Charleston, February 13, 2026
Charleston’s economy thrives with the entrepreneurial spirit of small businesses, making up 99.4% of all businesses in South Carolina. Proposed tax reforms aim to relieve the burden on local entrepreneurs, potentially accelerating growth and job creation in the region. Key legislative efforts, including House Bill 5006, target the Business Personal Property Tax, exhibiting support from multiple local organizations. As Charleston matures as an innovation hub, these reforms are crucial for empowering small businesses and ensuring sustained economic resilience.
Charleston
Smart Tax Policy Can Unlock More Growth for South Carolina’s Small Businesses
Charleston’s vibrant entrepreneurial spirit and strong community ties are key drivers of its economic success. Thoughtful adjustments to state tax policy, particularly for small businesses, hold the potential to further accelerate this growth and bolster the resilience of local enterprises across the Lowcountry.
The Palmetto State’s economy is profoundly shaped by its small business sector, a foundational element often hailed as the “backbone of the economy.” These determined entrepreneurs consistently demonstrate innovation and a commitment to their communities. As Charleston continues its trajectory as a hub for economic dynamism, focusing on policies that champion private investment and reduce unnecessary burdens can foster an even more robust environment for job creation and prosperity.
South Carolina’s Small Business Landscape: A Foundation of Growth
South Carolina is a state where small businesses are not just numerous, but are also significant contributors to the workforce and overall economic health. As of 2023, the state was home to 530,402 small businesses, collectively employing 863,326 individuals. This impressive figure means that small businesses account for 99.4% of all businesses in South Carolina and employ 42.9% of its workforce.
The growth trajectory for these smaller enterprises is particularly noteworthy. Between the first quarter of 2015 and the first quarter of 2025, the number of businesses in South Carolina employing fewer than five people experienced a substantial increase of 96.5%. This surge underscores the entrepreneurial vigor present throughout the state. Key sectors driving this expansion for businesses with fewer than 100 employees include professional, scientific, and technical services, which saw a 139.9% increase and added 20,351 small businesses, along with healthcare and social assistance adding 10,204 businesses, and construction adding 5,693 businesses, all between Q1 2015 and Q1 2025. Beyond domestic impact, small firms also contribute significantly to the state’s global presence, representing 83.8% of identified exporters and making up 11.2% of total exports by identified firms in 2023.
Understanding South Carolina’s Business Tax Structure
South Carolina maintains a corporate income tax rate of 5% on net income apportioned to the state, a rate considered among the lowest in the Southeast. Additionally, corporations are subject to an annual corporate license fee, also known as a franchise tax, calculated at 0.1% of capital stock and paid-in surplus, with a minimum of $15. For pass-through entities, active trade or business income is taxed at a flat 3%. The state’s individual income tax rates, relevant for many small business owners, are seeing reductions, with the top marginal rate projected to reach 6% by 2028 from its current 6.2%.
However, one area that frequently draws attention from small business advocates is the Business Personal Property (BPP) Tax. This tax requires businesses to pay taxes on tangible assets such as office furniture, machinery, and equipment, often after sales tax has already been paid on these items. Unlike many neighboring states like Georgia, Alabama, and Florida, South Carolina has historically lacked a broad exemption for these taxes, creating what some refer to as a “forever tax” and an ongoing compliance burden.
Proposed Tax Relief: Easing the Burden on Local Businesses
Recent legislative efforts aim to address the impact of the Business Personal Property Tax on South Carolina entrepreneurs. House Bill 5006, referred to as the “South Carolina Small Business Tax Cut of 2026,” proposes exempting the first $10,000 of a small business’s net depreciated business personal property from taxation. This measure also seeks to streamline processes by eliminating filing requirements for businesses falling below this threshold. Proponents argue that such a reform could foster a more attractive environment for investment and job creation by reducing a significant and often duplicative financial obligation for local businesses.
In addition to property tax relief, the bill includes provisions to reduce fees collected from startup companies that secure funding from angel investors and venture capitalists. It proposes a break on fees for the first $50 million raised by businesses headquartered in South Carolina, which is estimated to reduce state fees on venture capital by $1.7 million annually. This targeted relief aims to nurture entrepreneurial innovation and encourage critical early-stage investment in the state. Organizations such as the South Carolina Manufacturers and Commerce (SCMC) and 24 local Chambers of Commerce, including the Charleston Metro Chamber of Commerce, have voiced unified support for this legislation, emphasizing its potential to strengthen communities and families. The National Federation of Independent Business (NFIB) also reported that 96% of its members surveyed supported business personal property tax reform. While fiscal analysts estimate that counties could collectively see a $9 million reduction in tax revenue next year if the exemption passes, the long-term benefits of fostering a more competitive business environment are highlighted by supporters.
