State guide · South Carolina · 2026 rules

S corporation in South Carolina: what the election changes

In South Carolina the election starts a small annual license fee and unemployment tax on your salary. It can also change your state income tax, because wages do not get the 3% business rate.

Updated October 24, 20266 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

State where the business is Each state treats the election differently. The check shows only the questions that matter there.

Net profit for the year, before paying yourself Your business's profit after expenses. Money you take out for yourself does not lower it.

Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

Salary you would pay yourself as an S corporation What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.

Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)

Your job Pick the job closest to what you do most of the week.

Area Pick your metro area if it is listed. Pay varies by area.

Another job I also earn W-2 wages from a job outside this business

Typical values: change them if you know yours

Payroll service, per year typical value Published one-person prices: $492 to $684 a year (October 2026).

Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

Extra tax-prep cost for the S-corp return typical value A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).

Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Your top federal income tax rate Not sure? Keep 22%. It changes line 5 only.

Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Filing status Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).

Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The state

South Carolina follows the federal S election. An S corporation owes no South Carolina income tax to the extent it owes no federal corporate tax, and it files Form SC1120S each year.

The election makes your LLC a corporation for South Carolina tax. That starts the annual report and license fee: $15 plus $1 per $1,000 of capital stock and paid-in surplus, with a $25 minimum, due with the SC1120S. A disregarded single-member LLC or a sole proprietorship pays no license fee.

A new corporation also files an initial report (Form CL-1) and pays a one-time $25 initial license fee within 60 days of doing business.

Your state income tax on salary and profit

For 2026 South Carolina taxes individuals at 1.99% on taxable income under $30,000 and 5.21% (less $966) above that.

The owner of a pass-through business, including a sole proprietor, can elect a 3% rate on active trade or business income. Income tied to your personal services is left out, and all W-2 pay counts as personal services. If your pass-through income from businesses you work in is $100,000 or less, you may treat 50% of the business income as not tied to your services.

So moving profit into salary can raise your South Carolina income tax. The calculator leaves this out.

Unemployment tax on your salary

Unemployment insurance: 1.060% for a new employer, including a 0.060% contingency assessment, on the first $14,000 of wages in 2026.

Corporate officers are covered, and so is a member who owns 25% or more of a South Carolina LLC. In both cases the business can file a written election not to cover its owners. The election lasts at least two calendar years. The calculator counts unemployment tax on your salary.

The optional pass-through entity tax

An S corporation, including an LLC taxed as one, can elect each year to pay the 3% tax on its active trade or business income itself. You then leave that income off your own return. A disregarded single-member LLC cannot make this entity election. The calculator leaves it out.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salary	Statewide
$80,000 / $45,000	$792 lower
$120,000 / $60,000	$3,193 lower
$200,000 / $90,000	$7,974 lower

Starting payroll in South Carolina

Register for state withholding with the South Carolina Department of Revenue through MyDORWAY, and for unemployment insurance with the Department of Employment and Workforce through SUITS.

New hire paperwork for South Carolina

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status