Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
Forming an LLC, or limited liability company, is a great way to start a business in North Carolina. An LLC is a business entity that can offer its owners personal liability protection from potential debts and lawsuits.
In North Carolina, LLCs are governed by the North Carolina Limited Liability Company Act, which is found in Chapter 57C of the North Carolina General Statutes.
North Carolina is a great state to form an LLC. The process is relatively straightforward, and the state offers many benefits to businesses. This article will provide a step-by-step guide on forming an LLC in North Carolina.
Step 1: Choose a Name For Your LLC
It is important to choose a name for your LLC that complies with the North Carolina rules for LLC names. The name must be followed by any of the below:
- Limited Liability Company
- ltd. liability co.
- limited liability co.
- ltd. liability company
The name must also be distinguishable from the names of other businesses in North Carolina. You can check whether your potential business name is available online on the Secretary of State database.
You can reserve the name of your choice for 120 days by filing a Name Reservation Application with the North Carolina Secretary of State. The fee for this service is $30.
It may also be worth checking whether the domain name is available for your chosen business. The last thing you want is to get through filing for your business only to find out you can’t create a website in that name!
Step 2: Appoint a Registered Agent
Every LLC in North Carolina must appoint a registered agent. A registered agent is an individual or business entity that has agreed to accept the service of process on behalf of the LLC. This means that the appointed person or business must be able to receive legal mail. The registered agent must have a physical address in North Carolina and be available during normal business hours.
You can hire a professional registered agent service or designate yourself or another individual within your LLC to serve as the registered agent. If you choose to hire a service, you can choose from plenty of options.
Step 3: File the North Carolina Articles of Organization
To officially form your LLC, you need to file the Articles of Organization with the North Carolina Secretary of State. This short document includes the name and address of your LLC, the name and address of the LLC’s registered agent, and the purpose of the LLC. You can easily file for your LLC online or by mail. The filing fee is $125.
Step 4: Create an Operating Agreement
Although it is not required by North Carolina law, it is a good idea for your LLC to have an operating agreement. An operating agreement is a document that sets forth the LLC’s rules and regulations, including how the LLC will be managed, what happens if a member leaves the LLC, and how profits and losses will be allocated.
You will not be submitting this document to the state, but it is a good thing to have in your records so that you can consult it if and when disputes arise.
Step 5: Comply With Other Business Regulations
Depending on your business, you may need to obtain other licenses and permits to operate legally in North Carolina. For example, if you sell food or alcohol, you must obtain the appropriate license from the North Carolina ABC Commission.
You should also check with your local city and county governments to see if any business regulations apply to your specific business.
Cost To Start an LLC in North Carolina
The basic cost to form an LLC in North Carolina is $125. When filing your Articles of Organization, this non-refundable fee is paid to the North Carolina Secretary of State. This can be paid online, by mail, or in person.
In addition to the state filing fee, an annual report fee of $200 is due every year by April 15th. When filing your annual report, this fee is paid to the North Carolina Secretary of State.
Another cost to consider is hiring an LLC formation service. This is not a necessary step and should only be accounted for if you choose to hire a service to take care of all paperwork for you. There are many different services like ZenBusiness or Incfile that can help form your LLC for an extra fee. Similarly, if you hire a third-party registered agent service, you will need to consider the cost.
What To Do After Forming Your LLC in North Carolina
After you have filed your Articles of Organization and paid the filing fee, you will need to take appropriate measures to ensure that your LLC complies with all state and federal laws.
Obtain an EIN From the IRS
The first step is to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The EIN is used to identify your LLC for tax purposes. You can apply for an EIN online, by mail, or by fax. There is no fee to apply for an EIN.
Open a Business Bank Account
Once you have obtained your EIN, you should open a business bank account. This will allow you to keep your personal and business finances separate. Most banks require you to have your Articles of Organization and EIN to open a business bank account.
Having a separate business bank account offers multiple advantages like:
- Tracking business expenses
- Managing cash flow
- Making it easier to prepare your financial statements and taxes
- Showing credibility to investors and lenders
Hire an Accountant
It is a good idea to hire an accountant to help you keep track of your business finances. An accountant can also help you with tax preparation and ensure that your LLC complies with all applicable tax laws.
