Select A Business Entity in North Carolina

To start a business in North Carolina, you will need to choose a business entity / organizational structure in order to operate.  There are four primary structures and each has their pros and cons.  A brief overview is provided below:

Sole Proprietorship: A sole proprietorship is an individual that decides to go into business.  This is easiest of the four entities to set up as there is no formal filing.  Revenues are considered personal income and are taxed at the owner’s personal tax rate.

While sole proprietorships are the easiest and least expensive entity to form, there is a potentially major downside, which is unlimited liability.  This means if the business were to be sued, the business owner’s personal assets are at risk.    If separating your business and personal assets is important, corporations and LLCs are a better choice.

General Partnership: A general partnership involves two or more people conducting a business together. Like the sole proprietorship, there is no formal filing and just like the sole proprietorship, the partnership has unlimited liability so if the partnership were to be sued, all of the partners personal assets are potentially at risk.

Corporation: A corporation is a legal entity that is separate from the individual.  While corporations are more expensive and complicated than sole proprietorships and partnerships to form, should the corporation be sued (assuming no negligence) the owner’s personal assets are protected.

The initial cost to form the Articles of Incorporation in North Carolina is $125.

While you can form a corporation yourself, this is the most complex entity to form as several documents and activities need to take place to keep the liability protection (also known as the corporate veil).  Of major importance, a corporation must hold an annual board of directors meeting, shareholder meeting and record minutes at those meetings.  While a corporation can be owned and run by an individual, those activities must take place in order to keep the liability protection.

There are three options for filing a corporation in North Carolina:

1 – Do it yourself:
File – Articles of Incorporation
Finalize – Prepare corporate binder, bylaws, issue stock certificates, hold initial meetings, take minutes, etc.

2 – Online Incorporation Companies:  Nice option for most people who don’t want to form by themselves or pay for an attorney.  They help make sure filings are correct and provide the legal direction to ensure everything is in order.  Costs for these services are pretty affordable, typically starting around $50-$100, plus the state filing fee.
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3 – Hire an Attorney:  Hiring an attorney is the most expensive option but provides the most personalized service to best protect your assets (especially important if they are complicated) and ensure everything is filed properly.  Attorney’s fees to file a corporation usually ranges between $500 and $1,000, plus state filing fees.  Here is a link to attorneys in North Carolina.

Limited Liability Company (LLC): An LLC is a popular entity choice because it provides the liability protection of a corporation with the ease of operation of a sole proprietorship by eliminating the board of directors meeting, shareholders meeting, minutes, paperwork, etc that a corporation has to do.

The initial cost to form a North Carolina LLC is $125.

There are three options for filing an LLC in North Carolina:

1 – Do it yourself:
Instructions & to File – Articles of Organization

LLC-Made-Easy.com has a lot of resources and detailed answers to questions about forming an LLC.

2 – Online Formation Companies:  Nice option for most people who don’t want to form by themselves or pay for an attorney.  They help make sure filings are correct and provide the legal direction to ensure everything is in order.  Costs for these services are pretty affordable, typically starting around $50-$100, plus the state filing fee.
IncFile
Legal Zoom
BizFilings

3 – Hire an Attorney:  Hiring an attorney is the most expensive option but provides the most personalized service to best protect your assets (especially important if they are complicated) and ensure everything is filed properly.  Attorney’s fees to file an LLC usually ranges between $500 and $1,000, plus state filing fees. Here is a link to attorneys in North Carolina.

Check out our comparison chart of the different business entities.

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