What is a Certificate of Tax Compliance and Why Should You Get One for a Business Closing?
If you are planning on buying or selling a business in South Carolina, or a significant portion of its assets, you need to know what a Certificate of Tax Compliance is.
A Certificate of Tax Compliance is not mandatory in South Carolina, but we strongly advise our clients to get one prior to a business closing because it provides protection to the buyer.
Here’s what a Certificate of Tax Compliance is, how to get one, and how it can protect you.
What is a Certificate of Tax Compliance in South Carolina?
A Certificate of Tax Compliance is a document issued by the South Carolina Department of Revenue (SCDOR) that confirms a taxpayer has filed and paid all taxes due.
Any taxpayer in the state – business or individual – may request a certificate, which is valid for 30 days. If the taxpayer is current on taxes, the certificate is typically issued within 7-10 days of the request. If not, the SCDOR gives the taxpayer 30 days to file returns and/or remit payments to become up to date, after which a certificate will be issued. The taxpayer can request an extension if 30 days is not enough time.
How Do I Get a Certificate of Tax Compliance in South Carolina?
To request a Certificate of Tax Compliance (also called a Certificate of Compliance by the SCDOR), fill out Form C-268 and return it to the SCDOR by fax, email, or mail along with a $60 fee. Find the form and get more details on the SCDOR website and in the separate procedure document (PDF).
The request may be made either by the taxpayer (e.g., the business owner/seller) or by a third party (e.g., the prospective buyer) with a Power of Attorney authorizing the third party to request the certificate. Plan to get the certificate no more than 30 days before the business closing.
Why Get a Certificate of Compliance for Business Closings in South Carolina?
As stated above, a Certificate of Tax Compliance is not required by law for a business closing in South Carolina. But it serves an important purpose: it protects the buyer from any liens placed on the business assets due to unpaid taxes at the time of closing.
South Carolina Code § 12-54-124 (2022) states:
“In the case of the transfer of a majority of the assets of a business, other than cash, […] any tax generated by the business which was due on or before the date of any part of the transfer constitutes a lien against the assets in the hands of a purchaser, or any other transferee, until the taxes are paid. Whether a majority of the assets have been transferred is determined by the fair market value of the assets transferred, and not by the number of assets transferred. The department may not issue a license to continue the business to the transferee until all taxes due the State have been settled and paid and may revoke a license issued to the business in violation of this section.
“This section does not apply if the purchaser receives a certificate of compliance from the department stating that all tax returns have been filed and all taxes generated by the business have been paid. The certificate of compliance is valid if it is obtained no more than thirty days before the sale or transfer.” (Emphasis added.)
For just a $60 fee, a Certificate of Tax Compliance offers excellent protection for prospective business buyers, and that’s why we always strongly recommend our clients get one.
Contact South Carolina Business Attorney Gem McDowell
Gem and his team at Gem McDowell Law Group help business owners and employers in South Carolina with business creation, business acquisition and sales, business planning, and commercial real estate transactions. Gem has over 30 years of experience in South Carolina which includes multi-million-dollar real estate transactions, and he and his team have the knowledge and experience to help businesses grow and thrive. The Gem McDowell Law Group has offices in Myrtle Beach and Mt. Pleasant, SC. Call today at 843-284-1021 to schedule a free consultation to discuss your business needs.
How to Disinherit a Spouse in South Carolina Through Elective Share Waiver (Or: Pillow Talk Is Not Enforceable)
A lady came to our offices for help with her estate plan which included setting up a new trust to hold her assets. She planned to leave everything to her kids and nothing to her husband, which she said her husband had agreed to. He never signed anything on paper to that effect, but she insisted that he was okay with the arrangement.
Literally the following week, she died. Her husband then filed for elective share, which is the portion of a deceased person’s estate that a surviving spouse is entitled to by law. There was nothing barring the husband from receiving a portion of his wife’s estate, despite her wishes.
What could the wife have done differently?
Below we’ll look at elective share and how to disinherit a spouse in South Carolina.
Elective Share in South Carolina
A surviving spouse is entitled to a portion of the deceased spouse’s estate under the law regardless of the terms of the deceased spouse’s will. This portion is called the elective share, or spousal elective share. The portion the surviving spouse can claim varies by state; in South Carolina, it’s one third.
The surviving spouse may claim elective share even if the couple was estranged or in divorce proceedings at the time at the time of death. We previously covered a case on this blog in which a surviving spouse was able to claim elective share after the court granted the couple’s divorce, since the husband happened to die in between the court’s decision and the clerk filing and recording the divorce decree. [Read about that case, Hatchell-Freeman v. Freeman (2000) here.]
