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A limited liability company (LLC) is one of the main types of business entities that are relevant for someone who wants to start a business in any of the US states. There are several reasons and benefits to forming an LLC, especially for small businesses.
Choosing to start an LLC may help you protect your personal assets if someone sues your business. For instance, should you fall behind on loan payments while you run your business as legally required, creditors might have a tough time coming after your personal assets to pay them when you have registered your business as an LLC.
If you’re considering North Carolina as the place to open your LLC, know that the state has consistently enjoyed a reputation as a business-friendly state. When CNBC News ranked the best states for businesses, North Carolina came in first among all 50 states. Access to capital, workforce, economy, and cost of doing business were just some of the many factors the news outlet evaluated in its annual ranking for 2022.
The state requires all business owners except sole proprietors to register their business as a separate legal entity from themselves.
Here are the steps you’ll need to take in order to get open an LLC in North Carolina.
Below, you’ll find a detailed explanation to walk you through each step.
The first step to registering as an LLC in NC is to choose a business name in accordance with the state’s laws. If needed, you can reserve it until you can file your llc documents, and you can register for an assumed name if you’re gonna use a different one while conducting business.
In addition, after you have your business name you’ll want to think about a domain name and possibly registering for a trademark in order to add a layer of protection.
North Carolina enforces some unique business naming requirements that you should know before you select the name.
Starting with a local search is best. The following are resources you can use to make sure your business name is unique:
If you plan to trademark a symbol or any part of your business name (see more below), you will want to use one or both of the second two links to make sure no one else has claimed it.
If you came up with an available name that you like and is in accordance with all of the state’s requirements, but for whatever reason you’re not yet ready to register your LLC, you can file for name reservation (Form BE-14) to assure the name will remain available. The fee is $10 and the reservation is for a period of 10 years.
Registering for an assumed name in NC, also known as DBA (Doing Business As) allows you to operate your business under a different name than its legal registered name. Some business owners choose this option for branding purposes, or maybe after the business changed it’s offering and wish to use a name that better fits the market. People operating a franchise business also use different names for the LLC and DBA.
Assumed business name filings are processed by the relevant local County Register of Deeds. You’ll need to fill a form and pay a $26 fee.
A trademark is a symbol, name, or word used to identify your business (like the Nike’ swoosh for example). If you plan to use a trademark, North Carolina requires you to register it.
You start by completing a trademark search at the North Carolina Trademark Registration or the United States Patent and Trademark Office links above. The next step is to submit three complete and original renderings of the mark that your company has used in the last six months.
For the final step, complete a trademark application and mail it with a $75 fee to the Trademark Section at North Carolina Department of the Secretary of State, PO Box 29622, Raleigh, NC 27626-0622.
A registered agent is the person designated by the business partners to receive tax, legal, and other documents on behalf of the LLC. Pursuant to North Carolina’s state laws, the person selected must meet all three of these requirements:
You can act as your own registered agent if you meet each of the criteria above. Another option is to hire a registered agent service (such Tailor Brands), which can save you time, protect your privacy and business reputation, and ensure prompt handling of all correspondence.
The Articles of Organization is the document you file with the North Carolina Secretary of State’s to officially form your LLC, which you can do once you have selected a business name and a registered agent.
How much does it cost to open an LLC in NC? You’ll need to complete Form L-01 and pay a $125 fee to file the articles of organization.
Before you turn in your final LLC Articles of Organization paperwork, be sure that you have included the following information:
You have the following options to file your articles of organization in North Carolina:
An LLC Operating Agreement is a written document that outlines how you and your business partners will operate the business, and should cover topics like how to divide profits and losses, and the responsibilities of each member of the LLC.
North Carolina does not require that businesses formally file an LLC Operating Agreement. However, it is vitally important and best practice to create this document, especially when you create an LLC with one or more business partners. The agreement will help solve disputes that could lead to legal action after the business has been in operation for a while.
Start an LLC in North Carolina, Hassle-Free
North Carolina requires LLC owners to abide by several tax regulations. Be sure to educate yourself further on each of the tax topics below to ensure that you remain in compliance with these requirements. You may wish to consult with a tax advisor before deciding how to file taxes on behalf of your LLC for the first time.
The flexible structure of an LLC means that you can also choose to pay your federal tax obligations as a sole proprietor, partnership, or S-corp.
First, decide on the tax structure of your LLC: Most LLC business owners choose the pass-through structure for federal income tax purposes. This means that each member of the LLC reports their share of profits and expenses on their individual tax return. In this regard, LLCs operate like sole proprietorships.
