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Forming an LLC in North Carolina

There are many choices to make when you're starting a new business, including the legal structure itself. One popular type of legal structure for small businesses is the limited liability company (LLC). Many small business owners choose the LLC structure because of the flexibility, tax treatment, and limited liability it offers. If you would like to start an LLC yourself, just follow along with the step-by-step process below.

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Step One: Choose a Unique North Carolina LLC Name

You should choose an LLC name that is memorable, distinctive, and makes your business stand out from the competition. Further, you will need to make sure that the name is available in North Carolina and follows state naming rules.

In North Carolina, your LLC name must:

  • Be unique: Your name must be different from all other registered North Carolina business names.
  • Contain an LLC designator: Your name must contain language to indicate that it's an LLC. You can use the full words “limited liability company" if you like. If you prefer, you can use the abbreviations “Ltd." And “Co." in place of “limited" and “company." Or you can abbreviate the entire string of words to “LLC" or L.L.C."

To find out if your name is available, you should conduct a business entity name search at the Secretary of State website. If the name is already taken, you should choose a new one.

Next, you should do a simple screening search on the internet. Just type your desired name into your favorite search engine to see if any business outside of North Carolina is using your name. If there are matches, you should go back to the drawing board.

Finally, it's wise to continue your search at the United States Patent and Trademark Office (USPTO) trademark database. You should make sure that there are no matches for your name on this database. This will help you avoid getting into legal trouble for trademark infringement.

Once you have settled on a unique name, you should check for domain name availability. Although you might not launch your website immediately, it's good planning to have a domain name ready to go. This will make it easier to build your web presence when the time comes.

Step Two: Name a North Carolina Registered Agent

Under the North Carolina Limited Liability Company Act, all LLCs must have a registered agent. A registered agent is an entity or person who agrees to receive official legal papers on behalf of the business. This includes service of process if anyone sues your business.

The registered agent can be an individual who is a resident of North Carolina, or a business entity that's registered to do business in the state. The registered agent's address must match your registered office address. It must be a physical street address, not a P.O. Box. You should choose a person or entity that is available to receive legal papers during standard business hours.

Many LLCs choose one of their members to serve as their own registered agent. But if none of your LLC members are willing and able to take on this task, you can use a registered agent service. With a registered agent service, you pay a fee to a North Carolina resident or business to accept legal paperwork for your LLC. You can find many options for this service by searching online.

You will need to list your registered agent's name and address in your articles of organization in the next step.

Step Three: Submit Your Articles of Organization

To officially form your LLC as a legal entity, you will submit articles of organization to the state of North Carolina. Articles of organization form a legal document that lists the basic identifying information about your LLC. Under North Carolina law, you will need to provide:

  • Your LLC's name
  • Your registered agent's name and address (registered office address)
  • The address of your principal office
  • Your LLC's mailing address if this is different from your registered office
  • The names and addresses of all the people signing the articles of organization, and whether they are members or managers

Further, if you are starting a professional LLC, you will need to state the type of services you will be offering.

You can file your articles of organization online or by mail. The online portal and a PDF version of the form are both available at the North Carolina Secretary of State website. There is a $125 filing fee.

Step Four: Create an LLC Operating Agreement

Although it's not required by law, it's wise to form an LLC operating agreement. An operating agreement is an internal company document. You use it to establish rules and create key agreements among members. This includes:

  • Member rights and responsibilities
  • Voting rights
  • Procedures for adding and removing members
  • Ownership percentages
  • Procedures for dissolving the LLC
  • Anything else that's important to your business

Putting these agreements into writing can help to avoid future conflict among members and promotes more organized operations. Even a single-member LLC should have an operating agreement. Although you will not have to worry about member disputes with a single-member LLC, there are other reasons to have an operating agreement. You may need to show this document to professionals like lawyers and accountants to receive services. You will also likely need to provide it when opening a business bank account or seeking an investment.

Step Five: Comply With Tax and Licensing Rules

Your tax and licensing requirements will depend on the location and nature of your business.

To check for any local licensing requirements, you should contact your city clerk. State licensing requirements may apply too. To learn more, you should visit the North Carolina Secretary of State website. There, you will find North Carolina state licensing information and contact details for the office.

Depending on the type of business you run, you may need to register for state taxes at the North Carolina Department of Revenue (DOR). For example, if you pay employees and sell goods, you need to register with the DOR for withholding tax and sales tax.

If you think that your business may be subject to federal licensing requirements, you should check the Small Business Administration (SBA) website. There, you will find more information on the business activities that give rise to federal regulation.

