How to Start an LLC in NC: A 7-Step Guide
Are you an entrepreneur who’s considering starting a new business in North Carolina? While you have many business configurations to choose from, limited liability companies (LLCs) deserve your consideration.
Forming an LLC in NC is relatively simple and inexpensive. Our 7-step guide detailing how to start an LLC in NC will tell you what you need to know.
What Is an LLC?
A limited liability company (LLC) is a type of business entity that provides special benefits to business owners. It significantly limits the “members” liability so they won’t be held personally liable for any of the company’s debts. This business structure protects the “members” personal assets if the business is ever sued. However, members can still lose any money they’ve invested into the business.
Many of your favorite companies are likely LLCs, and they are one of the most popular types of business structures in the U.S. today.
Benefits of LLCs
When deciding how to start an LLC in NC, you need to understand what an LLC is and the many reasons entrepreneurs choose LLCs over other types of business structures.
LLCs are known for being flexible. They provide business owners with control over decisions such as how they’d like to be taxed and how the LLC should be managed. LLCs also have fewer legal formalities compared to other business entities, so they’re a good choice for people who want a more nimble organizational structure for their business.
Tax Flexibility
When creating an LLC in NC, think about how you’d like your business to be taxed. Unlike other business types, such as corporations, LLCs are not subject to “double taxation” (when income tax must be paid twice on the same source of income).
Instead, LLC owners can elect to be taxed via the “pass-through” method, where the LLC’s profits pass through to the members (owners) and are reported on their personal tax returns. Profits are taxed only once. Therefore, LLCs enjoy a lower tax rate than corporations.
Choice in Management Structure
One perk available to an LLC in NC is the freedom of owners to decide how they’d like their company to be managed. LLCs can be either single-member, member-managed or manager-managed.
Single-member LLCs are owned by one person who has full control over the company. Member-managed LLCs are run by all the owners (called “members”), and manager-managed LLCs are run by a smaller, designated group of professionals who run day-to-day business operations.
This flexibility allows entrepreneurs to choose their level of involvement for managerial purposes. Some owners prefer to be more hands-off and involved in operations at only the highest level. However, other owners may want all members involved in daily business operations.
Limited Liability
LLCs offer “limited liability” to business owners, a major benefit since the personal assets of business owners are protected from any debts or business-related lawsuits incurred by the company. If the LLC is sued, the owner’s financial liability will be limited to a certain amount and they won’t be expected to pay the liability out of their own pocket.
The only exception is if the member personally guaranteed the business’s obligations or loans: In that case, they might be held personally liable.
How to Start an LLC in NC
Here are seven key steps to take when creating an LLC in NC.
1. Decide How Your LLC Will Be Managed
How do you want to run your company? You’ll need to decide if you’d like the company to be single-member, member-managed or manager-managed. The right choice for you will depend on your industry, the stakeholders involved and your goals for the company.
Inside Scoop: Most smaller businesses with less complicated operations are member-managed LLCs.
Smaller companies tend to have fewer resources and less of a need for multiple tiers of management. Manager-managed would be a better option for more complex operations, including ones likely to attract investors who may want an ownership stake but not managerial responsibilities.
2. Choose Your LLC Name
Selecting the name of your LLC will be one of your first business decisions and is a great opportunity to get creative! There are a few rules for naming North Carolina LLCs. Importantly, your company’s name must be unique and distinguishable from the names of any other businesses in North Carolina. In addition, your LLC name must include one of these:
- Limited Liability Co.
- Limited Liability Company
- Ltd. Liability Company
- L.L.C
- LLC
- Ltd. Liability Co.
Next, you’ll need to confirm that no other businesses have already claimed your name. You can check name availability on the Secretary of State Business Search page.
Inside Scoop: If you plan to create a website for your business you may also want to know how to choose a name with domain availability. You can search for available domain names through a range of online services.
3. Choose Your Registered Agent
Anyone starting an LLC in North Carolina is required to designate a registered agent. The agent is the person responsible for receiving state and federal legal documents, tax documents and other important mail on the LLC’s behalf.
Your registered agent must be a state resident or business entity maintaining a street address in North Carolina. They can also be based in another state but must maintain a business office in North Carolina.
