State Franchise Registration Status and Franchise Laws
South Carolina
Registration or Filing Required? No*
Business Opportunity Laws? Yes
South Carolina is not a franchise registration state nor a franchise filing state. However, South Carolina does have business opportunity laws that sellers of business opportunities must adhere to. However, most franchisors are exempt from complying with those laws if their franchise is the owner or licensee of a registered trademark, either in South Carolina or at the federal level. More information can be found at the South Carolina’s Secretary of State Website.
Is My Franchise Exempt, and if so, do I need to File Anything?
The South Carolina Businesses Opportunity Sales Act defines a business opportunity as the sale or lease of any products, equipment, supplies or services for the purpose of enabling the buyer to start a business, where the buyer pays a fee exceeding $250, and the seller represents one of the following:
- That the seller will provide locations or assist the buyer in finding locations for the use or operation of vending machines, racks, display cases, or other devices;
- The seller will purchase products made by the buyer using the supplies or services sold to them by the seller;
- A guarantee that the buyer will derive income exceeding the purchase price, or will refund the buyer if they are not satisfied with the purchase; or
- That the seller will provide a sales or marketing program in conjunction with the agreement which will enable the buyer to derive income from the business. This does not apply to sales or marketing programs made in conjunction with the license of a registered trademark.
A franchise business would fall under the definition of a “business opportunity” in South Carolina, except for the exclusion of sales or marketing programs made in conjunction with the licensing of a registered trademark. So, a franchisor will typically be exempt if it has a trademark registered federally or in the state of South Carolina. However, if the franchisor’s business or offer falls under subsections 1, 2 or 3 above, it will still be subject to South Carolina’s business opportunity laws. There are several other types of business listed in the state’s code of laws that do not qualify as business opportunities, but these would not apply to most franchisors.
If a franchise has a registered trademark, either with the USPTO or the state of South Carolina (and does not otherwise qualify as a business opportunity), the franchise does not need to file any notice or letter with the state and can proceed to sell franchises while relying on that exemption.
What Should I Do if My Franchise is Not Exempt?
If you do not have a registered trademark for your franchise you will be subject to provisions of the Business Opportunity Sales Act. The Act requires business opportunities to register, submit more stringent disclosure documents, and potentially obtain a surety bond if the opportunity guarantees profits or refunds. In this case, we would recommend obtaining a registered trademark either at the federal level or in the state of South Carolina. While federal registration can be more difficult and time consuming, registering a trademark in South Carolina is relatively simple. It only requires that your mark currently be in use, that the owner of the trademark submit three examples of the trademark being currently used in commerce, and that the owner pay a $15 registration fee. Our brilliant trademark attorneys would be more than happy to help you register your mark. See our Trademarks page for more information.
How Do I Register?
If your business is not exempt and you do not want to obtain a registered mark, you will need to comply with South Carolina’s Business Opportunity Sales Act. The Act requires a business opportunity seller to submit a Registration Application of Business Opportunity, a copy of its disclosure statement that complies with the Act, and an audited financial statement, to the SC Secretary of State’s Office, Attn: Business Opportunities at 1205 Pendleton Street, Suite 525, Columbia, SC 29201. The filing also requires a $100 registration fee made payable to the Secretary of State.
If the seller makes any guarantees about income or refunds, the Act also requires them to obtain a surety bond in the amount of $50,000. Additionally, business opportunities must place their registration number on any advertisements they make about their business opportunity.
Once a business opportunity is registered in South Carolina, the registration is valid for two years before it must be renewed. The renewal process requires the same information as the initial registration process.