South Carolina Kept an Older Uniform Act, and It Contains a Mandatory Buyout
Most states moved to the revised uniform act in the last two decades. In doing so, they deleted the provision that obliged a company to buy out a departing member. South Carolina did not. Chapter 33-44 of the South Carolina Code is still the 1996 uniform act. Section 33-44-701 remains in force.
It reads that a limited liability company shall purchase the distributional interest of a member of an at-will company. The price is fair value, determined as of the date of the member's dissociation. That applies if the dissociation does not result in a dissolution and winding up of the company's business under section 33-44-801. Section 33-44-602 supplies the other half. Unless otherwise provided in the operating agreement, a member has the power to dissociate at any time, rightfully or wrongfully, by express will.
Put those together. A South Carolina company with no operating agreement is an at-will company. Its members can each leave whenever they choose, and be paid fair value for doing so. Section 33-44-701(b) then puts the company on a clock. It must deliver a purchase offer within thirty days. Three items go with the offer: a statement of assets and liabilities, the latest available balance sheet and income statement, and an explanation of how the estimated payment was calculated.
That is the practical reason to draft here, and it is a stronger reason than most states can offer. General patterns are covered in the operating agreement essentials guide. The transactional page for this state is South Carolina operating agreement.
The rest of chapter 33-44, read as written
Money splits by head. Section 33-44-405(a) requires any distributions made before dissolution and winding up to be in equal shares. Contributions do not change it. A member who funded the company and a member who did not receive the same amount.
Votes are counted by head too. Section 33-44-404(a) gives each member of a member-managed company equal rights in the management and conduct of the business. Matters are decided by a majority of the members.
A long list of decisions needs everyone. Section 33-44-404(c) sends a series of matters to unanimous consent. Those include amending the operating agreement, amending the articles, and admitting a new member. They also include approving an interim distribution or a sale of substantially all the property.
An at-will company is the default. A company is a term company only where the operating agreement specifies a definite term or a particular undertaking. Silence means at will. And at will switches on the section 33-44-701 buyout.
Loyalty cannot be eliminated. Section 33-44-103(b) blocks four things in an operating agreement. It cannot eliminate the duty of loyalty. It cannot unreasonably reduce the duty of care. It cannot eliminate the obligation of good faith and fair dealing. And it cannot unreasonably restrict access to records under section 33-44-408.
One member, and a statute that permits foreclosure
South Carolina's creditor provision cuts both ways. Section 33-44-504(e) makes the charging order the exclusive remedy. That is the only way a judgment creditor of a member or transferee may satisfy a judgment out of the debtor's distributional interest. But section 33-44-504(b) makes a charging order a lien on the interest. The court may order a foreclosure of that lien at any time. The purchaser at the foreclosure sale takes the rights of a transferee.
Foreclosure at any time is a materially weaker position than the one in Ohio, Oklahoma or North Dakota. Those acts prohibit it outright. In a company with one member and one interest, it is a live risk. Section 33-44-504(c) does leave a redemption route. Before foreclosure, the interest may be redeemed by the judgment debtor. Or by one or more of the other members, using property other than the company's. Or with company property, where the operating agreement permits it.
That last option exists only if the agreement says so. That is a reason for a sole owner to have one. Federal and banking consequences are in the single-member LLC guide, with state detail on the South Carolina single-member LLC page.
Ten Clauses, Written Against Chapter 33-44
S.C. Code Ann. 33-44-103(a) is the operating agreement provision, and it lets the members regulate the affairs of the company and govern relations among themselves. Section 33-44-103(b) marks the boundary. These ten clauses work inside it.
