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2022 Guide to Starting an LLC in North Carolina

North Carolina LLC Quick Facts

North Carolina LLC Costs

Initial Cost:
– State LLC Filing Fee: $125

 

Recurring Cost:
– Annual Report Filing Fee: $200

North Carolina LLC Processing Time

– Filing Online: 4-6 business days
– Filing by Mail: 2-3 weeks

Not sure about filing an LLC yourself?

Want an LLC, but not sure about filing the paperwork yourself? Let Zenbusiness, IncFile, or IncAuthority help guide you through the LLC formation process, so you know everything was done right.

IncFile and IncAuthority are both currently running a special where you only pay state fees for your LLC formation!

Overview

Guide to Starting an LLC in North Carolina

Are you thinking about starting your own business? If so, you’ll need to decide what organizational structure to use. One popular option is a Limited Liability Company (LLC). An LLC offers several benefits, including limited liability for its owners and flexibility in how it’s taxed. In this guide, we’ll provide an overview of the process of starting an LLC in North Carolina. We’ll also highlight some of the key things you need to know before you get started. So if you’re ready to take the plunge into entrepreneurship, read on!

Why choose an LLC?

An LLC is a type of business structure that can help protect your personal assets in the event that your business is sued. Unlike a sole proprietorship or partnership, an LLC provides its owners with limited liability protection, which means that their personal assets are separated from the assets of the business, which is useful if the business is sued. In addition, an LLC can help to shield you from personal liability in the event that your employees or contractors cause damage or injure someone while working for your company. As a result, an LLC can provide peace of mind for business owners who want personal asset protection.

Related: How to start a business in North Carolina

Steps to Form a North Carolina LLC

While it can be intimidating to form an LLC for the first time, with a little research and patience, you can learn how to form an LLC in North Carolina without an attorney.

Let’s break down the steps to complete the North Carolina LLC formation process.

Total Time: 10 minutes

Step 1: Choose a Name for the LLC

The first step in forming a North Carolina Limited Liability Company is to make sure the name you want is available.  

It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of North Carolina. The North Carolina Secretary of State makes it easy to search and verify if your LLC name is available.  Here is more information on how to do a North Carolina LLC name search. 

In addition to the name needing to be unique, the name of the LLC must include one of the following phrases or abbreviations (also referred to as designators) at the end of the business name:
– Limited Liability Company
– Ltd. Liability Co.
– Limited Liability Co.
– Ltd. Liability Company
– L.L.C.
– LLC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

If you plan to use a different name from the one you register (perhaps you want to run multiple businesses under the LLC), you can file an assumed name (sometimes referred to as a fictitious business name, trade name, DBA, or Doing Business As name).  To register an assumed name, file the Assumed Business Name Certificate, along with the $26 filing fee with the Register of Deeds office in the county where the LLC is located.

Before settling on a name, you may want to see if a domain name is also available to match your business name and website address.

Step 2: Appoint a North Carolina Registered Agent

North Carolina law requires that every LLC in the state have an active Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

The basic requirements to be a Registered Agent in North Carolina include:
– The agent must be a North Carolina resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.

Learn more about the requirements for a Registered Agent in North Carolina.

Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.

Step 3: File the North Carolina LLC Articles of Organization

The paperwork to officially create an LLC in North Carolina is called the Articles of Organization. To submit the paperwork, either file online through the North Carolina Secretary of State’s website or download and mail the Articles of Organization Form L-01 to the Secretary of State’s office. 

Related: How to fill out the North Carolina Articles of Organization

When filling out the LLC Articles of Organization, a few sections and terms can be challenging to answer. Let’s go over a few of these sections to help get your LLC started right.

LLC Organizers – Enter the name and address of each person responsible for executing the Articles of Organization and whether they are a member, organizer, or both by checking the applicable boxes.

An LLC Organizer is involved with the formation of the Articles of Organization.  The Organizer may or may not become an LLC member, such as a mentor, attorney, or accountant, but the initial members will all be listed as organizers.

Principal Office – There are two parts to answering the Principal Office question.  Section “A” is used if the LLC has a principal office, and Section “B” is used if the LLC does not have a principal office.
– Section A – In this section, enter the street address, city, state, and zip code of the LLC’s initial principal office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  You may not use a PO Box for the designated office.
– Section B – This is usually selected if the principal office has not been secured yet.  A principal office will need to be identified by the time the first annual report is due.

