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Editorial 7 MIN READ

South Carolina in 2023: the state with no LLC annual report

A $110 filing fee, a 5 percent flat corporate tax, and one of the cheapest ongoing compliance loads in the country

The Editors
Staff, Incorporator.org
7 min read Updated
Contents 7 sections
  1. What it costs to form
  2. Maintenance is the part that stands out
  3. The tax stack if you elect C-corp treatment
  4. The manufacturing carve-out
  5. Against the Delaware default
  6. Who this state makes sense for in 2023
  7. Sources

outh Carolina charges $110 to form an LLC online and asks for nothing back the following year. No annual report, no franchise tax, no recurring filing fee. That second sentence is the one most founders miss, and it is the reason the state deserves a second look in 2023.

This is a walk through what Columbia actually charges, what the statute actually says, and where South Carolina sits when you line it up against the Delaware default.

What it costs to form

You file Articles of Organization with the South Carolina Secretary of State through the Business Filings portal at businessfilings.sc.gov. The online fee is $110. Paper filings run the same base fee, with a longer processing tail. The form asks for the LLC name, the registered office address (which must be a physical address in South Carolina), the registered agent's name and signed consent, whether the LLC is member-managed or manager-managed, and the organizer's signature. That is the whole document.

The statutory basis is the South Carolina Uniform Limited Liability Company Act of 2006, codified at S.C. Code Ann. § 33-44. The filing requirement and fee schedule live in § 33-44-202 (content of articles) and § 33-44-1204 (filing fees). Reservation of a name costs $25 and holds for 120 days; most founders skip it and file directly.

Turnaround on the online channel is typically same day to two business days when the queue is clean. The Secretary of State does not publish a rigid SLA, and filings occasionally sit longer around fiscal year-end, but 24 to 48 hours is the practical expectation for an online Articles of Organization in 2023.

Foreign LLCs registering into South Carolina file a Certificate of Authority and pay $110. The mechanics are otherwise the same: registered agent in state, confirmation of existence from the home jurisdiction, and a portal submission.

Maintenance is the part that stands out

South Carolina does not require an annual report from LLCs. It does not require a biennial report either. There is no franchise tax on the entity, no privilege tax on capital, no recurring secretary-of-state filing fee tied to continued existence. Once the LLC is formed, the state's next billable touchpoint is usually the Department of Revenue, and only if the LLC has an activity that triggers one of the tax filings below.

This is unusual. California charges an $800 annual franchise tax on every LLC. Delaware bills $300 every June 1. Texas runs a no-tax-due report tied to the margins tax. Massachusetts wants $500 a year. Nevada's commercial filings and state business license together run north of $350 annually. Against that field, $0 in mandatory recurring state-level fees is a genuine outlier, and it matters more than the one-time formation fee because the line item repeats every year for the life of the entity.

The one caveat: LLCs that elect to be taxed as C corporations for federal purposes pick up South Carolina's corporate tax filings, and with them the corporate license fee discussed below. LLCs taxed as partnerships or disregarded entities stay out of that box.

The tax stack if you elect C-corp treatment

South Carolina's corporate income tax is a flat 5.0 percent, one of the lowest statutory rates in the country. The rate sits in S.C. Code § 12-6-530, which imposes the tax on the South Carolina taxable income of every corporation doing business in the state. There are no brackets; there is no surcharge. Apportionment follows single-sales-factor for most industries under § 12-6-2252 (effective for tax years after 2010).

On top of income tax, C corporations and LLCs that elect C status owe a corporate license fee. The mechanics are in § 12-20-50: the license fee equals $15 plus $1 for every $1,000 of capital stock and paid-in or capital surplus, with a $25 minimum. For a thinly capitalized operating LLC that has checked the box to C-corp treatment, the fee rounds to the $25 floor. For a holding company with real capital, the fee scales linearly and has no statutory cap, so large C corporations can see license fees that dwarf the 5 percent income tax on small-profit years. The fee is filed on Form SC1120 alongside the income tax return.

