How to start an LLC in North Carolina
North Carolina is a business-friendly state for a number of reasons. Entrepreneurs in NC can choose from several different business entity structures, but one of the most popular is the limited liability company or LLC. In this guide, we will discuss how to start an LLC in North Carolina.
In NC, the process of initial business formation is handled by the North Carolina Secretary of State. The primary document that needs to be filed is the Articles of Organization – although there is more to it than just that. Below, find a step-by-step guide to starting a North Carolina limited liability company.
Consider utilizing an LLC formation service
The first decision to consider is whether you want help with the process, or whether you’re comfortable doing it on your own. Both approaches have their own unique advantages and disadvantages.
LLC formation services – such as Northwest Registered Agent and ZenBusiness – help with the entire process from start to finish. They use a modern online system to simplify the somewhat outdated systems that most states still use. And, if there are any issues, they have support staff standing by to help.
To use a professional service, you will need to pay a little extra. However, many are quite affordable – ZenBusiness starts at just $49. For the time they save, the cost is well worth it.
If you choose to do the work yourself, follow the steps below closely.
Name your new company
Now, it’s time to come up with a name for your business. This should be a name that is relevant to the business activities you plan to engage in, and ideally, one that is memorable and catchy. Most businesses should focus on creating a brandable, memorable name that suits their industry.
More important than the branding potential of the name is to ensure that the name satisfies all the rules laid out by NC. Among these is the requirement that the name is unique/distinguishable from other business entities in the state. To confirm this, conduct a Business entity name search to ensure that your desired name is unique from already established companies.
There are other rules, as well. The name must contain the abbreviations “LLC” or “L.L.C.”, or the full term “Limited Liability Company”. Certain words related to financial services, law, and government are also restricted from use. All the business naming rules for North Carolina can be found here.
Using an Assumed Name in North Carolina
Businesses in NC can also use what is called an assumed name to do business under. This is in addition to the formal LLC name. It’s basically a secondary name that is added to an existing business entity, for the purpose of branding. For instance, “ABC, LLC” could file assumed names for “ABC Plumbing” or “Charlotte Plumbing”, allowing them to do business under multiple names.
In other states, assumed names may be called “doing business as” names or DBAs, or trade names. You can register an assumed name in NC after your business entity is formed. This allows for more flexibility in branding and marketing, and also means you don’t need to worry too much about choosing the perfect LLC name.
Appoint a Registered Agent
LLCs are required to nominate a “registered agent” for their company. This agent is an individual, or a company, that is a representative of the LLC. Their role is to receive important communications on behalf of the business. This can include tax forms, a notice of lawsuits, government correspondence, and more.
The registered agent can be any resident of North Carolina (including yourself), or any business registered in the state (the only exception is that the LLC cannot be its own registered agent). So, you have two options:
Appoint yourself, an LLC member, or an employee
Appoint a professional registered agent service. This can cost around $100 to $150+ per year
The second option, of using a professional service, offers some significant benefits. It reduces the chance of something being done incorrectly, or an important piece of mail being missed (while the owner is on vacation, for instance). And, it protects the privacy of the business owners. The Agent’s address must be publicly listed, so if you are your own agent, you may have to sacrifice some privacy.
You will need to appoint a registered agent before moving onto the next step, because you will need the agent’s address in order to file the North Carolina Articles of Organization.
Create an LLC operating agreement
Note: This step is optional, but recommended.
An operating agreement is an optional, but important document that most companies should have. It essentially establishes certain operating procedures for the company, as well as detailing the ownership structure.
Because of this last point, the operating agreement becomes particularly important for businesses with more than one owner/shareholder. However, even single-member LLCs will benefit from an operating agreement.
You can draft an operating agreement with the help of an online template from ZenBusiness or another similar service. Or, you can use a local attorney to help. You do not need to submit this document anywhere; it’s simply kept on file for your own use.
File LLC Articles of Organization
Business owners must file the Articles of Organization with the NC Secretary of State in order to form their business as a legal entity. This can be done online, or through the mail. The NC state fee is $125, which is nonrefundable and covers the cost to process the application.
To file online
Register an account with the Secretary of State and follow the instructions to file the Articles of Organization.
To file by mail
Once you have filed the document, you will simply need to wait for NC to process the application. You will be notified when it is complete, or if there are any issues.
Apply for an EIN
Employer Identification Numbers, or EINs, are important federal tax ID numbers issued by the Internal Revenue Service (IRS). They are used for tax filing purposes, and are necessary in order for a business to hire employees. Most banks also require them in order to open a business bank account.
There is no cost for an EIN, and almost all NC LLCs should apply for one. You can apply on the IRS website in just a few minutes.
Apply for business licenses & permits
Many North Carolina LLCs will require additional permits and/or licenses in order to legally operate. The specifics vary depending on the type of business activity, as well as its physical location.
North Carolina does not have a “general” business license that is required for all businesses. However, there are hundreds of licenses and permits required for specific business activities. More information on state permits can be found here.
In addition to state requirements, local jurisdictions (city/county) may require local business licenses, and/or specialty permits like health permits or liquor licenses. Check with the local county government for details. And keep in mind that if you have multiple business locations, you will need to check with each relevant city or county to ensure compliance.
Finally, businesses in certain industries have federal requirements for specific permits or licenses. These are mostly for highly regulated industries, including agriculture, finance, etc.
North Carolina LLC Tax Requirements
This is also a good time to research the tax requirements for your business.
If you plan to sell taxable goods or services, you will need to apply for a Seller’s Permit from the NC Department of Revenue.
If you plan to hire employees, you will need to register for unemployment insurance tax and employee withholding tax accounts. There may be other requirements, as well. More information on NC state tax requirements can be found here.
Keep your business in good standing
To stay compliant with all ongoing requirements, you will need to pay close attention to filings and reports on each level of government: Federal, state, and local. This will be on an ongoing basis, for as long as you operate your business.
With that said, the specific requirements that your business faces will vary a bit, depending on what type of business it is, and where it’s geographically located.
Some of the most common requirements that apply to most or all businesses are listed below:
North Carolina Annual Report – required annually for all LLCs. Due April 15th. $200 filing fee
North Carolina sales tax reports
North Carolina employer taxes/payroll taxes
Federal payroll taxes
Federal income tax and business tax returns
Local city/county tax returns
Business license renewals
Professional license renewals
You should notify the Secretary of State of any major changes to your business
You must always have a Registered Agent appointed for the life of the business
There may be other requirements, as well – the specifics vary by the business. Now is a good time to do the research to determine every requirement that you will need to satisfy. That way, you can start off on the right foot and never miss an important filing. It’s wise to create calendar reminders for important due dates, as well.
Another option for ongoing compliance needs is to use the help of a professional service like ZenBusiness. These services can help you file certain requirements, while also reminding you of other due dates.
Open a business checking account
Business owners should take additional steps to ensure that their business and personal finances are separated. By this, we mean that there should be bank accounts set up for the business itself, which are totally separate from the personal bank accounts of the owners.
At a minimum, you will need a business checking account. You may also want a savings account, business credit card, line of credit, or other financial products.
You can open an account at any financial institution that suits your needs. You will typically need to supply your EIN and business license – call ahead to see if there are any other requirements.