Question 1. I want to start my own business. Where do I begin?
First, check with your county and/or city and establish whether you need an occupational or business license to operate your particular business. Next, check with your State and determine if you must acquire any special license(s) in order to engage in the business you are contemplating. Finally, determine what type of business structure will best serve you in operating your business, i.e. sole proprietorship, corporation, partnership, etc.

A sole proprietorship is a business that is owned by an individual who is responsible for all aspects of the business. The owner is personally responsible for all debts of the business, even in excess of the amount invested in the business. A partnership is a legal entity that is jointly owned by two or more people. As in the sole proprietorship, the partners or owners may be personally responsible for all debts of the business, even those in excess of the amount invested in the business. A corporation is a business that is formed and authorized by law to act as a single person and is legally endowed with rights and responsibilities. A limited liability company (LLC) is an unincorporated business association that provides its owners (members) limited liability and flexible management and financial alternatives. An LLC usually provides the favorable pass-through tax treatment of partnerships and the limited personal liability of corporations.

For more helpful information on starting a business, go to the South Carolina Department of Commerce website at www.teamsc.com.

Question 2. What are the pros and cons of incorporating?
Incorporation can protect your personal assets from those that may have claims against the corporation, e.g. creditors. On the other hand, when you operate as a sole proprietor (you own the business but it is not incorporated), you are subject to personal liability for the actions of the business. This protection is probably one of the most popular reasons for incorporating. However, incorporation requires certain ongoing corporate formalities, such as filing annual reports, maintaining corporate books, and documenting the action of the corporation in order to maintain your liability protection. There are many different business forms and just as many reasons to choose a certain form. You should consult with an attorney before choosing which form to use.

Question 3. I need workers. Should I hire employees or independent contractors?
It depends. If you hire employees, you will have accounting issues and taxation issues to address. For example, will have to make social security contributions, unemployment compensation contributions, and will have to file quarterly wage reports. On the other hand, with an independent contractor, the individual worker is responsible for all of his/her taxes and you will simply be responsible for issuance of a Form 1099 for each taxable year. The IRS uses a test, and theoretically, under the law, you have more control over the activities of an employee than you do an independent contractor. Also, employers may not be responsible for carrying worker's compensation coverage for independent contractors.

Question 4. Do I need to register my business? Where?
If your business is a corporation, limited partnership, limited liability company or limited liability partnership, you need to register with the Secretary of State. Most businesses also must register with the South Carolina Department of Revenue. Some small, sole proprietorship businesses that are service-related and not selling goods and products to customers may not have to be registered with the Department of Revenue. However, if you have employees you will be required to register to withhold income tax from employee wages. You may also be required to register with the South Carolina Employment Security Commission to report and pay unemployment insurance for your employees.

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