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How to Form an LLC in North Carolina: The Benefits of Doing Business as a North Carolina LLC
There are many requirements that go in to getting your North Carolina LLC up and running, some of which can be overwhelming when trying to start a new business.
However, with the right support, you’ll be able to successfully form your North Carolina LLC so you can start doing business as a limited liability company. Below you will find an overview of each step:
The North Carolina LLC formation process has seven easy steps:
1. Complete an LLC Name Search
2. Select a Registered Agent
3. Obtain a Certificate of Formation
4. Create an LLC Operating Agreement
5. Get an EIN Number
6. File an Annual Report
7. File Your LLC Taxes
What is a Limited Liability Company (LLC)?
What is a Limited Liability Company? An LLC is a hybrid business entity with the benefits from sole proprietorships, partnerships, and corporations. Some of these benefits include ease of management, pass-through taxation, and personal liability protection.
The personal liability protection offered by the LLC business structure means that any real estate, bank accounts, vehicles, or possessions cannot be sought after in the case of debts or lawsuits against the North Carolina LLC. As long as your North Carolina LLC is in good standing, your assets cannot be touched.
How is an LLC Different from Sole Proprietorships?
A sole proprietorship is the simplest of all business structures and can be dissolved the fastest. A sole proprietorship is run by a single person for his or her own benefit. The sole proprietor can also be known as a consultant, a freelancer, or an independent contractor.
As a single-owner operation, a sole proprietorship does not exist apart from the owner and the owner’s resources. All liabilities arising from the operation of the business will fall upon the owner. If the owner dies, the organization will cease to exist.
Sole proprietorships have minimal creation fees and require very little paperwork to launch. However, owners of a sole proprietorship will need to set aside a sizable chunk of money from their net income to pay for the taxes that apply to such an operation.
Sole proprietorships are also known as single-member LLCs and are taxed on Schedule C. For more information check out our main page.
Why Should You Choose the LLC Business Structure?
An LLC is perhaps the best of all worlds when it comes to partnerships, sole proprietorships, and corporations. Limited liability corporations are independent entities from the owners and allow for easy dispersion of personal and business assets and debts. As a combination between a corporation and a partnership, forming an LLC is perhaps one of the easiest ways to go into business.
Limited liability corporations are taxed in the same way as sole proprietorship if there is a single owner. They are taxed as a partnership if there is more than one owner/member. Taxing structures can be chosen from either the S corporation model or the C corporation model, although most LLC owners choose to avoid double taxation by choosing the pass-through taxation option.
However, LLCs do have some drawbacks. LLCs require an LLC Operating Agreement outlining the structure of the organization. This document is usually prepared using the services of a lawyer and lays forth the terms of operation in a clear way.
If you need help with forming an LLC in North Carolina, contact the team at LLC Formations so we can help you with the business registration process. Here are the steps required to form an LLC in North Carolina:
1. Choose a Name for Your North Carolina LLC
When you form a North Carolina LLC you’ll need to choose a name for your business. Your name must be distinguishable from other LLCs in North Carolina state, meaning that the name of your business must not be the same as or too similar to the name of another North Carolina LLC.
For example, you cannot have a business named Suzie Q’s Grocery Store, LLC and a business named Suzie Q’s Grocery Store, Inc. in the same state, even if they are in different cities. You might also be restricted from using certain words in your name, so make sure that your name doesn’t include anything misleading. To check the availability of your name, you will need to conduct a name search.
Conduct a Name Search with the Secretary of State
In order to see if your name is available to be used in North Carolina state, you’ll need to conduct a name search before you form an LLC. If you form an LLC under an unavailable name, your application will be rejected and your filing fees are not refundable.
To make sure that your name is available, log on to the North Carolina Secretary of State website to conduct a name search through their online services. Select name search from the menu on the business page. This tool allows North Carolina LLCs to see potential name availability.
How Will I Know if a Name is Unavailable?
In the course of your research of the database, you might come across one or more of the following status indicators:
- Administratively dissolved
- Auto dissolved
- Reserved name
Any of these status indicators means that the name attached is not available and cannot be used for your North Carolina LLC formation, so you will have to go back and brainstorm. If your name is available, the menu will not list any businesses. This means that you can form an LLC under your ideal name and continue forward with the North Carolina business registration process.
