South Carolina Sole Proprietorship

How to Become a South Carolina Sole Proprietor

Starting a sole proprietorship in South Carolina is straightforward. There’s no official setup process or fees involved. To operate one, simply start working.

However, even though it’s easy to start, there are some extra steps you might want to consider. While not strictly necessary, many sole proprietors find them beneficial.

DBA Acquisition

A South Carolina doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.

That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.

Unlike most states, however, South Carolina does not recognize or register DBA names for sole proprietorships; only corporations and partnerships can register assumed names with the state.

Determine Taxation Requirements

Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.

Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.

Depending on the business activities which your sole proprietorship participates in, it’s likely you’ll need to pay several industry-specific business taxes such as partnership taxes, motor fuel taxes, sales & use tax, or other miscellaneous taxes. A listing of the state’s business taxes as well as instructions on how to file and pay can be found conveniently through the South Carolina Department of Revenue.

Obtain Business Licenses and Permits

There isn’t a requirement in South Carolina for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other licenses and/or permits to operate in a compliant fashion.

Depending on the business activities that your sole proprietorship takes part in, it’s likely you’ll need one of the industry-specific regulatory licenses. For help determining your state-level licensing needs, you’ll want to register with the South Carolina Business One Stop system.

In addition, you should check to see if your business needs any licenses or permits on the local level.

For example, municipalities such as Charleston, Myrtle Beach and Spartanburg each have their own local licensing requirements.

What Is a South Carolina Sole Proprietor?

As opposed to a corporation or South Carolina limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.

Here are the three main things you need to know:

Tax Responsibilities

Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.