that are common with the formation of other types of business entities. The main disadvantage, however, is that you are personally liable for all debts of your sole proprietorship. These debts not only include credit transactions, but cover potential court judgments against your business. You can limit this risk by purchasing an insurance policy that covers any lawsuits that arise in the course of your business.