Additional Provisions – This is an optional section and not used by most LLCs.  Here you would include the business purpose or additional rules for the operation of the LLC.

Company Officials – This section is optional but is used to list the company officials.  This section is optional but is used to list the company officials.  This is most often used for LLCs where a member may hold a job with connections or holds professional licensing through the state of North Carolina.

Effective Date – If you want the LLC to start on today’s date, choose Yes, otherwise select No, and enter a date less than 90 days in the future to start.
If you want the LLC to start immediately, choose today’s date.  If you want the LLC to start later, enter a date less than 90 days in the future to start.  The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business will not have any activity until the start of the year. 

Estimated Cost: 125 USD

Consider using an LLC formation service like Zenbusiness, IncAuthority, Northwest, or IncFile to guide you through the LLC formation process, so you know everything was done right.

IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!

You have a North Carolina LLC! Now what???

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a North Carolina LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an LLC operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: North Carolina LLC operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Also, note that an LLC that elects to be taxed as a corporation will also have to pay a franchise tax on the net worth of the business. The minimum franchise tax is $200.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Occasionally, the bank will request a North Carolina Certificate of Good Standing to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting the business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Sales & Use Tax Number – In order to sell products and certain services, registration with the North Carolina Department of Revenue will be necessary.

Related: What Business Licenses are Needed in North Carolina?

File the North Carolina Annual Report

LLCs are required to file an annual report with the NC Secretary of State.  The annual report is due by April 15th of each year and has an annual state fee of $200.

Related: How to File a North Carolina LLC Annual Report

Common Questions To Starting An LLC In North Carolina

How much does it cost to start an LLC in North Carolina?

The Secretary of State’s filing fee to start an LLC in North Carolina is $125.

How long does it take to start an LLC in North Carolina?

It normally takes 4-6 business days to start an LLC in North Carolina when filing online or 2-3 weeks when filing by mail for the state to process the LLC paperwork.

What is the total expected cost of operating an LLC in North Carolina?

In addition to normal business expenses, every year, North Carolina LLCs will pay the $200 annual report fee.

How do you know if your LLC name is available in North Carolina?

One of the first steps in forming a limited liability company (LLC) is to choose a name for your business. But before you can register your LLC with the state of North Carolina, you need to make sure that your chosen name is available. The best way to do this is to search the North Carolina Secretary of State’s website.

You can search by LLC name or by keyword. If your chosen name is already taken, you’ll need to choose another one. Once you’ve found an available name, you can proceed with the LLC formation process.

Who can be a Registered Agent in North Carolina?

Anyone can act as a Registered Agent, provided they are at least 18 years old, reside in the state of North Carolina, and are generally available to receive documents during normal business hours.

Related: What are the requirements for a Registered Agent in North Carolina?

Does an LLC need a business license in North Carolina?

It’s sometimes thought that the LLC and business license are the same in North Carolina, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.

Related: What business licenses are needed in North Carolina?

What is a Foreign Limited Liability Company?

A North Carolina foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state but wants to physically operate in North Carolina. Physically operating means having a presence, such as having an office or hiring an employee.

Related: What is a foreign LLC?

What is a Professional Limited Liability Company?

Businesses that require occupational licensing in North Carolina, such as accountants, architects, veterinarians, etc., can file for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.

Related: What is a Professional Limited Liability Company?

Is an LLC the same as a corporation?

The LLC is one of four main types of business entities. You can learn more about each here:
What is a sole proprietorship?
What is a general partnership?
How to form a North Carolina corporation

What is the difference between LLC, Ltd., and Co.?

LLC, Ltd., and Co. refer to entity designators that can be used at the end of a Limited Liability Name in North Carolina.

Related: What Do LLC, Inc., Co., and Ltd. Mean?

Can you have a single-member LLC in North Carolina?

An LLC in North Carolina can be operated by one individual or many. An LLC owned by one person is referred to as a single-member LLC

Should I use an LLC formation service or do it myself?

Following our guide, most people will be able to form an LLC on their own, however, LLC formation services like IncFile and IncAuthority will guide you through the process and guarantee it’s done right – and it doesn’t cost any extra to do so!

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