How to form your LLC in North Carolina?

LLC in North Carolina

There are different business structures you can choose in North Carolina although a limited liability company remains quite popular. You can opt for North Carolina LLC filing online or offline and the paperwork is less in comparison to profit corporations. The state is home to more than nine hundred thousand small businesses and includes 13 Fortune 500 companies. When you file LLC in NC, there are several benefits that can be leveraged from state-governed small business incentive programs to grants and funding programs.

What is a North Carolina LLC?

If you are planning to form a North Carolina LLC then you need to first understand this type of business structure. This is a type of corporate structure, which primarily protects its owners or members from personal responsibility toward the debts or liabilities of the company. It is often considered to be a hybrid entity as it constitutes characteristics of partnership, corporation, and sole proprietorship. If you file an LLC in NC then it will be governed by the state statutes and the said LLC will need to comply with all state requirements. The different types of LLCs that you can form in North Carolina are:

• Single-member LLC
• Multi-member LLC
• Professional limited liability company (PLLC)
• Series LLC
• Foreign limited liability company

Benefits of forming an LLC in North Carolina

A limited liability company is one of the most favored structures, especially among first-time business owners. This is mostly because of the many advantages it has as compared to other entity structures. The advantages of filing a North Carolina LLC application are:

• A Separate legal entity – When a limited liability company is formed, it is considered to be separate from its owners or members. It is separate in terms of responsibilities, rights, and liabilities. When you file LLC in NC then the company will be able to own, buy, as well as use its own personal or real property. The limited-liability company will also be able to make its own guarantees and contracts.
• Limited liability – The biggest advantage of Filing a North Carolina LLC online is limited liability. This is possible because the company and owners are separate. Limited liability refers to the fact that an individual asset of any LLC member cannot be used as collateral or for satisfying the debts and other obligations of the said LLC.
• Perpetual existence – Unless mentioned in NC LLC filing requirements or articles of organization, most limited liability companies enjoy perpetual existence. This simply means that the owner of a said LLC can be changed without triggering the dissolution of the LLC. The retirement or death of a member does not mean that the limited-liability company will cease to exist or operate.

Forming an LLC in North Carolina

North Carolina has one of the top business climates in the Southeastern region of the United States. In a business climate executive survey report, North Carolina has been ranked second successively for five years due to its pro-business environment and robust strategic economic development plan. Although entrepreneurs prefer to form a North Carolina LLC, it is important to key areas that will enable you to set up and operate your LLC with ease.

1. Choose a North Carolina LLC name

One of the foremost aspects to focus on for any new LLC in the state of North Carolina is its business name. A business name is always as important as the company itself. This is because the name of a limited liability company will play a monumental role when it comes to the growth and perception of the company or the brand. The NC LLC filing requirements for a new business constitute naming guidelines governed by the North Carolina General Statutes, Chapters 55D, 57C, and 57D.

2. Choose a North Carolina LLC registered agent

Another important role played in new business formation in the state, is by a North Carolina LLC registered agent. It is necessary to understand the role of a registered agent also known as a resident agent or RA. A company or an individual who has been designated to receive any legal documents or correspondence on behalf of a limited-liability company is known as a registered agent. According to NC Gen Stat § 57D-2-40 (2020) and NC Gen Stat § 55D-30 (2020), to form a North Carolina LLC, you will need to continuously maintain a registered agent in the state.

3. File Article of Organization with the North Carolina Secretary of State

The foremost NC LLC filing requirement is to submit the documents for new business registration. You will need to prepare and then submit the Article of Organization pursuant to NC Gen Stat § 57D-2-21 (2020) along with a filing fee of $125. You are required to provide a listing of company officials (owners or members) in the articles. You can submit the articles to the office of the Secretary of State, Business Registration Division. You can also opt for North Carolina LLC filing online.

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4. Prepare a North Carolina LLC operating agreement

One of the popular business entity structures for entrepreneurs and first-time business owners is a limited liability company. Although recordkeeping formalities are minimal for this type of structure, having an operating agreement is necessary. The operating agreement is mentioned in the NC LLC filing requirements and you will not be required to share it with the state as it is considered to be an internal document. There are several reasons why such a document is essential but the most important is that it provides proof of ownership. The agreement will contain the names of all members including those provided in the North Carolina LLC application. Generally, an LLC operating agreement should include information about:

• Transfer of membership interest
• Initial contributions
• Rights and responsibilities of members
• Voting rights as well as decision-making powers
• Allocation of profit, losses, and distributions
• Management and membership structure
• Various rules for holding internal LLC meetings
• Bookkeeping procedures
• Dissolution or buyout

5. Obtain an EIN for your North Carolina LLC

Once you form a North Carolina LLC, you will be required to maintain compliance with all annual requirements of the state. One of the important requirements is filing state, business, or local taxes. To file taxes, you will need to apply for and obtain a tax ID also known as Employer Identification Number (EIN). This is a unique tax ID number that is issued by the Internal Revenue Service (IRS). Normally, a single-member LLC is not required to obtain an EIN unless the company has employees or has to file excise tax returns.

Do you want to obtain an EIN in North Carolina?