Check Your Ideal Name with Trademark Registry
Check the Trademark Registry of the North Carolina Secretary of State’s Office to determine if any of the wording in your proposed name has been registered as a service mark or a trademark according to the laws of North Carolina.
Check Your Ideal Name with the U.S. Patent and Trademark Office
You can also check the U.S. Patent and Trademark Office for similar or identical federally recognized trademarks or service marks. To be on the safe side, ensure that you have received all of your paperwork from the North Carolina Secretary of State before you print any branded items such as checks, stationery, or signage.
Add the Proper Designator
Choosing a distinguishing name when forming an LLC in North Carolina does not count if you add a designator such as “LLC” or “Limited Liability Company.” There are other designators used as well, but these are the ones that are the most commonly used. Your name must be distinguishable from other LLCs, and you must have the proper designator that shows your company is an LLC.
You need to add LLC, L.L.C., or Limited Liability Company to the end of your business name. You cannot indicate that your business is anything besides an LLC entity type, such as nonprofits, corporations, state agencies.
Choose a Name that Customers Can Remember
An LLC name should be easy and logical to spell. Variations like “Gabe’s Oughto Rhepair Shop” or “Noorthwesst Huntyng and Fyshyng Store” should probably be scratched off your list.
Try not to have excessive punctuation in your LLC name either. “Date-and-Time-Clock-Repair, LLC” or “Float-Your-Boat, Rock-Your-World Marina, LLC” is also not the best option for an LLC.
Neither are long names like “Long Days and Short Nights Productions, LLC” or “The Happiest Day of Your Life Catering and Photography, LLC.” Shorter names are easier to remember and less likely to slip the mind of your customers/clients.
Your North Carolina LLC name should also have a positive connotation associated with your business. You want people to feel good when they hear the name of your company or service.
Reserve Your Ideal LLC Name with the Secretary of State
If you are not ready to officially file the name of your North Carolina LLC, you can reserve it with the Secretary of State’s Office by paying a $10 state fee. This will keep your name reserved for up to one year while you make your decision. After a year, the name will be released for public use.
Register Your LLC Name with the Secretary of State
Registering your LLC name is one of the first major steps in forming a North Carolina LLC. Once you register the name for your LLC in North Carolina, you can then move on to the other documents that will officially start your business in North Carolina.
To register the name of your North Carolina LLC, you will be required to pay a $125 state fee for the LLC Articles of Organization. Annual Report filings for your LLC will cost you a $200 state fee. You will need the following information for these documents as well as the state fees:
- The name of the business. The name must include either the “LLC” initials or the words “Limited Liability Company”
- The name and street address of the registered agent of the business
- The name and address of the person executing the Articles of Organization
- The business address if it differs from the street address
- The phone number and the address of the principal office, if applicable
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2. Choose a Registered Agent for Your LLC in North Carolina
The registered agent of a limited liability company is sometimes referred to as the statuary agent. The registered agent is responsible for receiving all official documents on behalf of the LLC and passes them along to the appropriate parties.
What is the Role of a Registered Agent?
The registered agent serves as a point of contact for receiving business-related correspondence including tax notices, payment reminders, and other legal documents. The state of North Carolina requires a physical location to ensure a record of the delivery of official or legal documents.
The registered agent must also be available during all normal business hours. This is to ensure that the agent available to handle the delivery of Service of Process such as complaints, summons, and/or subpoenas for the North Carolina LLC.
Who Can be a Registered Agent?
As the business owner, you can be your own registered agent, you can choose a trusted friend or family member, or you can hire a registered agent service for your LLC in North Carolina. The chosen registered agent must be over the age of 18 and have a street address in North Carolina state.
What are the Benefits of Hiring a Registered Agent Service for Your North Carolina LLC?
Having a registered agent other than a member of your business can offer you a certain level of privacy as you will not have personal addresses on file with North Carolina state. Each registered agent is required to list his or her address as the place to receive legal notices, which is a public record within North Carolina state.
A North Carolina registered agent service specializes in receiving mail on behalf of your North Carolina LLC and will either forward it to you via mail or upload it onto your online account. Most commercial registered agents in North Carolina cost between $100 and $300 a year and can be a big asset to your LLC in North Carolina.