South Carolina at a glance
| Question | What S.C. Code chapter 33-44 says |
|---|---|
| Governing act | South Carolina Uniform Limited Liability Company Act, S.C. Code sections 33-44-101 and following |
| Required by statute? | No. Section 33-44-103 says all members may enter into one |
| Form accepted | Written or otherwise. Section 33-44-103 says it need not be in writing |
| Filed with the state? | Never. No form, no submission, no fee |
| Default voting | Equal rights per member, decided by a majority of the members, section 33-44-404 |
| Default distributions | Equal shares, whatever the contributions were, section 33-44-405 |
| Quitting | A member may dissociate at any time by express will, section 33-44-602 |
| What that costs | The company shall purchase the interest at fair value if the company is at will, section 33-44-701 |
| Charging order | Exclusive remedy, but the court may order foreclosure at any time, section 33-44-504 |
| State fees you do pay | $110 to form. No annual report for a limited liability company |
1. Members, percentages, and the distributional interest
List each member with a stated percentage, and use the statute's vocabulary. A distributional interest is the member's interest in distributions alone. That is what a transferee or a foreclosure purchaser ends up holding. A bank verifying beneficial ownership at account opening needs the ownership schedule. South Carolina publishes no member information, and a limited liability company files no annual report to update it.
2. Contributions, and the equal-shares rule that ignores them
Record the form, date and agreed value of every contribution. Then recognize what section 33-44-405 does with that record: nothing. Distributions are in equal shares unless the agreement says otherwise. Section 33-44-402 also makes a member's contribution obligation enforceable notwithstanding an inability to perform because of death or disability. So document promised contributions as carefully as delivered ones.
3. Member or manager management, and the agency rule behind it
A company is member-managed unless the operating agreement provides otherwise. Section 33-44-301 then governs the agency of members and managers. That is what determines whether an unauthorized signature binds the company. Define who may sign, for what categories, up to what amount, and with what internal approval. And set the manager's term, compensation and removal procedure.
4. Weighting the vote, and pruning the unanimity list
Two moves in opposite directions. Tie votes to ownership if that is the intention, because section 33-44-404(a) counts heads. Then look hard at section 33-44-404(c), whose unanimity list includes approving an interim distribution. In a company with five members, one holdout can stop everyone from being paid. Most agreements replace that with a manager decision or a supermajority. They keep unanimity for admission and amendment.
5. Allocations, distributions and a tax draw
Separate allocation from distribution, and add a tax distribution obligation. Members of a company taxed as a partnership owe tax on allocated income whether or not cash arrived. Then displace the equal-shares rule with the split the members actually agreed. Section 33-44-405(c) also gives a member who becomes entitled to a distribution the status of a creditor of the company for that amount.
6. Transfers, and the transferee the statute already limits
Sections 33-44-502 and 33-44-503 make a distributional interest transferable. They give the transferee no right to participate in management or to demand access to records. Add the rest: consent requirements, a right of first refusal, permitted estate planning transfers, and a mandatory purchase on death, divorce, bankruptcy or expulsion. Also address section 33-44-504(c). State expressly whether company property may be used to redeem a charged interest, since the statute permits it only if the agreement does.
7. The buyout clause, and whether to become a term company
This is the South Carolina clause. Under section 33-44-602 a member may dissociate at any time by express will, unless the operating agreement provides otherwise. Section 33-44-701 then obliges an at-will company to purchase the interest at fair value.
Three drafting routes exist. Restrict the power to dissociate. Or make the company a term company by specifying a definite term or particular undertaking, which moves the valuation date to the end of the term. Or keep the buyout and define it: valuation method, discounts, installment terms, interest rate and subordination to lender covenants.
8. Dissolution, and the two things you cannot waive
Section 33-44-801 lists the dissolution events. They include judicial dissolution where it is not otherwise reasonably practicable to carry on the business in conformity with the operating agreement. They also include the case where the managers or controlling members have acted in a manner that is oppressive and directly harmful to the applicant.
Section 33-44-103(b)(6) stops an operating agreement varying the requirement to wind up in the cases specified in section 33-44-801(3) or (4). The filing itself is on the South Carolina dissolution page, and an administratively dissolved company works through reinstatement.
9. Tax classification, and the filing that follows it
Record the federal classification and test the allocations against it. An S corporation election cannot carry preferred returns or special allocations. Then note the state consequence. A South Carolina limited liability company taxed as a partnership files no annual report. One that elects corporate treatment files an annual report with the Department of Revenue alongside its income tax return. The tax election therefore changes the company's whole recurring compliance calendar.