Get Business Insurance
You should also consider getting business insurance. This will protect your LLC if something goes wrong. There are many different types of business insurance, so speak with an insurance agent to determine which type of policy is right for your business.
Get a Website
In today’s business world, it is important to have a website. A website will allow you to reach a larger audience and promote your business. You can hire a professional to design and build your website or use a do-it-yourself platform like WordPress or Wix.
Get a domain with the same name as your business. This will help customers find your website and also make it easier for you to promote your business.
If you want, you can further establish your online presence by becoming active on social media. Many businesses use platforms like Facebook, Instagram, or TikTok to reach new audiences and customers. In fact, many businesses nowadays use their social media presence instead of having a traditional website.
How To Keep Your LLC Compliant In North Carolina
Keeping your LLC compliant with all state and federal laws is important. Here are some tips to help you do that:
File Your Annual Report
The North Carolina Secretary of State requires that LLCs file an annual report. The report is due every year on April 15. The report can be filed online or by mail, with an online filing fee of $200. The state will dissolve your LLC if you fail to submit your report, so make sure you adhere to the deadline.
Hold Annual Meetings
It is important to hold annual meetings for your LLC. You should elect a board of directors at the meeting, approve the financial statements, and discuss other important business matters. You should keep the minutes of the meeting in your LLC’s records. Annual meetings will also be a good way to ensure your operating agreement stays up to date.
Keep Accurate Financial Records
It is important to keep accurate financial records for your LLC. This will help you track your expenses and prepare your financial statements. You should keep financial records for at least three years.
Stay In Good Standing With the State
To stay in good standing with the state, you must file your annual report, keep accurate financial records, and file your annual tax return. Your LLC could be dissolved if you do not stay in good standing. Annual meetings aren’t required, but are a good idea for any business.
The above-listed are the basics of forming an LLC in North Carolina. Following these steps will help ensure that your LLC complies with state and federal laws.
Tax Filing Requirements for LLCs in North Carolina
Like other businesses, LLCs in North Carolina are required to pay taxes. LLCs can be taxed as partnerships, corporations, or sole proprietorships.
By default, LLCs in North Carolina are taxed as pass-through entities, so any tax requirements fall to the individual members of the LLC, not the LLC itself. In other words, you will need to pay income tax for any money you pay yourself as a business owner. This also applies to other members of the LLC or other employees. The standard income tax rate in North Carolina is 5.25%, which is subject to change.
If you sell any products or services, you will also need to pay sales tax. This tax is collected when a product or service is bought by a customer.
If you choose your LLC to be taxed as a C corporation, you will also be required to pay the North Carolina Franchise Tax.
Taxes can get complicated, so consult your attorney or accountant if you want more detailed information on this topic.
Frequently Asked Questions
How long does it take to register an LLC in North Carolina?
The registration process for an LLC in North Carolina usually takes about two weeks, or 7 to 10 business days, if you file online. If you file by mail, it may take up to 15 business days, not including the time to send and receive mail.
If you’re in a hurry to form your LLC, you can expedite the process by paying a $100 fee for 24-hour processing. For same-day processing, there is a fee of $200.
What tax structure should I choose for an LLC in North Carolina?
Most LLCs are pass-through entities, meaning the business itself is not taxed, but the members are taxed on their share of profits. You can choose your LLC to be taxed as a sole proprietorship, partnership, or S or C corporation. The tax structure you choose will depend on the type of business you have and your personal tax situation.
To understand the best tax structure for your business, consult a business attorney or accountant. They will be able to best inform you of what would be the ideal tax structure for your specific situation.
Should you hire an LLC formation service in North Carolina?
While you are not required to hire an LLC formation service in North Carolina, it may be helpful to do so. An LLC formation service can help you with the paperwork and ensure everything is filed correctly. They can also provide you with helpful resources and advice. With all the benefits an LLC formation service can offer, it may be worth the cost. Hiring a third-party service to form your LLC allows you to focus on other aspects of starting a new business instead of worrying about paperwork.