Start a business in South Carolina

South Carolina has no general state business licence. What it has is a local business licence tax, charged by every municipality that levies it — and, in much of the state, by counties as well — on the gross income of businesses operating within its boundaries. Not net income. Not profit. The top line.

And "operating within" is doing the work in that sentence. A licence is owed where the business does business, not only where its address is. A shop with one location and local customers deals with one or two jurisdictions. A trade, a service business or anything mobile deals with as many as it works in, and each of them assesses its own tax on the same revenue.

The consolation is that the rest of South Carolina is unusually light. There is no annual report for an LLC at all, so nothing recurs from the Secretary of State — five years of state formation fees is $125, the $125 you paid on day one and nothing after it. The LLC hub has the formation detail.

Until fairly recently every South Carolina municipality ran its own licence year, its own form, its own definitions and its own counter. A business in five towns had five renewal dates. The Business License Tax Standardization Act — Act 176 — changed that, and it is a real improvement.

What Act 176 did not do — and was never going to — is stop the multiplication. Five jurisdictions still means five assessments on the same gross income. The administration got much better; the arithmetic did not change.

Practically, this means two things when you price work. Jobs in a new town carry a licence cost you have not yet paid, and the tax is on revenue, so a low-margin job in a fifth jurisdiction can be worse than no job. Neither shows up in a quote unless you put it there.

Most states let you register for sales tax for nothing. South Carolina charges: the SCDOR retail licence is a one-off fee per location rather than a free registration. The figure commonly quoted is $50 per location, though that fee was not re-verified against SCDOR in this pass, so confirm it on MyDORWAY before you budget. Once issued it is permanent, provided you keep filing — there is no annual renewal.

The retail licence is a sales tax registration, not a licence to operate. It does not replace the local business licence and the local business licence does not replace it. A shop needs both.

South Carolina lets an owner elect to have active trade or business income taxed at a flat rate rather than at ordinary individual rates, on Form I-335. The 2025 form states that rate as 3%. Whether it survives unchanged into 2026 was not re-verified here, so treat 3% as the figure to check rather than the figure to plan on — but check it, because for a profitable owner-operated business it can be the single largest saving available in this state.

The ordinary rates themselves fell for 2026 under H.4216: 1.99% on income below $30,000 and 5.21% above it, with further reductions triggered if state revenue grows 5% or more in a year. So the election matters most to owners whose business profit sits well above $30,000, where the gap between 5.21% and a flat rate compounds.

No South Carolina city or county levies an income tax, which is worth stating because the business licence tax is so visible that people assume there must be a local income tax behind it. There is not. The licence tax on gross income is the local charge on doing business here.

The Workers' Compensation Commission requires cover at four or more employees. Part-time workers count toward the four, and so do family members. Non-profits are held to exactly the same test as for-profits.

The point people get wrong: paying someone on a 1099 does not by itself take them out of the count. Whether a worker is an employee is decided by the substance of the arrangement, not by the form you issue in January. A three-person firm that "has no employees, only contractors" may well have four employees as far as the Commission is concerned, and finding that out after an injury is the worst possible timing.

Unemployment insurance runs on a much lower trigger than the four-employee test, so it catches you long before workers' comp does: $1,500 of wages in a calendar quarter, or one employee in 20 different weeks. Registration is with the Department of Employment and Workforce. The 2026 wage base and new-employer rate were not confirmed here — SCDEW publishes them.

One last thing about hiring in this state: employees at a site in a new jurisdiction can create a presence there, and presence is what the business licence tax attaches to. The cost of putting a crew in a new town is the wages plus, possibly, a licence.