10. Amendments, and the boundary in section 33-44-103(b)
Set the amendment vote, since section 33-44-404(c) otherwise makes it unanimous. And require signatures. Then draft inside the non-waivable list. The agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable. It may also specify the number or percentage of members or disinterested managers who can authorize or ratify a conflicted transaction after full disclosure. Keep a dated log with the articles and any South Carolina articles of amendment.
Create your South Carolina operating agreement
We draft an operating agreement built around South Carolina law and your ownership split, ready to sign. Or keep reading and draft your own.
How the South Carolina Buyout Actually Runs
The procedure in sections 33-44-701 and 33-44-702 is detailed. Knowing the steps is what makes the risk manageable. Take a dissociation from an at-will company that does not dissolve the business. The company must deliver a purchase offer within thirty days of the dissociation date. Three attachments go with it: a statement of the company's assets and liabilities as of that date, the latest available balance sheet and income statement, and an explanation of how the estimated payment was calculated.
If the price and terms are fixed by the operating agreement, those govern unless the purchaser defaults. Say no agreement on purchase is reached within one hundred twenty days of the dissociation date. The dissociated member then has a further one hundred twenty days to bring a proceeding to enforce the purchase. The court's jurisdiction in that proceeding is plenary and exclusive.
Section 33-44-702 then tells the court what to weigh. The going concern value of the company. Any agreement among some or all of the members fixing the price or specifying a formula for any purpose. The recommendations of any court-appointed appraiser. And any legal constraints on the company's ability to purchase.
The court may order installments, subordination to other creditors, security for a deferred price, and a covenant not to compete. Interest runs from the dissociation date. And where a party has acted arbitrarily, vexatiously or not in good faith, the court may award the other side its reasonable expenses, attorney's fees and appraiser costs. Failing to make the thirty-day offer counts.
Two drafting consequences follow. First, an agreed formula is not merely convenient. Section 33-44-702(a)(1) directs the court to consider it. So a formula written years earlier shapes the outcome even in litigation. Second, the thirty-day offer is a real obligation with a fee-shifting sanction attached. A company that receives a notice of withdrawal should treat the clock as running that day.
Veil Piercing in South Carolina, and the Single Enterprise Question
South Carolina courts approach disregard of the entity in two stages. They look first at the observance of separateness. They look second at whether respecting the entity would produce fundamental unfairness on the facts. The factual inquiry covers the familiar ground: capitalization at formation, whether separate records were kept, and whether corporate or company formalities were observed. It also covers whether the entity paid dividends or distributions while insolvent, and whether it functioned as a facade for a dominant owner.
The Supreme Court of South Carolina addressed the related single business enterprise theory in Pertuis v. Front Roe Restaurants, Inc., 423 S.C. 640 (2018). The theory requires a showing of more than that the operations of various entities are intertwined. Combining multiple entities into a single business enterprise requires further evidence of bad faith, abuse, fraud, wrongdoing or injustice.
Owners running several related companies should take the point seriously in the other direction. Shared bookkeeping, shared bank accounts and unpapered intercompany transfers are exactly the facts a claimant will assemble.
The document does real work here. A signed operating agreement, a contribution ledger, a written authority clause, and evidence that distributions were declared rather than drawn: that is the record that answers the first stage. Where a group of companies shares premises or staff, written intercompany agreements at arm's length are worth more than any recital about separateness.
Five Mistakes South Carolina Owners Keep Making
Three of these come from the buyout. The other two come from provisions people assume are the same everywhere.
Mistake 1: Using a template written for the revised uniform act
The revised act deleted the buyout. It also abolished the default right to dissociate and be paid. South Carolina kept both. A template drafted against the revised act will be silent on dissociation, because its drafter assumed the default was harmless. That silence leaves section 33-44-701 fully operative. The clause to look for is one that either restricts the power to dissociate or makes the company a term company.
Mistake 2: Not realizing the company is at will by default
A company is a term company only if the operating agreement specifies a definite term or a particular undertaking. Without a document there is no specification. So every South Carolina company with no agreement is at will, and every member of it has a fair value put. Founders who describe their business as a long-term venture have said nothing that the statute recognizes.