The LLC itself does not pay federal income taxes with pass-through taxation in North Carolina (there are some states that require LLCs to pay federal income tax at the corporate level).
If you choose to pay your taxes as an S-corp instead of on a pass-through basis, you will need to complete IRS Form 2553.
Form 2553 is for organizations paying taxes as a business and will accompany your LLC’s official tax return. Before choosing this option, you should know that North Carolina charges a 5% flat tax on annual business income along with an annual franchise fee (based on your revenue).
North Carolina charges a flat 4.75% rate on all taxable merchandise. Cities and counties can also assess sales tax at a combined maximum rate of 2.75%. State laws cap total tax collected per transaction at 7.5%.
Your LLC must remit sales taxes to the state, city, and county once each month if it collects more than $100 in total. If your business collects less than that in sales tax, you can remit the amount due every 90 days.
North Carolina requires businesses selling certain products and services to register with the Department of Revenue. Typical examples include (not solely): appliances, digital items like online movie downloads, furniture, physical items like cleaning supplies for the home, and vehicles.
NC does not collect sales tax on gasoline, groceries, and prescription drugs.
If you plan to mainly sell services with your LLC, check this list to see if you need to collect and remit sales tax.
The North Carolina Department of Revenue (NCDOR) provides the option to register online or download and mail Form NC-BR.
North Carolina LLC laws require each member to pay state income tax on any income they pay to themselves and list on their federal income tax return. The current income tax rate is 5.25%.
The IRS requires employers to deduct the following from every employee’s paycheck (if you don’t have any employees, not all of these are relevant):
One of the main things that are very important to cover early on is understanding whether and which business licenses and permits you might need to obtain, and what are the relevant regulations you need to comply with.
NC business licenses:
You do not need a general business license from the NC state government to operate your LLC. However, several cities do require that you register for a business license before you begin serving customers or clients. As of early 2022, these cities include: Charlotte, Greensboro, Raleigh and Winston-Salem.
Relevant regulations and permits in NC:
Once you have filed the documents to create an LLC in North Carolina and learned about the relevant state regulations and tax obligations, and have your LLC officially registered, there are still some things you will want to take care of. Here are the main things to start with:
The Internal Revenue Service (IRS) requires people operating a business under any structure other than sole proprietor to apply for an EIN, which stands for Employer Identification Number. An EIN for your business is similar to what a Social Security number (SSN) is for your personal affairs.
The following situations are examples of the when a business might need an EIN:
If you’re not sure whether you need an EIN or not, check this link.
You do not have to pay a fee to obtain an EIN. Simply navigate to this link and follow the on-screen instructions, or you can hire a service like Tailor Brands to apply for an EIN on behalf of your new business to save you time and focus on your other tasks.
Too many entrepreneurs have learned the hard way that not separating their business and personal finances causes major headaches, especially tax-wise.
Sole proprietors can get away with having a single bank account because the person and the business are one entity in the eyes of the law. However, this is not the case with LLCs – by mixing your finances, you run the risk of losing the limited liability this type of entity provides.
Apart from the legal reasons for opening a bank account, there’s also a professional angle to this. Consider how it would look to customers and vendors to receive a check from your personal account, as they may assume you are unprofessional and don’t take your business seriously.
Another benefit of having a business checking account is that you can delegate payroll and accounting tasks to employees or your business partners. Having an EIN and a business bank account also makes your LLC come off as more professional with potential creditors.
What will you need?
Here is the documentation you will need to open a business banking account in North Carolina:
Note that if you are part of a multi-member LLC, all members need to be present when opening a business bank account. Also, you will need to contact the bank for guidance if you need to add or remove an LLC member at a later date.
Your LLC must pay ongoing fees to North Carolina to remain operational and in compliance. Mainly, you need to submit an annual report and pay a $200 fee, plus a $3 fee if filed online.
It’s important to note that if you do not pay the required annual fees, you run the risk of the state shutting down your NC LLC and losing the limited liability protection.
All types of business owners should consider hiring an accountant or tax advisor along with a business attorney. An accountant or tax advisor will handle business finances for you and ensure that you pay as little taxes as possible. This person can also provide guidance throughout the year on how to best manage your business finances.
Having a business attorney on retainer means that you always have someone to call with legal questions. You don’t want to ever assume you can take a certain action with your LLC unless you are certain it’s 100% legal and legitimate.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.
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