How to Start an LLC in NC: Everything You Need to Know
How to start an LLC in NC is a straightforward process if you do a little research ahead of time. 9 min read
How to Start an LLC in NC
How to start an LLC in NC is a straightforward process if you do a little research ahead of time. A Limited Liability Company is a form of corporate structure where the company’s members cannot be held responsible for any of the company’s liabilities or debts. Here is everything you need to know when starting a LLC in North Carolina.
Name Your LLC
There are several things to consider when choosing a name for your business. There are some words that must be included and then there are some that are restricted. The name of the entity must contain one of the following words: Limited Liability Company, LLC, or L.L.C. Some of the restricted words (university, bank, attorney, etc.) require an individual licensed in those particular sectors like a lawyer or doctor to be a member of the LLC. Restricted words are discouraged because they are too easily confused with state or federal agencies.
Once you have come up with a possible name, you must check to see if that name is available. If no one else is using that name, you can then go in and reserve it so that when you are ready to process the paperwork, the name is still available. To check name availability, go to North Carolina’s database of business names and do an entity search. To reserve the name, fill out a reservation application with the Secretary of State and include a $10 fee for filing. The name of the entity can be reserved for anywhere up to 10 years. To reserve a name for up to 120 days, you must file a reservation application with North Carolina’s Secretary of State, submit by mail, and include a $30 filing fee. If the name is not distinguishable, a foreign LLC must acquire a fictitious name. The adoption of the fictitious name must be included along with the application. It’s also wise to touch base with the Trademark Registration Office to see if your chosen name has been trademarked.
Another thing to consider when choosing a name is a potential email address. You want to make sure the email address sounds professional. Emails may be acquired via Google apps.
Ultimately, when naming your LLC, you must file the necessary forms with the SOS, also known as the Secretary of State, and pay any required fees. It’s crucial to meet all requirements when naming and forming your LLC.
Keep in mind that the state can reject the desired name if it feels that the type of business is being misrepresented. The State of North Carolina may also require businesses to prove that they can provide certain services.
Choose a Registered Agent
Another important thing to do is to choose a registered agent. This person or business agrees the handling of legal documents on behalf of the LLC. This agent must reside in North Carolina or be a corporation that is authorized to do business in the state. The registered agent may be yourself or any other individual within the company. Agents must be available Monday-Friday from 9 a.m. to 5 p.m.
File the Articles Of Organization
Part of the registration process includes filing Articles of Organization. These articles must include the following information:
- The LLC Name
- Address Of Principal Office
- Organizer’s Name And Address
- Registered Agent’s Name And Address
- Management Type - Manager Managed Or Member Managed
- Business Email
- Effective Date If Different From Filing Date
- Dated Signature
- Applicant Name And Title
- Member’s Names, Addresses, And Signatures
Along with the filing, you will need to include the Articles of Organization fee. After around 10 to 15 days, you should receive a certified copy from the Department of the Secretary of State.
If you decide to reserve your business name, be sure to do that prior to filing the Articles of Organization since the articles basically layout all the basic information of the business to the public such as business name, address, registered agent’s name and address, operational hours, nature of business, and names and addresses of signatories included in the articles.
Create an Operating Agreement
Operating agreements are legal documents that outline pretty much everything about the business such as the ownership and all of the operating procedures. While highly recommended, this agreement is not required in the State of North Carolina. If you do decide to create an operating agreement, you may want to consider having an attorney draft it up, especially if there are multiple members.
Obtain an EIN
An EIN should be acquired after the company is formed. EIN or Employer Identification Number is a Federal Tax Identification Number that identifies a business entity. It is basically just like a social security number that represents the company. The EIN is required when filing federal and state taxes and when opening a bank account for the business. This number is acquired from the IRS at no charge by applying online or by submitting the corresponding form via mail.
Separate Personal Assets From The LLC
A well-organized accounting system will prevent a lot of headaches down the road. This will simplify tracking business finances such as expenses, bills and income which as a result will make filing annual taxes a much smoother process. One way to simplify the accounting process is to purchase the right software that syncs with the business' bank account, cross references transactions with invoices and purchase orders and bills.
Register Your LLC for North Carolina State Tax
When you register your LLC with the State of North Carolina there are several taxes that you will be responsible for. If you have employees, you need to register for unemployment insurance tax and withholding on state income tax. You will report to North Carolina’s Division of Employment Security for the Unemployment Insurance Tax and North Carolina’s Department of Revenue for the Employee Withholding Tax. If the business entails the sale of services or taxable goods, you will be required to register with North Carolina’s Sales Tax. Sales and Use Tax must be registered through North Carolina’s Department of Revenue. Depending on the nature of the business, other state taxes may apply as well.