6. Check local licenses and permits

Once you form a North Carolina LLC, it is time to make the business operational. A company can transact business in the state only when it has the necessary licenses and permits. There are many kinds of licenses available for you to apply for, and a single LLC might even need more than one license or permit. The business licenses in the state can be categorized as under:

• Sales Tax License – This is a mandatory license for any LLC that is selling a product directly or indirectly to its consumers. Selling should be the primary activity. In such a scenario, after you file an LLC in NC, you will need to register with the Department of Revenue and obtain a Certificate of Registration.
• Occupational Licenses – Many different categories of occupation or profession require a license or permit. The issuing authority for such licenses and permits may also vary.

  Example: If you want to start an Adult Care Home with 2-6 residents then you will need to apply for a business license under Licensure Rules 10A NCAC 13G. The licensing authority will be the NC Department of Health & Human Services. Similarly, if you operate Airport Storage then the license will be issued by the NC Department of Public Safety.

• County Licenses – This is a type of license that is also known as a local or municipal license. Every county or city in North Carolina has different regulations for permits and licensing.

8. Open a North Carolina LLC bank account

One of the most challenging tasks of business operation is to manage finances, this includes all types of transactions. The best way to streamline your transactions, both expenses, and revenue, is by opening a business bank account. It is important to note that certain business structures are legally required to have a checking account like if you form a North Carolina LLC. A business bank account will not only make bookkeeping easier but will also make filing taxes simpler. You will also be able to accept credit card payments and enjoy identity and liability protection.

9. Comply with taxes and other regulations

Once you file LLC in NC, you will be required to fulfill all annual maintenance requirements of the state. There are two important annual requirements and they are:

• Annual Report – After you form a North Carolina LLC, this is one of the most important annual requirements. Each LLC is required to file this online or offline to the North Carolina Secretary of State – Business Registration Division.
• Taxes – An LLC is a pass-through entity and hence taxes have to be filed for the income of the owners. Apart from this, a limited liability company in North Carolina may have to file other state or local taxes such as the sales and use tax.

Know more about starting an LLC in North Carolina!

There is a process for new business registration and there are several rules, regulations, and compliances to be met to ensure that your company remains active and operational in the state. You may have several questions concerning the different aspects of an LLC in NC. For that reason, we have created a special section of “Frequently Asked Questions” for addressing some of these queries.

Is North Carolina a good state to form an LLC?

The state of North Carolina fosters a pro-business environment and has been ranked amongst the top states for startups and small businesses. Some of the reasons why entrepreneurs prefer to form a North Carolina LLC are:

• One of the lowest tax rates in the U.S with a Corporate income tax rate of just 2.5%
• The state has one of the lowest overall business costs
• It has been ranked number 7 in the list of Best Regulatory Environments by Forbes
• The state is home to a world-renowned education system and a high-quality talent pool
• NC provides easy access to both domestic and international markets
• The Information Technology Industry in the state has been growing at a rapid pace

How do I know if my North Carolina LLC name is available?

To start a limited liability company then it is imperative to follow all NC LLC filing requirements including reserving a business name. Once you have chosen a name, you need to conduct a North Carolina LLC search. This is possible by using the online business entity search offered by the website of the Secretary of State.

How much does an LLC cost in North Carolina?

In order to start a limited-liability company in North Carolina, you will have to submit the Article of Organization. There are two types of costs in the state – initial fixed costs and recurring costs. The LLC registration cost is an initial fixed cost and is $125. The cost of a business name reservation is $30. Similarly, there are other recurring costs like those attached to Annual Reports, Business Licenses, and hiring a North Carolina LLC registered agent among others.

Do I need a business license for my North Carolina LLC?

Yes. A business license is required for making your limited-liability company operational. You may incur a penalty if you conduct business without proper licenses or permits.

Can I set up a single-member LLC in North Carolina?

Yes. You can set up a single-member LLC in the state. The single-member LLCs will be treated the same as sole proprietorship firms.

What taxes does an LLC pay in North Carolina?

If you form a North Carolina LLC, you will need to file taxes annually. The type of tax may vary according to the business activity. For example, sales tax is meant for businesses selling products in the state. Apart from this, being a pass-through entity, an LLC is not required to file corporate taxes. Instead, owners are required to file individual income tax returns. If your company has employees then the LLC will also be required to file employer taxes.

Can I register a foreign LLC in North Carolina?

Yes. You can register and operate a foreign LLC in the state. You will need to obtain a Certificate of Authority pursuant to NC Gen Stat § 57D-7-01 (2020) in order to transact in the state. This process is known as the “Foreign LLC Qualification” and without it; you will not be allowed to conduct business in the state.

How do I dissolve my North Carolina LLC?

After you file an LLC in NC, there can be several reasons for dissolving the company. According to state laws, NC Gen Stat § 57D-6-01 (2020), you will be required to file Articles of Dissolution with the Secretary of State. There is a fee of $30 for dissolution.

Ready to form a North Carolina LLC?

A Limited Liability Company is one of the most popular structures, especially for first-time business owners or entrepreneurs. This type of business structure has its own advantages including limited liability and tax benefits. If you want to file a North Carolina LLC application then IncParadise can assist you with the process of registration.