Charleston’s Thriving Entrepreneurial Ecosystem
Charleston continues to solidify its reputation as a dynamic hub for innovation and entrepreneurship, drawing both established companies and promising startups. Recent initiatives, such as the opening of the Mount Pleasant Harbor Entrepreneur Center, exemplify the regional commitment to providing resources that help entrepreneurs thrive. In 2022 alone, approximately 22,000 new businesses commenced operations in the region, showcasing a robust startup culture.
The Charleston area is home to a diverse array of innovative companies, including Sprockets, a SaaS company utilizing technology for applicant identification; Grùthan Bioscience, LLC, focused on rare liver disease treatments; and Heron Farms, an AgTech company operating an indoor saltwater vertical farm. The local business community, in conjunction with government and various organizations, actively cultivates this innovative atmosphere, facilitating access to capital, a skilled workforce, and a high quality of life. The “Charleston Inspired: Discover the Possibilities” five-year economic strategy further outlines goals to enhance Charleston’s standing as an innovation hub, attract and retain top talent, and bridge funding and research gaps. This strategic focus projects that an increased emphasis on innovation could elevate Charleston’s economic growth from a projected 3.5% to 4.2% by 2040, potentially adding $13 billion in regional economic output and $10 billion in earnings. The City of Charleston also provides resources like the CHS Small Biz Resource Guide to better inform and support small business owners and entrepreneurs. While the region boasts a wide array of services, an assessment has noted areas for potential growth, such as increasing support for manufacturing operations and logistics, and expanding access to equity capital and microloans for early-stage companies.
The Impact of Regulation on State Economic Growth
Beyond taxation, the regulatory environment significantly influences the vitality of Charleston SC business and the broader South Carolina entrepreneurs landscape. South Carolina’s regulatory code contains over 136,000 restrictions and ranks 35th out of 44 states in terms of regulatory burden. Research suggests that cumulative regulatory burdens can hinder economic expansion. For instance, a study on federal regulations between 1997 and 2015 in South Carolina found associations with negative economic outcomes, including an increase of 77,414 people in poverty, a 2.3% rise in income inequality, the annual loss of 129 businesses, and 1,689 fewer jobs annually, alongside a 7.35% increase in prices. These findings suggest that state-level regulatory complexities likely compound these effects.
Occupational licensing requirements in South Carolina also present a notable hurdle. Approximately one in five workers in the state needs an occupational license, with an average of 428 days of education and experience required for low- and moderate-income jobs. This burden is associated with 17,000 fewer jobs and an estimated loss of up to $1.57 billion across the state. To address these challenges, the “Small Business Regulatory Freedom Act (HB 3021)” has been introduced, aiming to reduce regulatory burdens, enhance transparency, and curtail judicial deference to administrative agencies. This act has passed the House. Studies indicate that even a modest 10% reduction in regulatory red tape could yield substantial economic benefits, with more comprehensive reforms potentially boosting real GDP growth by 0.7 percentage points annually, adding billions to the state’s economy over a decade. Such efforts to foster regulatory clarity and efficiency are crucial for sustaining Lowcountry economic growth and supporting Charleston small business.
Conclusion: Charting a Course for Continued Prosperity
The vitality of Charleston’s economy is undeniably linked to the strength and dynamism of its small business community. By thoughtfully addressing tax policies, particularly the business personal property tax, and striving for a more streamlined regulatory environment, South Carolina can further empower its entrepreneurs. The ongoing legislative discussions surrounding House Bill 5006 and the Small Business Regulatory Freedom Act represent critical steps toward reducing burdens and fostering an economic climate where innovation and personal achievement can truly flourish. Supporting these common-sense reforms is essential to strengthening our local economy and ensuring Charleston, SC, business continues to be a beacon of prosperity and opportunity. We encourage readers to engage with their local businesses and stay informed about policy discussions that shape our collective economic future.
Key Features of South Carolina’s Small Business Environment and Proposed Reforms
| Feature | Details | Scope |
|---|---|---|
| Number of Small Businesses | 530,402 (as of 2023) | State-level |
| Small Business Workforce Percentage | 42.9% of the state’s workforce (as of 2023) | State-level |
| Corporate Income Tax Rate | 5% flat rate | State-level |
| Pass-Through Entity Tax Rate | 3% on active trade or business income | State-level |
| Proposed Business Personal Property Tax Exemption (HB 5006) | First $10,000 of net depreciated property | State-level |
| Estimated Annual Loss to Counties from BPP Exemption | $9 million | State-level |
| Number of Regulatory Restrictions | Over 136,000 | State-level |
| Regulatory Burden Ranking | 35th out of 44 states (1 being most burdensome) | State-level |
| Projected Economic Growth with Innovation Focus (Charleston) | From 3.5% to 4.2% by 2040 | Local (Charleston) |
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