For many entrepreneurs, startups, and small business owners, getting an LLC license is one of the best business decisions you can make. Starting a North Carolina LLC cost is minimal, especially for the benefits you’ll enjoy, such as personal liability protection and saving money on taxes.
However, trying to start an LLC in NC can be an intimidating task—but we’re here to help! We’ll walk you through every step of the process, from selecting a company name to filing all the necessary documents and beyond.
In this post, we will cover:
Why Start An LLC In NC?
There are so many fantastic reasons why you should consider opening an LLC in North Carolina. For entrepreneurs, startups, rental property owners, and small businesses, LLCs are typically the best legal structure and can offer many benefits you’ll experience with other legal entities. Here’s what makes them great:
Personal Liability Protection
When you create an LLC, you establish a separation between your personal assets and your businesses. Other legal entities, like sole proprietorships, have no clear designation between the two, which means you're personally liable if you’re sued or accused of negligence. In other words, even if your personal assets (your house, car, etc.) aren’t part of your business, they’re at risk in certain legal situations.
Only your business assets are in jeopardy with an LLC, unless you’re involved in any legal wrongdoing.
Profit Distribution Flexibility
If your business is a corporation, you must distribute profits based on the number and type of shares their shareholders hold. This doesn’t bind LLCs. If you and your partner each own 50% of your LLC, but you’re doing most of the work, you can agree to distribute profits in a way that’s fair to both of you. Similarly, if you own 75% of your LLC and your partner only owns 25%, but you want to split the profits and losses 50/50, you can do so.
Management And Ownership Flexibility
A formal business structure binds corporations, and they are required to meet annually to make decisions. LLC partners can decide how they want to run their businesses. They’re not bound by a formal structure, unlike corporations. Aside from paying taxes, North Carolina LLC’s only obligation is to file an annual report by April 15 each year.
Last but certainly not least are the tax benefits of a North Carolina LLC. NC LLCs can adopt the tax status of any other main legal structure (sole proprietorships, S corporations, C corporations, etc.).Unless you opt to be taxed as a corporation, the IRS will designate your company as a disregarded entity LLC. In other words, you’ll enjoy the tax benefits of a sole proprietorship, which means you won’t owe any federal or state taxes, and your business and personal income are merged into one. You’ll also pay self-employment and employer taxes if your LLC has employees.
What To Do Before You Create Your NC LCC
Before you form your LLC, determine if you’re filing as a domestic or foreign entity. The documents you file vary depending on where you’re doing business. Also, check to see if your business name is available. You don’t need to include that in everyday conversation (you can use your “Doing Business As” name for that), but it’s a requirement when filing out any legal documents.
As an LLC, your company must include either “Limited Liability Company,” “LLC,” “L.L.C.,” “LC,” or “L.C.” as part of its name. North Carolina cannot include terms related to a government entity. If you want to have words like “mutual,” “trust,” “engineering,” “wholesale,” and “insurance,” you
must get approval from the appropriate agency or state department. Check out North Carolina’s Secretary of State website for more information.
Before applying for your LLC license, check if another North Carolina business uses your desired name. Check the Trademark Electronic Search System (TESS) database for sure. If another company uses that name, you risk infringing on its existing trademark.
Finally, if you’re worried about another business taking your name before you can do your LLC paperwork, you can reserve your business name for up to 120 days. Simply fill out a form to Reserve a Business Name and pay the $30 fee.
How To Start An LLC In North Carolina
Here’s the step-by-step process for how to start LLCs in NC:
Choosing Your Registered Agent
Your registered agent is the person who will handle your organization's required tax, legal, and government correspondence. In other words, they’ll accept official mail and notices from the state of North Carolina on behalf of your business. They must either be a physical person or a commercial entity that maintains an address in North Carolina (not a P.O. Box).
You can designate yourself or one of your LLC members or partners as the registered agent for your business. Before you make the decision, remember that the registered agent’s address becomes public record upon receiving your LLC license. For added privacy, many startups and small businesses use a commercial entity as their registered agent.
