A limited liability company, or LLC, is a business structure that offers its members more flexibility and protection than a traditional corporation. In North Carolina, you can form an LLC as a sole proprietor or as a partnership.
Are you feeling overwhelmed or unsure of the next step to take? Allow our step-by-step guide and the ZenBusiness team help you start and grow your LLC today.
The 5 steps to form an LLC in North Carolina:
To start an LLC in North Carolina, you’ll need to register some paperwork with the Secretary of State’s office. You’ll also have to check with local city and county offices to cover all the requirements of starting a new business in your area. Here are the five basic steps to get you going on the road to business success.
Step 1: Name Your North Carolina LLC
The first step in forming your North Carolina LLC is to create a name for your new venture. There are legal requirements for business names that you must follow in North Carolina. For example, the name MUST NOT contain language that:
- States or implies the business is for any unlawful purpose
- States or implies the business operates in a way not allowed by its formation documents
- Is offensive to accepted standards of decency
You also can’t use the following words unless you prove that you’re legally qualified to perform the implied service:
- Certified Public Accountant or CPA
- Prescription Drug
If you intend to operate as a wholesale business, you can use “wholesale” in your LLC’s name. You’ll have to submit a letter with your Articles of Organization to explain how you’ll comply with North Carolina wholesale business laws. Depending on the type of wholesale business, you may need to apply for a local or state license.
“Bank,” “banker,” “banking,” “cooperative,” “co-op,” “mutual,” and “trust” are off-limits, too. State law forbids banking institutions from forming LLCs. If there are prohibited words you would like to use in your name, you can receive permission to do so by applying to the proper legal authority. If the state approves your request, then you can reserve the name to use at a later date.
In addition to the above restrictions, North Carolina law states that the name MUST contain one of the following phrases or abbreviations:
- Ltd. Liability Co.
- Limited Liability Co.
- Ltd. Liability Company
- Limited Liability Company
The name must be different from any other business on the state’s business registry. For example, a successful and well-established Outer Banks seafood business is called “Sal’s Shrimp Shack.” You can’t name your new shop “Sal’s Shrimp Shak” or “Sal’s Shrimp Shack & More.” The original company could sue you for infringing on their established name and business.
To find out if the name you want to use is available, you’ll need to conduct some research or use ZenBusiness to help you perform a search. The Secretary of State’s office suggests the following:
- Do an extensive online name search.
- Check the register of deeds office in your county and nearby counties.
- Browse business directories, city directories, and chamber of commerce lists.
- Check with the United States Patent and Trademark Office.
- Search the North Carolina Trademark Registration website.
To reserve a business entity name for use in North Carolina, you’ll need to fill out and submit an application. A $30 fee is due at the time of filing. Only you will have the right to use that name for 120 days. If you fail to form your LLC within this time frame, you’ll have to file another name reservation application and pay the fee again.
After registering your LLC with the state, you’ll need to file a DBA (“Doing Business As”) name if you plan to launch new brands or product lines under a different business name. You register DBA names to do business under a name other than the legal name of your LLC.
Using a DBA name means you won’t have to form a new business or pay additional taxes each time you want to operate under a different name.
A DBA name is also known as an assumed business name in North Carolina. All assumed business names are filed at the Register of Deeds’ offices in counties throughout the state. A statewide online database allows you to do an assumed business name search to see if the name you want to use is available.
File your Assumed Business Name Certificate at the office of your local county Register of Deeds. Even if you do business in multiple counties, you only have to file one application. Just designate which counties you plan to operate within on the form. It costs $26 to file. You can also amend or withdraw your Assumed Business Name Certificate at any time.
After you’ve secured your LLC name and/or DBA name, it’s a good time to decide on a domain name for your company. A domain name will represent your LLC online.
A domain name needs to be unique and correspond to your company’s name. You can use a domain name for a website and/or email address. Brainstorm a few ideas, and then do a domain name search to see what’s available.
Once you’ve chosen and registered the name of your LLC, you may have a logo created for your goods or to advertise your services. It’s a smart move to register your LLC’s trademark and/or service mark with the state. This prevents anyone else from using or profiting from your intellectual property.
A trademark can be a word, phrase, symbol, design, or any combination of such. It’s used to identify your goods as yours and to distinguish your products from others. A service mark is similar but is used for advertising services instead of goods. It also sets your services apart from competitors.