Another responsibility when registering your LLC is to submit your Articles of Organization to the Secretary of State. A fee of $125 is due upon submission and if expedited, the fee is $200 for same day processing and $100 for one day processing. Fees are subject to change. The processing time usually takes from 3 to 5 days but can be expedited to the same day or a 24 hour turnaround for an additional fee.
When it comes to classifications of federal income tax, LLCs are handled just like limited liability partnerships, single-member LLCs or corporations. CD-405/CD-401S is a corporate income tax form that must be completed and filed. Your responsibilities when it comes to federal tax may vary depending on the taxation type you choose for your business.
Again, to conduct business legally in North Carolina, your business must be registered with North Carolina’s Department of Revenue. This can be done on their website or submitted by mail. If you have employees and your business sells particular products, additional state taxes may need to be paid in addition to the income tax.
Effective accounting can simplify the whole financial process. Quality accounting software will track every financial aspect of your business including expenses, bills and income. It sure makes tax return filing a lot easier.
Obtain Business Licenses & Permits
In order to operate your business, you must follow government regulations on the local, state, and federal level. The SBA or U.S. Small Business Administration is your go-to resource for permits and licenses on the federal level, check your regional Chamber of Commerce for permits and licenses on the local level, and the North Carolina Business Development site for permits and licenses on the state level. There are fees for certain licenses and permits.
Just to reiterate, when starting an LLC in North Carolina, you must comply with all tax regulations and acquire all necessary business licenses and permits.
Insurance provides assurance for employers and employees both. Most businesses should provide Workers Comp if they hire employees, however, the requirements vary by state. General Liability Insurance is another form of insurance that is highly recommended but again the requirements for this coverage vary by state as well.
Employee Hiring Compliance
Every business that hires employees is expected to follow certain regulations. Here are some of those regulations that businesses should follow:
- ensure that all employees meet the requirements for holding jobs in the United States
- notify the state of new hires
- provide workers comp insurance to employees
- withhold income taxes
- print and place compliance posters in an obvious location
- ensure employees are paid in designated increments required by State
How to Maintain Your LLC
If you want to make sure your LLC remains in good standing there are certain things that should be carried out that may in the end, even avoid penalties. To maintain your LLC in North Carolina, you must make periodic filings with the state. Annual reports must be filed with the Secretary of State. Many businesses are suspended or dissolved for failure to file these annual reports. Because of this, many LLCs lose their limited liability protection. This is where registered agents come in handy since their responsibilities are to keep track of upcoming deadlines for filing and submitting reports on the company’s behalf. While North Carolina doesn’t charge late fees for failing to file an annual report, they will dissolve your business within 60 days of failing to file. LLCs are known as ‘pass through’ entities and don’t directly pay income tax. However, there are states that require LLCs to submit their annual income in a report. Most multi-member LLCs in North Carolina are required to report their income on an annual basis.
Obtain a Certificate of Good Standing
A Certificate of Good Standing is a good reflection on your business. It verifies that your LLC is following all legal guidelines and that it is being properly run. In North Carolina, it’s actually known as a Certificate of Existence. This certificate is required at times when applying for loans from lenders, forming a foreign LLC, or acquiring or renewing certain business permits or licenses. To obtain a North Carolina Certificate of Existence, go online to the Secretary of State’s website to create an account.
How to Dissolve a North Carolina LLC
Just like LLCs need to be formed, they also need to be dissolved officially when you don’t want to run the business any longer. In order to dissolve your business, file Articles of Dissolution and close all of your business tax accounts.
Foreign LLC in North Carolina
If you already have an LLC and want to do business in the State of North Carolina, you will need to create a Foreign LLC. This way you can operate your own business in various regions. If you initially form your LLC in one state, you can then take the business and file it as a foreign LLC in other jurisdictions or states. To conduct business in the State of North Carolina, if organized originally outside the state, you must register with North Carolina’s Secretary Of State. In addition, Foreign LLCS must designate a registered agent who is physically located within North Carolina. To register as a Foreign LLC, apply for a Certificate of Authority For Limited Liability Company, send it via mail, and include a filing fee of $250. The application must also include a Certificate Of Legal Existence or a Certificate Of Good Standing from the LLC’s home state with a date of no more than 6 months old.
Starting an LLC in North Carolina
Before initiating the formation of an LLC, be sure to know what it is, what it stands for, and whether it’s a suitable structure for your business. The main purpose of an LLC is that it’s a business structure designed to provide tax benefits as well as personal liability protection. If it is an appropriate choice, then here are some steps to follow in starting an LLC.
- Complete a Name Reservation Application. Information needed for this is business name, type of entity, name and address of applicant, state it’s being formed in, and an authorized entity name with title and signature. Be sure the name is appropriate and helpful in building your business brand.
- If your LLC has more than one member, it is highly recommended that you have a Limited Liability Company Operating Agreement. This agreement in the State of North Carolina is recognized as a governing and legal document.
- Become familiar with all legal obligations, in particular, annual reports.
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