If you need help with looking into registered agent services, contact the team at LLC Formations so we can help you find the best-registered agent service so you can get your business up and running.
3. File the Articles of Organization for Your North Carolina LLC
When filing forms with North Carolina for starting up your new business, you will need to complete and file the Articles of Organization and a Coversheet with the North Carolina Secretary of State: Business Registration Division. The Articles of Organization officially creates your business and registers the LLC under North Carolina law.
What is Included in the Articles of Organization?
LLC name: List your business name on the Articles of Organization so your company can be formed under this name.
Name and address of all members: This includes the Organizer(s) and the Owner(s)/Member(s). The Organizer is defined as the person who will execute the Articles of Organization.
The name of your chosen registered agent. This is the person who agrees to receive Service of Process on your behalf in the event that you are involved in a lawsuit or another legal situation. Include the name and mailing address of the registered agent for your North Carolina LLC.
Principle office address and phone number. The principal office is defined as the place where the actual business operations are conducted or where all the official LLC documents and business records are located. If you don’t yet have a principal office, you can check option B on the form.
Additional provisions. This is an optional section that most people do not fill out. Additional provisions are other rules/requirements related to the LLC and are usually not used unless directed by an attorney or a business advisor.
Company officials. This is another optional section and is used for listing company officials, also known as the LLC members. LLC members can simply sign the LLC operating agreement, while the organizer can sign a statement or organizer to create a complete paper trail demonstrating how the members operate in relation to the organizer.
Email address. Experts recommend that you enter your email address here to notify you of any documents that are filed on behalf of your LLC.
Effective date. This is the date that you wish your LLC to officially come into existence. If you would like the LLC to go into existence on the date that it is approved by the North Carolina Secretary of State, leave this space blank. You can also choose a later date not more than 90 days in the future of the date listed on your paperwork.
How to Submit the Articles of Organization
You can file your Articles of Organization either by mail or online. The $125 one-time state fee is the same for each option. Online filing tends to achieve faster results with notification of approval (or rejection) in three to five business days. Filing by mail is a little slower with notification of your filing status within four to six business days.
The terms “LLC filing fee” and “Articles of Organization fee” are one and the same and can be used interchangeably. This is the document that, upon approval by the North Carolina Secretary of State LLC, officially creates your business entity.
Regardless of the filing method that you opt for, you will need to download and print the documents yourself in order to file them. To file by mail, you will sign and date the documents and mail them to the state along with a check or a money order. If you file online, you will scan and upload the documents to the state website and pay using a credit or debit card.
If you are filing for your LLC in October, November, or December and don’t intend to open the date of approval, you can forward-date your filing to the first of January the following year. That way, you will not need to file any paperwork or tax returns for a business that isn’t even operating yet.
If you have more than three members within your LLC and would like to list these names on your Articles of Organization, you will need to include a state-approved attachment with your filing. You don’t have to list all LLC members on the Articles of Organization. You can have any additional persons besides the organizer instead sign the Operating Agreement.
4. Create an LLC Operating Agreement
An Operating Agreement sets forth the terms under which the business will be run both financially and operationally. Unlike your Coversheet and your Articles of Organization paperwork, an North Carolina LLCs do not need to file an Operating Agreement with the state. It is kept with your business records as an “internal document.”
The purpose of an Operating Agreement is to put in writing who the members of the business are and what percentage of the business they own. The Operating Agreement also defines how the business is managed, how finances are handled, who has access to the business bank account, and the method of distribution of profits and losses among members of the North Carolina LLC.
Who Needs an Operating Agreement?
Regardless of whether your business is owned by a single person, family members, or multiple non-related individuals, it is recommended that you create an Operating Agreement for your North Carolina LLC.
Additionally, it is recommended that you have an attorney go over your Operating Agreement with you to ensure that you covered everything. You might need to provide a copy of the Operating Agreement to lenders, title companies, accounting/tax professionals, lawyers, or potential investors or partners.
An Operating Agreement should be flexible and able to compensate for changes within the organization, so keep this in mind when you’re creating your document. If you ever update your document, be sure to get new signatures from each member of the North Carolina LLC.
North Carolina LLCs can really benefit from having an Operating Agreement for their business. Contact the team at LLC Formations if you need help creating a personalized document for your North Carolina business.