The Trademarks Division of the Office of the North Carolina Secretary of State handles in-state registrations. They thoroughly examine marks and apply all applicable state and federal laws and examination procedures. If they find the mark to be eligible, they will guide you through the registration process that offers substantial commercial and legal advantages.
State law prohibits registering a new mark that is the same or confusingly similar to an existing mark or trade name. North Carolina requires you to perform searches within three databases to determine if the trademark or service mark is available. You’ll need to search the following online:
- Trademark/Service Mark database: Search all marks that are registered in North Carolina and currently active. Look for words or design elements that might be similar to those you want to register.
- Business Registration Division database: Search all of the trade names of businesses actively operating in the state. Any name used to identify a person’s business is considered a trading name. This database also includes DBA names, fictitious names, and assumed names.
- U.S. Patent and Trademark Office Trademark Electronic Search System (TESS): Search the TESS database to see if your intended mark is already registered at the federal level. Companies that do business in multiple states may have skipped state-level registration in favor of federal registration.
The next step is to get and submit three specimens showing the use of the trademark or service mark to the Trademarks Division. The specimens can be three of the same items or different items, but either way, the mark has to be identical on all three.
Specimens must also be complete, original, and current, meaning no more than six months old. The mark has to be currently in use on your LLC’s goods or in the advertising or sale of your services. Be sure to review all specimen requirements before sending in your samples.
North Carolina doesn’t require you to register your trademark or service mark. However, the state recommends you do so because ownership of the mark provides:
- More easily recognizable goods or services.
- Exclusive rights to use the mark in North Carolina.
- The ability to file a lawsuit for trademark infringement.
- Notification of mark ownership to the public and competitors.
To register a mark, complete a trademark registration application and have it notarized. Mail the form, a $75 non-refundable filing fee, and three specimens to the North Carolina Department of the Secretary of State, P.O. Box 29622, Raleigh, NC 27626-0622.
This registration is only available through the mail at this time. You’ll need to renew your trademark or service mark registration every 10 years. Complete the above application again and mail a $35 renewal fee.
The Trademarks Division has a system of trademark and service mark registration protection on par with the federal system. However, the state and federal trademark offices do not correspond with one another. If you plan to do business in other states, you’ll need to register with the U.S. Patent and Trademark Office to protect your mark.
Step 2: Appoint a Registered Agent in North Carolina
By law, in North Carolina, you must appoint and keep a registered agent for your business. A registered agent acts as direct and official contact between the state and your LLC. You must have an official address for your North Carolina registered agent to receive mail for your LLC. This address is where the state will send:
- Tax notices
- Important legal documents
- Official government correspondence
- Service of process (a lawsuit)
You may think that you want to hold this position yourself, but it can end up costing a lot in lost time and revenue. If you’re busy doing the job of a registered agent, you aren’t free to focus on running and growing your business. It can be overwhelming to manage all the legal paperwork and a company at the same time.
We offer registered agent services at ZenBusiness to make your life easier. Appoint an experienced registered agent today so that we can help you:
- File your annual report
- Stay organized and meet deadlines
- Avoid legal penalties and fines
- Maintain a permanent office address
In North Carolina, you can appoint a registered agent when you file your Articles of Organization with the state. You’ll need the following information to do so:
- Name of the registered agent
- The street address and county of the registered agent office
- Mailing address, if different from street address
The agent’s address can’t be a P.O. box or something similar. Your registered agent’s address must be a physical address in North Carolina.
Step 3: File North Carolina Articles of Organization
To form an LLC in North Carolina, you must file the Articles of Organization with the Secretary of State’s office. The Business Registration Division will then review your application for approval or denial. In addition to your registered agent’s details, you’ll need the following information for this legal document:
- Name of the LLC
- Name and address of each person executing the Articles of Organization
- Address and phone number for the principal office (if you have one at the time of filing)
All those listed as executing the Articles of Organization are to be marked as a member, an organizer, or both. They must all sign and date the document, too. You may also submit the following information with your Articles of Organization:
- Purpose of the LLC
- Name of the LLC’s company officials
- Provisions for managing and regulating the LCC
It’s recommended that you include a cover letter with your documents. It’s a simple step that helps the filing process go much smoother. The cover letter includes your contact information and your preferred processing method: regular, same-day, or 24-hour. You’ll note which return method you prefer, either via mail, email, or in person.