Mistake 3: Ignoring the thirty-day offer after a withdrawal notice
Section 33-44-701(b) requires the offer, with three financial attachments, within thirty days of the dissociation date. Section 33-44-702(d) lets a court award the other side its expenses, attorney's fees and appraiser costs where a party acted arbitrarily, vexatiously or not in good faith. It expressly says the finding may be based on the company's failure to make the offer or comply with section 33-44-701(b). Silence is not a negotiating position here. It is a fee exposure.
Mistake 4: Looking for a filing, or an annual report that does not exist
The operating agreement is never filed and there is no fee for it. A South Carolina limited liability company taxed as a partnership also files no annual report with the Secretary of State. That surprises owners moving from a state with a yearly filing. The formation fee is $110. Companies electing corporate tax treatment do file an annual report with the Department of Revenue, alongside their income tax return. The position is set out on the South Carolina annual report page.
Mistake 5: Assuming the charging order stops a creditor cold
It does not in South Carolina. Section 33-44-504(b) lets the court order a foreclosure of the lien on a distributional interest at any time. The purchaser at the sale takes the rights of a transferee. The exclusivity language in subsection (e) limits the route, not the outcome. So draft accordingly: discretionary distributions, transfer restrictions binding on a foreclosure purchaser, and an express authorization for the company to use its own property to redeem under subsection (c).
Three South Carolina Companies, and What the Buyout Did
Composite cases drawn from disputes under this act.
Example 1: A Charleston hospitality group and a thirty percent put
Four members owned two restaurants and a catering operation. The going concern value was about $2.1 million. One member holding thirty percent gave notice of withdrawal. There was no operating agreement, so the company was at will. Section 33-44-701 required it to purchase the distributional interest at fair value as of the dissociation date. The claim was roughly $630,000 in cash. The business assets were leasehold improvements and goodwill. The offer deadline was thirty days.
Example 2: A Greenville supplier where one member blocked every payment
Five members ran an industrial supply distributor. Section 33-44-404(c) sends approval of an interim distribution to unanimous consent. One member withheld it for two years during an unrelated dispute about a delivery contract. The company was profitable and nobody could be paid. The other four had no clause to point to, because the company had no operating agreement. The deadlock ended only when the objecting member was bought out.
Example 3: A Myrtle Beach rental company and a foreclosed interest
A judgment creditor held a $310,000 judgment against one member of a three-member vacation rental company. It got a charging order, then applied under section 33-44-504(b) to foreclose the lien. The other two members wanted to redeem the interest using company cash. Subsection (c) permits that only where the operating agreement allows it. There was no operating agreement, so that route was closed. The interest was sold to an outsider who took the rights of a transferee.
The Financial Consequence of Relying on the Statute
South Carolina imposes no penalty for having no operating agreement. These are the amounts the defaults move.
The fair value put. This is the largest exposure in the batch. A thirty percent member of a company worth $2.1 million can require the business to pay roughly $630,000 in cash. The offer is due in thirty days, with interest running from the dissociation date. On a company worth $800,000, a one quarter member can demand about $200,000. There is no statutory discount for lack of control or marketability. Anything of that kind has to come from an agreed formula.
The fee-shifting sanction. Section 33-44-702(d) lets a court award the other side reasonable expenses, attorney's fees and appraiser costs. The trigger is a party acting arbitrarily, vexatiously or not in good faith. It specifically contemplates a finding based on failure to make the thirty-day offer. In a contested fair value proceeding with appraisers on both sides, that is a five-figure or six-figure transfer on top of the purchase price.
The distribution nobody can approve. The Greenville pattern is quieter and just as expensive. Two years of withheld distributions in a profitable company, on unanimity that section 33-44-404(c) supplies by default. That is two years of members paying tax on income they never received.
The costs South Carolina does charge. Formation is $110 and there is no annual report for a limited liability company. So nothing ever prompts an owner to look at the governance file. A certificate of existence requested for a closing is often the first review in years. A company trading elsewhere adds foreign qualification and a second calendar.