What the Surviving Spouse is Entitled To
In South Carolina, the surviving spouse is entitled to one third of the deceased spouse’s estate. This third includes assets that are not subject to probate, such as life insurance proceeds, retirement accounts, property owned jointly with right of survivorship, and assets in revocable trusts. The value of these and other interests due to the surviving spouse count towards the elective share first, along with the value of anything that was renounced or disclaimed. Only then is the balance due taken from the probate estate.
Claiming elective share usually means a surviving spouse will inherit assets that would otherwise have gone to other heirs named in the deceased spouse’s will. Because of this, the surviving spouse has a duty under South Carolina code Section 62-2-205(b) to inform recipients of the probate estate whose interests are adversely affected of the time and date of the hearing set to determine elective share.
Disinheriting a Spouse in South Carolina: A WRITTEN Waiver of Elective Share
The laws regarding elective share ensure that a spouse is not easily disinherited.
But an individual can fully disinherit a spouse in South Carolina. This may happen, for example, in blended families when each spouse wants to leave their assets to their own children and knows that the other spouse is financially secure. Or an individual may wish to disinherit a spouse because of estrangement or separation.
Whatever the reason, it’s important to know that drawing up a will or creating an estate plan that intentionally leaves out the spouse is not enough. The couple must take active steps to disinherit a spouse in South Carolina.
Written Waiver of Elective Share
A spouse may voluntarily agree to give up all or part of their elective share. The spouse who is to be disinherited must agree to waive the right to elective share in writing. Such a waiver is often part of a prenuptial or postnuptial agreement but may be a standalone document.
The spouse waiving their right to elective share in whole or in part must be fully aware of what they are giving up. South Carolina code Section 62-2-204 requires that the disinheriting spouse provide “fair and reasonable” disclosures of their property and financial obligations in writing to the waiving spouse.
Schedule a Free Consultation with Estate Planning Attorney Gem McDowell
For legal help and advice on waiver of elective share, prenuptial or postnuptial agreements, probate, or other estate planning concerns, call Gem McDowell of the Gem McDowell Law Group of Mt. Pleasant and Myrtle Beach. Gem and his team help families in the greater Charleston and Myrtle Beach areas create and review estate plans to help ensure their wishes are carried out.
Gem can also help you understand the consequences and potential downsides of your estate plan. Sometimes estate plans created with the best of intentions can lead to unintended consequences, disputes, and fractured relationships between family members and heirs.
If you have a complicated family situation, a large estate, or you simply want a basic estate plan put in place for your peace of mind, call Gem and his team today at 843-284-1021.
The FTC’s Proposed Final Noncompete Rule: What It Means for South Carolina
*This blog will be updated with new information as it becomes available*
UPDATE: On August 20, 2024, the U.S. District Court for the Northern District of Texas entered a final judgment stating that the ban should not take effect or be enforced nationwide. The FTC “is considering an appeal,” according to its website. Additionally, “The decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.”
UPDATE: On July 3, 2024, federal judge Ada E. Brown of the Northern District of Texas issued an injunction pending litigation on the FTC’s noncompete rule, effectively putting it on hold. The ban on noncompetes was set to go into effect on September 4, 2024. The court says that it will issue a final order on the merits by August 30.
ORIGINAL POST published 04/25/24:
The Federal Trade Commission (FTC) released its final proposed rule on noncompetes on Tuesday, April 23, 2024. If adopted, the Non-Compete Clause Rule would ban new noncompete agreements altogether for all workers (with very few exceptions) as of the effective date, which could be as soon as late August. (The effective date is 120 days after the publication of the rule in the Federal Register, according to the 570-page PDF which you can find here.)
The rule is already being challenged. The U.S. Chamber of Commerce and the tax firm Ryan LLC both filed lawsuits in Texas on Wednesday aiming to stop the rule from going into effect.
South Carolina, like most states, does allow noncompete agreements, aka covenants not to compete. How would this rule affect the workers and employers in our state?
What the FTC’s Proposed Noncompete Rule Means for South Carolina Businesses
On this blog we’ve previously looked at how SC courts view covenants not to compete; they are enforceable as long as they are reasonable and don’t overly restrict the worker’s ability to find gainful employment. Covenants not to compete that are excessively restrictive in terms of duration, geographic location, and/or industry will be found to be unenforceable.
The FTC’s noncompete rule, if adopted, would override state law. No new noncompete agreements would be allowed in South Carolina for any kind of worker (with very few exceptions), not even for “senior executives” who earn more than $151,164 annually and are in a “policy-making position.”
What about existing noncompete agreements? Existing noncompete agreements for senior executives would remain in force as of the effective date. Extant noncompete agreements for other kinds of workers in South Carolina would no longer be enforceable after the effective date.
Is the FTC’s Proposed Noncompete Rule Likely to Go into Effect?