5. Obtain an Employer Identification Number (EIN)
North Carolina LLCs need an EIN in order to conduct business within the state of North Carolina. The employer identification number is to your North Carolina LLC what a social security number is to a person. It identifies your LLC from all the other LLCs in the country and allows to IRS to process your taxes and other important documents. Having an EIN allows you to:
1. Open a separate business bank account under the name of your business
2. Apply for certain business licenses and permits in North Carolina
3. Handle employee payroll
4. Obtain business lines of credit
5. Obtain business loans
6. File LLC Taxes: federal tax, state tax, and local tax
Other Terms for an EIN
Even though it is called an employer identification number, it does not necessarily mean that you have employees. An EIN is a type of tax identification number (TIN) that identifies your business to the IRS for North Carolina LLC filings. Similar terms for an EIN include:
- EIN number
- Employer ID number
- Federal employer ID number
- Federal employer identification number
- Federal tax number
- Federal tax ID number
- Federal tax identification number
Application for an EIN in the state of North Carolina is free as the IRS does not charge anything for the application. A social security number (SSN) or an individual taxpayer identification number (ITIN) is required to apply for an EIN.
If you don’t have either of these, you will need to file using a different form. https://www.irs-ein-tax-id.com/learn/faq/get-ein-without-ssn/
What is an EIN Responsible Party?
The EIN responsible party is the individual who goes on file with the IRS when you apply for your North Carolina LLC. All correspondence related to your EIN will be sent to this person. The EIN responsible party can be yourself or another member of your business. As of 2018, whole companies are no longer allowed to be the responsible party for an EIN in North Carolina.
Use the EIN to Open a Business Bank Account
You’ll need to have your EIN in order to open a business bank account for your North Carolina LLC. A bank account is important for keeping your business organized when it comes time for taxes, but it’s also important for if you ever want to pay employees on payroll.
Additionally, in order to utilize the asset protected offered by the LLC structure, you’ll want to keep your personal finances separate from your business finances as soon as you form an LLC.
6. File an Annual Report
Each year, you are required to file a North Carolina LLC annual report with the state. Annual reports are an opportunity to update the contact information for your North Carolina LLC. At this time, you also pay the annual filing fee, which is $200 in the state of North Carolina.
When is the Annual Report Due?
Your LLC must meet both of these requirements by April 15th of the year following the formation of your LLC, and then every year after that. You will receive reminders from the state several weeks in advance. Failure to file your annual report will result in dissolution of your LLC. If you fail to send your annual report by June 14th, you may receive the notice of pending dissolution.
You can file online or by mail. If you file by mail, include a check or money order for the proper amount in an enclosed envelope. The address you will be sending the annual report to is:
Secretary of State
PO Box 29525
Raleigh, NC 27626-0525
Be sure to file your annual report before the deadline. If you miss the deadline for your annual report, you could be responsible for additional state fees, or worse, your North Carolina LLC can be shut down. To keep your Certificate of Good Standing, be sure to mark down the date in your calendar.
7. File Taxes for Your North Carolina LLC
Depending on the type of business you are opening, you will probably need to register your North Carolina LLC with the North Carolina Department of Revenue. You will be required to file annual state income tax as well as any additional tax documents that will be dependent on your business structure and whether or not you have any employees.
You can check with your local government to see which taxes may be relevant for your business, or you can check with an accountant who is knowledgeable about taxes for a North Carolina business.
Consult Accountants about Your LLC Taxes
Proper calculation of your tax documents can be difficult to accomplish on your own. To avoid making potentially serious mistakes, experts recommend that you hire a tax professional to ensure that you are in compliance with the state since your LLC must file taxes annually.
Your tax professional can also serve as a business advisor if you have business-related questions. Choose a tax professional who you’re comfortable with and who is a good fit for your LLC. Talk with a few different accountants before making your final decision.
How Can LLC Formations Help You?
It takes a lot of time and energy to start up a new business. Aside from coming up with the idea and figuring out how to execute it, there is a ton of paperwork that you’re required to fill out in order to get your North Carolina business started.
It’s best to work with a professional team who can walk you through each step of the process. Contact LLC Formations so we can handle all of the paperwork while you focus on growing your business.
The next guide is our North Dakota LLC step by step guide.