How File.Business Drafts a South Carolina Operating Agreement
The intake starts with the buyout, because it is the provision with the largest number attached. Should you restrict the power to dissociate under section 33-44-602? Should you make the company a term company? And what formula should govern the price if the put is kept?
From there the work covers the equal-shares allocation rule, and the unanimity list in section 33-44-404(c) including the interim distribution item. It covers the redemption authority in section 33-44-504(c). And it covers duty carve-outs, drafted inside the non-waivable boundary in section 33-44-103(b).
Delivery includes a member and contribution schedule formatted for a bank's beneficial ownership file. It also includes signature pages and a written consent adopting the agreement. South Carolina limited liability companies file no annual report. So the document goes into the diary for review at each anniversary, rather than being prompted by a filing. The flat fee is $97 and no state fee attaches, because there is no filing. Adjacent work runs alongside: registered agent coverage, agent changes and trade name questions.
Template or drafted document
A single-member company has no dissociation counterparty. It can run on a careful template written to chapter 33-44. Every multi-member company earns a drafted document, and the test is one search. Open the template and look for the word dissociate. Does the document restrict the power, or specify a definite term or particular undertaking? If it does neither, the company is at will. Each member then holds a fair value put against the business, the single largest liability the statute can create.
South Carolina Operating Agreement FAQ
Does South Carolina require an LLC operating agreement?
No. Section 33-44-103(a) lets all members of a limited liability company enter into an operating agreement, which need not be in writing. It regulates the affairs of the company and governs relations among the members, managers and company. The section is permissive, and the Secretary of State never asks for it.
Do I file the operating agreement with the South Carolina Secretary of State?
No. There is no form for it, no filing channel and no fee. It is a private contract among the members. The state fee you do pay is $110 to form the company. And a South Carolina limited liability company taxed as a partnership files no annual report at all.
Can a member of a South Carolina LLC quit and be paid?
Yes, by default. Section 33-44-602 gives a member the power to dissociate at any time by express will, unless the operating agreement provides otherwise. Section 33-44-701 then requires an at-will company to purchase that member's distributional interest for its fair value as of the dissociation date.
How quickly must a South Carolina LLC respond to a withdrawal?
Within thirty days. Section 33-44-701(b) requires the company to deliver a purchase offer to the dissociated member within thirty days of the dissociation date. Three items go with it: a statement of assets and liabilities, the latest available balance sheet and income statement, and an explanation of how the estimated payment was calculated.
How are profits divided in a South Carolina LLC with no agreement?
Equally. Section 33-44-405(a) requires any distributions made by the company before its dissolution and winding up to be in equal shares. Contributions do not change the result. A member who funded the business receives the same distribution as one who funded none of it.
Can a creditor foreclose on a South Carolina membership interest?
Yes. Section 33-44-504(b) makes a charging order a lien on the distributional interest. The court may order a foreclosure of that lien at any time, and the purchaser takes the rights of a transferee. Subsection (e) still makes the charging order the exclusive route for a judgment creditor.
Can a South Carolina operating agreement waive fiduciary duties?
Not entirely. Section 33-44-103(b) stops an agreement eliminating the duty of loyalty, unreasonably reducing the duty of care, or eliminating the obligation of good faith and fair dealing. The agreement may identify specific categories of activity that do not violate the duty of loyalty, if not manifestly unreasonable. And it may set who can ratify a conflicted transaction after full disclosure.
Need a custom South Carolina Operating Agreement?
File.Business drafts South Carolina-specific Operating Agreements at $97 flat: customized for single-member or multi-member structure, ownership percentages, capital contributions, tax election preferences, and management structure. Includes member-signature template and document-vault storage.
Doing this in South Carolina specifically: South Carolina operating agreement covers the detail for this state, including the current fee and the exact form the agency expects.
Each statutory statement above was read in the sources below. Confirm current requirements with the agency before acting on them.
Disclosure. File.Business is a private filing service, not a government agency and not a law firm. We prepare and submit filings at your direction, and nothing on this page is legal or tax advice. Filing fees, deadlines, and statutory references are current as of the last-updated date shown above and can change. Confirm current requirements with the relevant state agency before you file.