We don’t know for sure, but many people are predicting that the proposed rule will fail, including former FTC general counsel Alden Abbott (via Forbes). Or if it does go into effect, it will likely not be permanent. The rule is already being challenged and will certainly continue to be challenged, as many view it as exceeding the FTC’s authority.
Here at the Gem McDowell Law Group, we also think it’s unlikely that this rule is here to stay. We will follow this story closely and provide updates – stay tuned.
What Makes an Arbitration Agreement Unenforceable?
UPDATE 03/04/25: Some sections below have been revised to reflect the Supreme Court of South Carolina’s decision in Huskins v. Mungo Homes (2024).
Originally published April 22, 2024:
Is it easy to get out of arbitration in South Carolina? That’s the question we’ll look at today.
Arbitration agreements and clauses are ubiquitous these days, from employment contracts to online End-User License Agreements. Arbitration is often touted as being a faster, less expensive, and more private alternative to civil lawsuits and civil court. But arbitration agreements can put individuals at a disadvantage by requiring them to waive their rights or burden them with lopsided terms. This may prompt them to try to get out of arbitration.
Maybe you’re a customer or consumer who doesn’t want to be bound to arbitration. Or maybe you’re a business owner or professional who wants to ensure the arbitration agreements in your contracts are enforceable. Whatever your situation, you should understand when arbitration is enforced and when it’s not in South Carolina so you can better look after your own interests.
First we’ll look at what makes a contract enforceable and unenforceable in South Carolina, then dive into some cases to see how these issues played out in the courts.
Are Arbitration Agreements Always Binding in South Carolina?
Generally yes, but occasionally no.
Valid arbitration agreements are enforceable in South Carolina. In the 2020 case Weaver v. Brookdale Senior Living, Inc. (which we’ve previously covered here), the South Carolina Court of Appeals stated that there is “potent” public policy favoring arbitration when the terms are entered into validly.
What constitutes a valid and enforceable contract in South Carolina? To start, parties signing the contract must have the authority and capacity to understand and enter into such an agreement. The contract also must:
- Be mutually agreed upon
- Be freely entered into
- Include “consideration,” an exchange of values between the parties, such as money or the promise of a service
- Not violate public policy
Since South Carolina courts view and treat arbitration agreements as they do any other part of a contract, these same standards apply.
In short, there’s no way to “get out” of a valid arbitration agreement in South Carolina.
Reasons an Arbitration Agreement May Be Unenforceable (Or, How to Get Out of Arbitration)
Arbitration agreements are not enforceable in South Carolina if they are not valid. Arbitration clauses within a contract may also be found to be unenforceable.
Reasons an arbitration agreement may found to be unenforceable (this list is not exhaustive):
- Absence of signature
- Fraud
- Duress or coercion
- Lack of authority to sign the agreement
- Lack of capacity (aka sound mind)
- Lack of mutual agreement
- Lack of consideration
- Violation of public policy
- Unconscionability
- Unclear language
Proving an arbitration agreement is unenforceable can be difficult, but it does happen. Next we’ll look at cases where arbitration agreements were successfully challenged in court.
Lack of Authority to Enter into Arbitration Agreement without Power of Attorney: Solesbee
In some cases, the enforceability of an arbitration agreement comes down to small details. That’s what happened in the 2022 South Carolina Court of Appeals case The Estate of Mary Solesbee v Fundamental Clinic (read it here).
The Background
Mary Solesbee entered Magnolia, a skilled nursing facility in Spartanburg County, in June 2016. Her son, Allen Dover, signed the admission agreement and a separate arbitration agreement when she was admitted. On July 14, 2016, Solesbee was transported to a hospital, where she died two weeks later.
Connie Bayne, Solesbee’s personal representative, then filed a wrongful death and survival action alleging nursing home negligence for actual and punitive damages. In response, Magnolia filed a motion to compel arbitration.
The trial court denied the motion to compel arbitration, finding that Dover did not have the authority to sign the arbitration agreement on behalf of his mother and rendering it invalid. On appeal, the SC Court of Appeals agreed with the trial court’s decision to deny Magnolia’s motion to compel arbitration.
The Details
The appeals court determined that the admission agreement and the arbitration agreement were two separate documents. Magnolia argued that the court should have found the two were merged, since merger is usually presumed when multiple documents are signed by the same parties at the same time as part of the same transaction.
But the court says that’s not always so. It found that the two documents were indeed separate because:
- The admission agreement provided it was governed by South Carolina law, while the arbitration agreement provided it was governed by federal law
- The arbitration agreement referenced the admission agreement, showing it was conceived of as a separate document
- Each document was separately paginated with its own signature page
Additionally, the arbitration agreement was not a requirement for admission to Magnolia.
This matters because Bayne (Solesbee’s representative who brought the suit) argued that Dover (her son) did not have the authority to sign the arbitration agreement on his mother’s behalf. He did not have power of attorney for his mother at the time (and had only briefly possessed such powers years earlier before they were revoked) and did not have the authority to sign under any other legal theory.