4. File Your Articles of Organization
Articles of organization are an important legal document that must be filed with the North Carolina Secretary of State. They can be filed online or via mail to the Business Registration Division in Raleigh. Regardless of which method you choose, your articles of organization must include:
- LLC name
- Principal office address
- Phone number
- Registered agent and address
- Date articles become effective
- Names and addresses of signers
- Signature of one LLC member, organizer or representative
5. Write Your Operating Agreement
While not required in North Carolina, it’s a good idea to draft an operating agreement. Operating agreements ensure that all of your company’s stakeholders are on the same page when forming the LLC. This document should include important business information such as the individual responsibilities and obligations of members, the business’s overall structure and how the company will be run.
6. Obtain Your EIN
The Internal Revenue Service (IRS) tracks businesses using nine-digit employer identification number (EIN). Single-member LLCs don’t need to apply for EINs, but other LLCs in NC will need to do so. This number is essential to complete important functions like filing taxes and opening bank accounts.
Inside Scoop: You can apply for your EIN online for free.
7. Know Your Legal Obligations
Once your LLC is operational, it must comply with NC and federal regulations to maintain the company from year-to-year. An important task includes filing an annual report with the Secretary of State. You can do this online or by mail.
You’ll also need to register with the North Carolina Department of Revenue, depending on the details of your business and any applicable regulations that may apply. For example, any LLCs collecting sales tax will need to register their company to ensure the correct tax.
Finally, review the NC Governor Boards and Commission Profiles directory for information on business licenses and permits you may need.
How to Start an LLC in NC FAQs
Where can I go to find important LLC forms?
Setting up an LLC in NC requires the owner to fill out and submit various forms. To download and create the necessary business formation documents, visit the website for the North Carolina Secretary of State, where you’ll find forms for articles of organization, certificates of authority, articles of dissolution and more.
How long does it take to start an LLC?
When starting an LLC in NC, you’ll want to plan for how long it takes to accomplish all the different steps you need to take. The good news is that filing your articles of organization only takes about two weeks. You can even expedite the process for an additional fee. Other than filing the articles, the timeline is mostly up to you.
Can I be my own registered agent?
Yes. You can list yourself as a registered agent, but keep in mind that there are potential issues with doing so. The named registered agent must be present at the address listed to receive government, tax and legal correspondence during official business hours. You will need to include a physical address and not a P.O. box, so listing your home address can risk exposing your personal information to public records.
How much does a registered agent service cost?
Hiring a registered agent will cost you between $50 and $300 annually.
Do I need a business license to open my NC LLC?
There is no federal business license required to operate your LLC in North Carolina, but depending on your industry, your jurisdiction may require a business or occupational license.
Can I operate a North Carolina LLC from out-of-state?
Yes. To operate your out-of-state (“foreign”) LLC in North Carolina you’ll need to register your business with the state. For example, if you originally formed the LLC in Delaware, but you want to set up a retail store in North Carolina, you would need to complete registration for a foreign LLC and ensure that it meets all tax and regulatory requirements for the state. Another option is to form a new LLC in the state where you want to operate.
What documents are needed for a foreign LLC?
The process is different in each state, but — with a foreign LLC — you will most likely have to file a certificate of good standing from the original state and a certificate of authority in the new state where you’ll be conducting business. You may also be required to submit additional forms. To ensure that you comply, please seek counsel from an experienced corporate attorney who specializes in business formation.
What are the costs to start an LLC in NC?
Your filing costs may vary. However, you will have to pay fees to register your corporate name, along with filing costs and fees for your annual report.
How can I dissolve my NC LLC?
While it may seem counterintuitive, it’s smart not only to know how to start an LLC in NC, but also how to close one. To dissolve your LLC, fill out your articles of dissolution and pay the required filing fee.
Consider Getting Help With Your Legal Paperwork
Although you can set up an LLC yourself, you may find that you need help filling out your paperwork. Consider hiring an online business formation company to form your LLC so it is set up legally and on time.
Legal Disclaimer: This article contains general legal information but does not constitute professional legal advice for your particular situation and should not be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed in your jurisdiction.