There is no franchise tax separate from the license fee. The state consolidated that structure years ago. South Carolina does, however, impose the usual sales and use tax (6 percent state plus local add-ons bringing total rates to roughly 7 to 9 percent depending on county), payroll withholding, and the state's unemployment insurance. None of those are entity-formation fees; they are operating taxes that apply to any business with the relevant triggers.

The manufacturing carve-out

Where South Carolina's tax code gets interesting is manufacturing. The state offers a long list of abatements and credits designed to pull industrial investment across the border from North Carolina and Georgia, and the abatements are statutory rather than discretionary.

The big one is the five-year property tax abatement under S.C. Code § 12-37-220(A)(7), which exempts new manufacturing facilities from the county portion of property tax for their first five years, subject to qualification thresholds. Layered on top are job tax credits under § 12-6-3360, which give per-job credits that vary by county tier; Tier IV (the most distressed counties) currently carries a $25,000 per-job credit against income tax liability, while the Tier I counties around Charleston and Greenville are at $1,500. The credit is nonrefundable but carries forward.

The fee-in-lieu-of-tax (FILOT) regime under § 12-44 lets qualifying investments of $2.5 million or more negotiate a reduced assessment ratio (typically 6 percent instead of 10.5 percent) for up to 30 years. This is how BMW ended up in Spartanburg, how Boeing ended up in North Charleston, and how a steady stream of mid-sized manufacturing operations end up picking South Carolina over states with lower headline rates but fewer carve-outs.

For a founder forming an LLC to build a widget, this matters. For a founder forming an LLC to run a SaaS product from a laptop, it does not. The service sector does not get the FILOT treatment.

Against the Delaware default

Compare the recurring line items. Delaware is $90 to form and $300 every year after that. South Carolina is $110 to form and $0 every year after that. Over a five-year hold, the Delaware entity has paid the state $1,590 in mandatory recurring and formation fees; the South Carolina entity has paid $110. Over ten years, the gap widens to roughly $3,000.

That math does not make South Carolina a replacement for Delaware. What Delaware sells is the Court of Chancery, a century of corporate case law, and the tacit assumption of every venture firm that a term sheet will name a Delaware entity. If you are raising institutional capital, you form in Delaware or you convert later at a cost that makes the $300-a-year franchise tax look like a bargain. (See our Delaware LLC formation walkthrough for the specifics.)

What South Carolina offers is a state that does not charge an operating business for the privilege of existing. For a local operating company, a real-estate holding entity, a family business, or a manufacturer looking at the abatement stack, that is the framing worth noticing. The Delaware premium is paid out of optionality the small operator will never use.

If the LLC will be multi-state, the usual foreign-qualification math applies: forming in South Carolina and operating in, say, Florida means paying South Carolina's $110, then qualifying in Florida and paying Florida's $125 plus its $138.75 annual report. In that structure, the South Carolina formation savings are real but they are not compounding; the foreign state's recurring fee becomes the recurring-fee floor.

Who this state makes sense for in 2023

Three profiles match cleanly. A South Carolina-based operating business that does not expect outside equity and wants the cheapest legal home the state offers, because there is genuinely no cheaper compliance posture available. A manufacturing or distribution operation scoping sites in the Southeast, because the FILOT and job-tax-credit stack is large enough to swing a site selection. And a real-estate LLC holding South Carolina property, because the property sits here anyway and there is no reason to push the entity out of state.

The profiles that do not match: anyone raising institutional capital, anyone building a company that might exit via acquisition by a Delaware-organized buyer, and anyone running the Wyoming privacy play (South Carolina's filings require the registered agent and principal office, and the state does not offer the managerless ghost-entity structure Wyoming markets). The savings are real but they are savings that compound quietly, not savings that rewrite a cap table.

File through businessfilings.sc.gov, pick a commercial registered agent if you do not have a Columbia address, and move on. The absence of a June notice from the Secretary of State is the feature; there is nothing to remember next year.

Sources

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