NC LLC: Everything You Need to Know
When it comes to an NC LLC, you should first be aware of the North Carolina LLC Act, which establishes contract freedom, allowing members to tailor capital contributions to losses and profits.3 min read
2. Operating Agreements
3. Registered Agents
4. Membership Rights
5. Retaining Control
6. Creating an LLC
7. Employee Identification Number
8. Foreign LLCs
When it comes to an NC LLC, you should first be aware of the North Carolina LLC Act, which establishes contract freedom, allowing members to tailor capital contributions to losses and profits. The Act allows members to create different tiers of membership according to his or her stake in the company. The tier structures groups various members together who share the same duties, rights or powers. Further, the Act allows shares and profits to be divided accordingly as prescribed by the company’s operating agreement.
An operation agreement outlines the governing structure of your organization. You may include the following in your agreement:
• Rights and duties of each member
• Compensation system
• Managerial Structure
• Roles of each employee within the business
Operating agreements are not mandatory in North Carolina, but it is a good idea to have one in place to ensure all members of the LLC are aware of the rules and guidelines. It should be made available for all members and participants to see in the open.
A registered agent should also retain a copy of your operating agreement. A registered agent is an appointed representative of your company. Registered agents can be you, someone within the company or another organization. Registered agents will accept official documents for your LLC and will relay all vital documents to your LLC.
This type of structure gives each member greater contractual leeway to adjust income streams and loss risks into their overall management strategy. With that, the Act does not require members to file their names.
Further, the Act also allows LLCs to exist permanently while allowing members to protect their share of the LLC. In other words, your entity will exist in perpetuity unless you or another representative call for its dissolution. Your LLC can also outlive yourself or anyone within the company.
According to data, North Carolina currently has over 128,000 existing LLCs. It is the tenth largest state according to gross domestic product and population. The U.S. Chamber of Commerce states that North Carolina ranks as the seventh most viable tax haven for established firms, and the thirteenth best for start-up companies.
State law allows members to protect their interests in the company, however, members also cannot assign membership interests. An article of organization may not prohibit assignment, but it still will not break up the LLC or will allow an assignee to possess the same rights as the former member. Rather, an assignee can only get certain loss and profit distributions. However, all members must consent to the transfer of shares before the process is official. On the other hand, the articles of organization can also entirely forbid the transfer of membership interests.
Further, a member can cease his or her control if that member files for bankruptcy or assigns interests to satisfy creditor demands. This is known as “events of withdrawal,” when a creditor gains rights to membership but is not an official member.
Creating an LLC
Any individual within an LLC can file what are called articles of organization. You can file the articles of organization with the Secretary of State of North Carolina, or anyone in your organization. Under state law, a person can also be any legal entity or business. In essence, any person or entity representing your company can be an “organizer” and file with the Secretary of State office.
Employee Identification Number
This number will be one the IRS uses to label your business for tax purposes. You need an EIN for such purposes as:
• Filing state and federal taxes
• Opening a business checking account
• Hiring employees
You can get an EIN for free via the IRS website.
One notable part of North Carolina law is its punishment for not getting a certificate of authority in regards to an LLC. This is also known as “qualifying” foreign LLCs to conduct business in North Carolina.
A foreign LLC is one that was created out of state and wishes to do business in North Carolina. These types LLCs have fewer rights than North Carolina LLCs. For instance, a foreign LLC may defend itself in court, but a foreign organization cannot be a plaintiff in any case unless it is qualified.
If you fail to obtain a certificate of authority, your LLC could face civil penalties amounting to $10.00 each day, or $1,000 fine annually for each year the foreign LLC conducts business in the state without entering qualified status.
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