He did, however, have the authority to sign the admission agreement under South Carolina’s Adult Health Care Consent Act. This act is limited to making health care related decisions only, and therefore did not give Solesbee’s son the power to sign the separate arbitration agreement.
Ultimately, because of how Magnolia wrote and structured its contracts, the court found that it could not compel arbitration.
Other Examples of Unenforceable Arbitration Agreements in South Carolina
Here are brief overviews of three other South Carolina cases in which arbitration agreements or sections were found to be unenforceable.
Lack of Authority Even with Power of Attorney: Arredondo
In Arredondo v. SNH SE Ashley River Tenant, LLC (2021), the South Carolina Supreme Court found that a daughter did not have the authority to sign an arbitration agreement on behalf of her father, despite being his agent under both a health care power of attorney and a general durable power of attorney. This case came down to the very specific wording in the powers of attorney, and it demonstrates how enforceability of a contract can hinge on language and word choice.
(The daughter also contended that the agreement was unconscionable and therefore unenforceable, but the court did not address this issue.)
Read more in detail about powers of attorney and the full story behind Arredondo in our blog on this case here.
Lack of Authority Due to Timing: Stott v White Oak Manor
In Stott v White Oak Manor, Inc. (2019), the South Carolina Court of Appeals found that a niece did not have the authority to sign an arbitration agreement on behalf of her uncle. There are two important elements in this case: One, capacity. The uncle possessed “intact mental functioning” at the time of his admission into a medical facility and therefore had the capacity to enter into agreements himself. Two, timing. A power of attorney that would have given the niece authority to enter into the agreement on his behalf was not recorded – and therefore not valid – until six days after her uncle was admitted to the facility.
Read more in detail about the background and the court’s reasoning in our blog on Stott here.
Violation of Public Policy: Huskins v Mungo Homes (2024)
The Supreme Court of South Carolina ruled that the arbitration agreement in the purchase agreement signed by the Huskins when buying a new home from Mungo was unenforceable because it included terms that violated public policy and were therefore unenforceable, regardless of whether they were unconscionable.
Previously, South Carolina courts would have likely severed the offending terms and allowed the rest of the agreement to stand, as the SC Court of Appeals had done in 2022. However, in its 2024 Huskins decision, the supreme court stated that SC courts should no longer sever terms from an agreement lacking a severability clause.
Read more about this important decision about adhesion contracts here on our blog.
Unconsiconability: Damico v. Lennar Carolinas, LLC (2022)
The Supreme Court of South Carolina found the terms in the contracts between homebuilder Lennar Carolinas, LLC and several homebuyers (including Patricia Damico) unfairly favored Lennar to the point of being unconscionable and were therefore unenforceable. For something to be considered “unconscionable,” it must contain two elements: 1. The absence of meaningful choice, and 2. Oppressive and one-sided terms.
Read the court’s Damico decision here and read more about unconscionability in SC here on our blog.
Unconscionability: Huskins v Mungo Homes
In Huskins v Mungo Homes (2022), the South Carolina Court of Appeals found that a portion of an arbitration clause within a purchase agreement was unconscionable and therefore unenforceable. It found the offending terms were absent of meaningful choice and were oppressive and one-sided, making them unconscionable.
Importantly, only the offending portion was severed from the clause, leaving the rest of the arbitration clause enforceable, and the court affirmed the circuit court’s order to compel arbitration under the newly modified terms.
Read more in detail about the background of this case and about unconscionability in our blog on Huskins v Mungo Homes here.
Understanding Arbitration and Reserving Your Rights
The examples of cases above show just how challenging it can be to get out of arbitration in South Carolina.
As a consumer, customer, or patient, you need to understand that the majority of the time, you are bound to arbitration when you agree to it. However, it’s not a given that you must agree; many contracts and agreements online allow you to opt out in writing within (typically) 30 days of signing the agreement. The next time you encounter a wall of text online that tells you to click the “I Agree” button, first look in the fine print for instructions on how to opt out of compelled arbitration and reserve your rights.
As a business owner or professional drafting an arbitration agreement or arbitration clause, you should know that the enforceability of your agreement can come down to terms, word choice, and other seemingly small details. It’s also important to ensure that the parties signing your agreement have the authority to do so.
Get Help with Contracts and Business Law in South Carolina
For help drafting or understanding arbitration agreements, employment contracts, and other contracts, contact Gem at the Gem McDowell Law Group. With over thirty years of experience, Gem along with his team helps South Carolina business owners grow their businesses and protect their interests and can represent individuals in contract disputes. Call to schedule your free consultation today at the Mount Pleasant office or Myrtle Beach office by calling 843-284-1021 today.
