What Constitutes Doing Business in North Carolina: Everything You Need to Know
What constitutes doing business in North Carolina involves operating a commercial enterprise to make money.3 min read
What constitutes doing business in North Carolina involves operating a commercial enterprise to make money. If you are considering operating a business in North Carolina, what it essentially comes down to is your responsibility to collect state sales tax on sales to the state’s residents.
Regardless of whether or not you have registered your business in another state, you will be required to have a physical location in the state. This can be any of the following: a warehouse, a store, an office, or even only a sales representative in the state.
However, if you did not set your business up as a limited liability company (LLC), you will have to register as a foreign company in the state with the Secretary of State of North Carolina.
Operating as a Foreign Corporation in North Carolina
Being recognized as a foreign corporation in North Carolina does not mean that you’ve set up your business outside of the U.S. What it does mean is that you registered your business in another US state. It’s a very common term used by states throughout the country because, as opposed to a domestic corporation, which is the term used for a business that operates in the state in which it was formed.
US laws allow businesses to organize in any state they desire regardless of where they do business, in order to take advantage of tax laws, simple filing requirements, or a reputation of being “business friendly.” For instance, popular states for forming LLCs are Delaware, Nevada, Wyoming, South Dakota, Florida, and Alaska.
Therefore, no matter where you have incorporated or formed your business, if you intend to conduct business in another state, you will be considered a foreign corporation in that state and, in most cases, need to register as such with that state.
To determine if you will need to file as a foreign corporation in North Carolina, consider these factors:
- Did you form your LLC in North Carolina? If the answer is no, then you are a foreign corporation. Do you need to register as such? That depends.
- Does your business have a physical location in North Carolina? If yes, you should register as a foreign corporation.
- Do you make money in North Carolina from the sales of merchandise or by providing services to citizens of the state? If yes, you should register as a foreign corporation.
- Do you pay state payroll taxes because your business has employees in North Carolina? If yes, you should register as a foreign corporation.
- Did you apply for a business license in North Carolina? If yes, you should register as a foreign corporation.
When You’re Not a Foreign Corporation in North Carolina
If you are an LLC that was not formed in North Carolina, the state’s LLC Act offers exemptions to the need to register as a foreign corporation. These include, but are not limited to, whether your LLC is:
- Defending or settling a lawsuit in the state.
- Conducting internal business, such as holding an annual meeting of the members.
- Has a bank account in North Carolina.
- Has another individual or business handling the business’ securities.
- Entering into contracts for orders that require approval outside the state.
- Collecting debts owed by a business or individual doing business in the state.
Registering as a Foreign Corporation in North Carolina
In order to establish your LLC as a foreign corporation in North Carolina, complete an Application for Certificate of Authority for Limited Liability Company with the North Carolina Secretary of State. You will find that the information you’re asked to provide is very similar to that which you needed initially form your LLC. This information includes:
- The name of your LLC (You may need a new name if the existing one is already in use in the state).
- State of formation.
- Address of principal office.
- Name and address of your registered agent in North Carolina (address cannot be a PO box).
- Names and addresses for members or managers (if manager-managed) of your LLC.
- Certificate of Existence (or equivalent) from the Secretary of State of your home state.
In 2017, Forbes Magazine recognized North Carolina as one of the best states for business in the US. If you’re thinking of conducting business in the state, take the required steps to either organize your business there or register as a foreign corporation.
To learn more about what constitutes doing business in North Carolina, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.