There are three ways to file your cover letter and Articles of Organization with the state. These are:
- Online via a PDF upload portal
- Mail to Business Registration Division, P.O. Box 29622, Raleigh, NC 27626-0622
- In-person at 2 South Salisbury Street, Raleigh, NC 27601
Processing times vary, but most filings take 10 to 12 business days at this time. The Business Registration Division calculates processing time based on when they receive a document to when they return it to the filer.
Step 4: Create an Operating Agreement
North Carolina doesn’t require you to submit an Operating Agreement with your Articles of Organization. However, creating an LLC Operating Agreement is one of the most important things you’ll do when forming your LLC. This document sets the rules for how your company is going to operate so that everyone involved knows what to expect and how things will work.
ZenBusiness provides an LLC Operating Agreement template you can customize to your needs. An excellent Operating Agreement addresses these questions and more:
- Who are the LLC owners?
- How much of the LLC does each own?
- Who manages the LLC?
- Who gets to vote on important decisions?
- How are the profits divided?
- What happens when an LLC member leaves?
- What circumstances could lead to the LLC’s dissolution?
- What happens when the LLC is dissolved?
- Can additional members be admitted?
- What are the LLC’s terms and conditions?
There are many benefits to creating an Operating Agreement. For example:
- More protection: The formality of an Operating Agreement legitimizes your LLC, especially in the eyes of the court. It helps others to see your LLC as a real business that is entirely separate from your personal affairs. This separation adds another layer of legal protection between your business and personal assets.
- Less fighting: Friends and family members often go into business together when forming an LLC. An Operating Agreement keeps everyone on the same page and can stop fights before they begin since everyone agreed to the rules beforehand.
- All your way: If you don’t have an Operating Agreement and a problem comes up, you’ll have to abide by North Carolina state rules for LLCs. Address issues and how to best deal with them in your agreement. This way, problems can be resolved your way and not the state’s.
- Ownership details: The agreement can define what percentage each member of the company owns and how much they contributed in capital. It can also include how expenses and profits should be shared.
- Clear dissolution rules: Include specific details about what events could lead to the dissolution of your LLC. Lay out the terms of the dissolution and any further information about succession, too.
- Funding: Having an Operating Agreement can help you secure lines of credit or business loans from a bank.
Your Operating Agreement helps you to conduct business in many ways. Even though the state doesn’t require the agreement, others will request it as you follow other steps to forming your LLC. You may need to show it to:
- Banks when opening a business bank account
- Potential investors or business partners
- Financial and legal professionals
- Title companies when purchasing real estate
Easily create an Operating Agreement online with the ZenBusiness Operating Agreement template. It will include information such as:
- Details of the LLC from the Articles of Organization
- Record of capital contributions of members
- Distribution of profits and losses among members
- Ownership of the LLC in percentages
- Appointment of those to maintain the books and records
- Tax accounting and preparation
- Company bank account details
- Management structure and voting rules and rights
- Handling of membership changes, disagreements, and disputes
- Dissolution and liquidation processes
Our template covers everything you need to operate an LLC, so rest assured, you won’t miss a single important detail. We’re always here to help should you need any guidance.
Step 5: Apply for an EIN
To identify a business, the federal government uses an Employer Identification Number (EIN). Each business has a unique EIN assigned to it. It’s also known as a FEIN or Federal Employer Identification Number. The Internal Revenue Service (IRS) uses your EIN for tax purposes.
You’ll use your EIN to open a business bank account, hire employees, set up retirement plans, apply for financing, file taxes, and stay in good standing overall. It also helps keep your personal and business transactions separate, preserving the limited liability of your company.
It’s free to apply online for an EIN when you meet certain criteria. The IRS verifies your information during an online session, and if all is well, it immediately issues an EIN for your LLC. To apply, you’ll need to determine your eligibility, understand the application, and submit it. The EIN confirmation notice can then be downloaded, saved, and printed for your records.
You can also apply for an EIN by mailing or faxing a completed Form SS-4 to the IRS. Faxing has a turnaround time of four days, while the mail takes four weeks.
