South Carolina LLC: S corp or C corp?

South Carolina at a glance

What is different about South Carolina?

South Carolina has two quirks that decide this question. First, an S corporation here is not tax-free at the company level. The Department of Revenue says the rate on S corporations is 5% on South Carolina taxable income that the S corp itself is taxed on, and an LLC taxed as an S corp can even elect to have its active trade or business income taxed at the entity level. Second, there is a license fee: 0.1% of capital and paid-in surplus plus $15, never less than $25, charged to S and C corporations alike. If you have owners outside South Carolina, there is also a 5% withholding on their share. Put together, the election costs a little more paperwork here than in states that simply ignore S corps.

Does South Carolina recognize a federal S corp election?

South Carolina follows a valid federal S election and asks for no separate state form. An S corporation files the SC1120S. It pays 5% on South Carolina taxable income that is taxed at the S corporation level, and owes the annual license fee of 0.1% of capital and paid-in surplus plus $15, with a $25 minimum. An LLC taxed as an S corp can also elect each year to have active trade or business income taxed at the entity level. With nonresident shareholders, the S corp must withhold 5% of their South Carolina taxable income.

Does my LLC need a separate South Carolina election or form?

South Carolina has no separate S election form; a corporation with a valid IRS S election files the SC1120S return.²

What does South Carolina tax an S corp or LLC at the entity level?

• An S corporation pays 5% on South Carolina taxable income that is taxed at the S corporation level, plus an annual license fee of 0.1% of capital and paid-in surplus plus $15 (minimum $25).³
• S corporations pay an annual license fee of 0.1% of capital and paid-in surplus plus $15, never less than $25.⁶
• An S corporation must withhold 5% of the SC taxable income of shareholders who are not South Carolina residents.⁷

Is a South Carolina LLC taxed as a C corp ever better?

A South Carolina C corp pays a flat 5% on South Carolina taxable income, starting from federal taxable income with state modifications. It also pays the annual license fee: 0.1% of capital and paid-in surplus plus $15, never less than $25. A new corporation pays a one-time $25 initial license fee when it first registers. There is no graduated schedule and no other corporate minimum on the Department's page. Dividends you take out are taxed to you as an individual, whose top rate was 6% for tax year 2025.

Run your South Carolina numbers

The license fee is the same for S and C corps, so it does not tip the choice. What eats into an S election in South Carolina is the 5% entity-level tax on income taxed at the company level, plus the nonresident withholding if you have out-of-state owners. If your profit passes straight through to you, the S election usually pays once the federal savings clear the extra return and fee work.

How much would a South Carolina LLC owner save as an S corp?

Assumes a 60% salary⁹ and a single filer. Income tax is left out. C corp dividends are taxed again. South Carolina's 5% S corp tax reaches only income taxed at the S corp level; the $25 minimum license fee is shown. We could not confirm on an official South Carolina source whether a default LLC pays an entity-level tax, so none is shown.

When is the Form 2553 deadline for a South Carolina LLC, and what if I miss it?

Late relief: federal steps, deadline guide.

What to do next

More on South Carolina: How to start a South Carolina LLC · How to start a South Carolina corporation · South Carolina LLC cost · South Carolina annual report · Annual report late fees by state

Common questions