Filing Your Articles Of Organization
The term articles of organization might sound intimidating, but they’re actually pretty straightforward. These are the legal documents that include basic information about your LLC. You can find them and most other forms you’ll need for your LLC on SOSNC.gov.
To prepare your articles of organization, you need the following:
While you know most of this information off the top of your head, double-check your articles of organization before submitting them. If you accidentally make a typo or put something in the wrong box, it can cause a massive headache later.
Drafting Your Operating Agreement
Your operating agreement is basically your organization’s constitution. It outlines how you will run your business, and includes your rules, regulations, and principles. Whether you’re a small business with multiple partners or an entrepreneur running a single-member LLC, every business should have an operating agreement. Without an operating agreement, critical endeavors may be left up to the courts to decide if there’s ever a financial or legal dispute. Their results may not be in your or your LLC’s best interest.
Here’s what you should include in your operating agreements:
Applying For Additional Business Licenses
Depending on the nature of your business, you may have to apply for additional licenses to operate your LLC. While North Carolina doesn’t require a general business operating license, most cities and counties do. Contact your local government agency to figure out what licensing requirements are in your area.
If your company sells taxable goods and services, you must acquire a sales and use tax number from the NC Department of Revenue. While operating your business, you’ll be required to collect sales tax from customers and file returns to the state regularly. Your filing frequency depends on how much you receive in taxes from customers.
Obtaining An Employment Identification Number (EIN)
Your EIN is a nine-digit number that the IRS assigns you and identifies your LLC for tax purposes. In most cases, you can’t file taxes, hire employees, or open a business bank account without one.
What To Do After Opening An LLC In North Carolina
Once your application for an LLC license is approved, you must remain in good standing to operate legally as an LLC. Here’s how:
Comply With Your Local, State, And Federal Regulations
The rules and regulations you must abide by vary slightly by location, so check in routinely with your local government to stay attuned to their requirements. For example, if you hire employees, you must report your new hires, pay unemployment taxes, withhold payroll taxes, and get workers’ compensation insurance.
File Your Annual Report
As we mentioned earlier, LLCs are required to file an annual report on or by April 15 each year.
Pay Your Taxes
Make sure you pay all your taxes on time. If you’re designated a disregarded entity, each partner of your LLC must pay taxes on their personal tax return. Depending on your business, you might also be responsible for self-employment taxes, sales taxes, and payroll taxes.
How Much Does An LLC Cost In North Carolina?
An NC LLC costs a one-time payment of $125 to file domestically, and $250 if you’re a foreign entity. In addition, you’ll also file an annual report. Filing online costs $202, and filing via
mail costs $200.
Still have more questions on how to start an LLC in North Carolina? We’ve got answers!
A single-member LLC has only one owner, instead of two or more. Single-member LLCs often enjoy many benefits that LLCs and sole proprietorships have to offer.
If you’ve got all the information handy, you can set up an LLC in a matter of hours. However, obtaining approval from the Secretary of State’s office usually takes five to seven business days.
Paying yourself from an LLC or taking an “owner’s draw” is pretty easy to do. Simply transfer a portion of your organization’s cash reserve from your business account to your personal account. If you’re dividing funds among partners, do so based on agreed-upon percentages.
To dissolve an LLC, you must file the Articles of Dissolution of an LLC with the Secretary of State and pay its $30 filing fee. Before you can dissolve your LLC, you must settle all your remaining debts, pay all your taxes, distribute any remaining assets, and inform creditors of your closing.
Conclusion: How To Start An LLC In North Carolina
Setting up an LLC in North Carolina can be an exciting, but daunting process. However, by following this step-by-step process, you should get an LLC License in no time and be well on your way to running your business.Are you ready to maximize your organization’s potential? Check out The Lazy Man’s Guide to Living The Good Life, and learn how to amplify your chances of success!