It’s easy to apply for an EIN when you understand tax classification systems and how LLCs in North Carolina should be taxed. But like most small business owners, you probably have some uncertainties. Let ZenBusiness take the guesswork out of the application process and help you set up your LLC.
While on the topic of taxation, another item to consider is state taxes. To pay taxes for your business in North Carolina, you must register with the state’s Department of Revenue and receive a tax account ID number. There is no fee to submit your business registration application online. You can also file Form NC-BR for free in person or by mail.
The Department of Revenue’s business registration checklist can help you prepare to file for a tax account ID number. You’ll need to gather information such as:
- Your federal EIN
- Your business name, address, and phone number
- Name, title, address, and Social Security number of the partner or responsible person
Details about your business
After you submit your online application, you’ll receive a confirmation page. A notice with your official tax account ID number will be mailed to you within five to 10 business days, depending on system processing times. You can file and pay taxes with the North Carolina Department of Revenue once your ID number has been issued.
How much does it cost to start an LLC in North Carolina?
Whether you submit your Articles of Organization online, in person, or by mail, the state of North Carolina charges a $125 fee. If you need your application processed faster than usual, the state requires you to request it in your cover letter at the time of submission. Expedited filing fees are $100 for a 24-hour filing and $200 for same-day filing (same-day filings must be submitted by noon).
There’s also a $30 fee to reserve a business entity name for a nonrenewable period of 120 days. Altogether, state fees to start an LLC in North Carolina range from $155 to $230. All checks must be payable to the North Carolina Secretary of State.
What are the benefits of an LLC in North Carolina?
The benefits of forming an LLC include:
- Flexible ownership and management structures
- Personal asset protection from debts and lawsuits
- Exemption from double taxation
- Less regulation and more flexibility than corporations
Doing business in North Carolina comes with its own set of benefits. For example:
- Educated workforce: With over 50 colleges and universities and almost 60 community colleges, North Carolina workers are well-educated, skilled, and ready to work. The state’s community colleges offer some of the best advanced vocational and technical programs in the country. More than 22,500 students earn science, technology, engineering, and mathematics degrees statewide every year.As a right-to-work state, North Carolina doesn’t require union membership for workers to gain employment. This law and a competitive labor market promote business-friendly wages. There’s also a pool of more than 460,000 manufacturing employees, which is more than any other state in the region.North Carolina provides custom training and recruiting services for in-state businesses, as well. Its community college system partnered with the North Carolina Department of Commerce to develop this service called NCWorks. New and expanding businesses work together with NCWorks to develop free and customized job training and recruiting programs. Students who graduate from these programs go directly into the workforce to help fill specific business needs.Another great quality of North Carolina’s workforce is the number of military veterans available to work for you. More than 80% of discharged veterans are 30 years old or younger and have high-demand occupational skills in engineering, information technology, health care, communications, and research.
- Pro-business climate: North Carolina has consistently been recognized for its pro-business environment in recent years. Low taxes, low business costs, and a favorable legal and regulatory environment all play a part.At 2.5%, North Carolina has the lowest corporate income tax rate in the country. The state is always working to reduce and streamline business taxes to promote economic growth and work opportunities.Compared to other major metropolitan areas, North Carolina’s cost of living is about 11% below the national average. Building and expanding businesses also cost less here. With a talented workforce at hand and one of the best legal climates in the country, North Carolina is a fantastic place to do business.
- Prime location and infrastructure: North Carolina enjoys an excellent location on the East Coast of the U.S. Almost half of the country’s population is within a day’s drive of the Tar Heel State. The state’s supply chain is enhanced by four international airports, two deep-water seaports, and a reliable railroad system.North Carolina also has an exceptional state-owned, 90,000-mile highway system. The central East Coast location provides access to three major interstates. I-95 is the north-to-south coastal highway linking states from Maine to Florida. I-85 starts in North Carolina and runs through the manufacturing heart of the southeast. And finally, I-40 takes drivers from the East Coast to the West Coast, all the way to California.