You will need to get an Employer Identification Number (EIN) if you have a multi-member LLC or plan on hiring employees. An EIN is a unique identifying number. The Internal Revenue Service (IRS) uses EINs to distinguish between companies for tax purposes. It's like a Social Security Number for businesses. You will need this number for employee payroll and to open a business bank account. An EIN is free and easy to get at the IRS website. You can apply by mail, fax, or online.

For more information about your federal tax obligations, you should check the IRS Business Taxes page.

Although you can often handle it yourself, business licenses and taxes for small businesses can get tricky. If you have any trouble with these issues, it's a good idea to contact a business attorney.

Step Six: File Annual Reports

To keep your business in good standing, you will need to file annual reports with the state. You can do so online or by postal mail. Along with your report, you need to submit a $200 state filing fee. There is an additional $3 charge if you file online.

In your annual report, you will need to provide the following basic information:

  • Your LLC's name and address
  • The location where you organized your LLC (if a foreign LLC)
  • Contact information for your company officials
  • Your registered agent's contact details
  • The nature of your business
  • The address of your principal office

This information will mostly confirm the details you initially provided with your articles of organization. Your annual report is due by April 15th every calendar year following the year you created your LLC.

North Carolina LLC FAQs

Why Should I Form an LLC in North Carolina?

You may want to start an LLC if you want a flexible business structure that helps you to limit your personal liability for business obligations.

LLCs are popular among small business owners due to the personal liability protection they offer. With personal liability protection, you are only on the hook for your company's liabilities up to the amount you invested into it. So, in the event of a lawsuit, your personal car, home, and accounts are not at risk for business liabilities. This is not the case with all business structures. For example, if you have a sole proprietorship, your business's creditors could seize your personal assets to cover business debts.

An LLC is also an easy business structure to set up and maintain. This is an advantage over corporations, which have more formal requirements and record-keeping obligations.

Further, LLC owners have the option of choosing pass-through tax treatment for the business. This means that the LLC pays its taxes through the members' personal income tax returns. Pass-through taxation can be preferable to corporate tax treatment, which can result in double taxation. Double taxation occurs when corporations pay taxes on their profits at the corporate level and stockholders then pay taxes on their dividends too.

Can I Operate My Foreign LLC in North Carolina?

Yes. To legally operate your international or out-of-state (foreign) LLC, you need to file an Application for Certificate of Authority. The associated state fee is $250. You will need to include a certificate of existence (sometimes called a certificate of good standing) from the state or country where you organized your LLC. This certificate should be less than 6 months old.

Before filing your Application for Certificate of Authority, you need to make sure that your LLC name is available in the state of North Carolina. Checking for name availability is covered in more detail in step one above. If you discover that your name is being used in North Carolina, you will need to operate under a DBA (a “doing business as") name. A DBA name is simply any business name that is different from your LLC's official name.

Can I Operate My LLC Under a DBA (a “Doing Business As" Name)?

Yes. In some situations, you may wish to offer a product or service under a name other than your LLC's name. Companies typically choose to do this if they are moving into a new geographical area, launching a new product, or offering a new service. To legally operate under a name other than your LLC name, you need to file a DBA (a “doing business as") name. You may also hear people refer to a DBA name as an assumed name or fictitious business name.

You can learn how to get a DBA name in North Carolina with FindLaw's How to File a DBA in North Carolina in 3 Steps.

Can I Reserve My LLC Name?

Yes. If you have chosen a name but are not ready to start your LLC, you can reserve the name for a few months in the meantime. To do so, you need to submit an Application to Reserve a Business Entity Name with the North Carolina Secretary of State. This will reserve your LLC name for a period of 120 days. The associated filing fee is $30. After you have filled out the paperwork, you should submit the document to the address listed on the form. You can submit the document online through the Secretary of State's online portal if you prefer.

Is an Operating Agreement the Same as Articles of Organization?

No, articles of organization form a legal document that you file with the state to officially create your LLC. In it, you will give basic company information to identify your business and form a record of its existence.

An LLC operating agreement is an internal company contract. You use it to spell out key rules, procedures, and agreements among your LLC members. This is not a required document, but it's advisable to have an operating agreement. After you and your LLC members have signed the operating agreement, you should store it with your other important company records. You may need to show it to certain professionals to receive financial and expert services.

Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.

Forming an LLC in North Carolina: Related Resources

For additional information and resources related to this topic, please click on the links listed below.

North Carolina Business Laws

Incorporation and Legal Structures

Starting a Business

Small Business Law

Get Help to Start Your North Carolina LLC

Fortunately, forming an LLC can be a straightforward process with FindLaw’s Business Formation Service. If you have legal questions or would like help drafting your business formation documents, it's a good idea to speak with an experienced business organizations attorney near you.

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