- High quality of life: North Carolina has consistently ranked low in the cost of living and high in residents’ personal satisfaction. There are many things that contribute to the high quality of life that most North Carolinians experience.Residents enjoy a moderate climate and a varied landscape. Winter is mild, while spring and fall are long and pleasant. Summers are warm to hot, perfect for enjoying the state’s lakes and oceanfront. North Carolina has everything from the beautiful mountains in the west to miles of sandy beaches in the east. You’ll also find plenty of sports, arts, and cultural events throughout the state. Recreational opportunities to enjoy on your day off include museums, theaters, aquariums, wineries, and so much more. The top health care facilities and a comprehensive educational system contribute to the well-being of residents, too.
- Business incentives: North Carolina operates targeted, performance-based incentive programs for those doing business in the state. Its goal is to lessen tax burdens and lower the overall costs to the company. There are over 20 programs for which businesses may qualify.For example, the County Development Tier Designations is a system to encourage economic activity in less-prosperous counties. Program incentives encourage companies to do business in these areas. So, you can do business for less while helping to uplift the local economy and residents’ lives.The Job Development Investment Grant is an incentive program of cash grants for new and expanding businesses. This money can help offset the cost of locating or expanding a business facility in North Carolina. There are also building reuse and building demolition programs to encourage site renovations and expansions.Multiple transportation incentive programs are in place to improve the condition of state infrastructure. They also help move goods and people more easily within the state and to and from North Carolina.Tax exemption programs help to decrease the tax burden on companies doing business in the state. North Carolina offers sales and use tax exemptions for manufacturing companies, data and software centers, and large fulfillment facilities. Exemptions are also extended to research and development activities for software publishers and physical, engineering, and life science companies.Your LLC can qualify for further tax exemptions based on pollution control, abatement equipment, and recycling within your business. And finally, you may qualify for a historic preservation tax credit when you rehab and operate an income-producing historic property.
The Economic Development Partnership of North Carolina is eager for you to do business in North Carolina. Learn more about the many benefits of the LLC business structure to see if it’s the best option for your business.
How is a North Carolina LLC taxed?
There is a wide variety of business taxes that your North Carolina LLC will need to pay, depending on certain factors. These include taxes payable to the North Carolina government, like sales tax and state tax.
You’ll also need to pay federal, self-employment, and possibly payroll tax to the IRS. To file taxes in North Carolina, you’ll need to register your LLC to receive a state tax ID number from the Department of Revenue.
LLCs have a lot of flexibility when it comes to how they are taxed, and tax laws can be tricky to navigate. You’re not alone in facing business tax struggles.
North Carolina LLC FAQs
If this is the first time you’re organizing an LLC in North Carolina, you’re sure to have many questions about the process. Here are the top answers to some of the most frequently asked questions.
- What is the processing time to form my North Carolina LLC?
The processing time for your Articles of Organization is 10 to 12 business days, starting from when the document is received. The Business Registration Division also offers 24-hour and same-day processing for a fee. The office processes LLC reinstatement documents in five business days.
- Do I need to file my Operating Agreement with the state of North Carolina?
North Carolina does not require you to file your Operating Agreement with the state. However, it highly advises you to create one, as it has many benefits and uses within and without your company.
- What tax structure should I choose for my North Carolina LLC?
Most LLC owners have their business taxed the default way, which is as a sole proprietorship (for single-member LLCs) or a partnership (for multi-member LLCs). This method only requires partners to pay taxes on their percentage of the profits on their personal tax returns. The LLC itself is not taxed. Other options include being taxed as a C or S Corporation. Each tax structure has its advantages and disadvantages.rnrnThe right tax structure for your LLC depends on many factors, such as profits and the number of owners. It’s best to talk to a qualified accounting professional to understand all your options and choose the right tax structure for your LLC.
- Does North Carolina allow a Series LLC?
North Carolina does not allow a Series LLC. This business structure has an “umbrella” LLC under which one or more LLCs are organized. It’s a relatively new way to structure an LLC, and not many states allow them at this time.
- How do I reinstate an LLC in North Carolina?
To reinstate an LLC in North Carolina after dissolution, fill out an Application for Reinstatement form and submit it to the Secretary of State’s office. The fee for reinstatement is $100.
- How do I dissolve my LLC in North Carolina?
To dissolve your LLC in North Carolina, you’ll need to fill out an Articles of Dissolution form and submit it to the North Carolina Secretary of State’s office. The filing fee for dissolution is $30.