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With steady population growth, proximity to top colleges and universities, an affordable cost of living and a pleasant climate, North Carolina is one of the best places in the country to start a business. Therefore, if you're looking to launch your business in this state, one of your first steps will be selecting a business entity structure. In particular, if you want to limit your personal liabilities on business matters, you might consider starting a limited liability company, or LLC, in North Carolina.
The North Carolina Secretary of State dictates the guidelines businesses need to follow in order to successfully register and form an LLC in the state. Below, we break down each step.
1. Choose a name for your LLC
First, starting an LLC in North Carolina requires that you select a business name. Your business name will have to adhere to the requirements set out by the Secretary of State.
Name availability and reservation
When choosing a name for your North Carolina LLC, you'll need to ensure that it ends with the phrase “limited liability company” or with the abbreviations “LLC” or “L.L.C.” Additionally, there are restrictions on using any of the following words in your LLC’s name: corporation, incorporated, Inc., bank, trust, mutual, co-op, insurance, engineering and architect.
The Secretary of State will reject your business name if it’s too similar to the name of another business entity. For example, if a company called “A Delicious Restaurant, LLC” already operates in North Carolina, then you can’t call your LLC “The Delicious Restaurant, LLC.”
Once you have a name in mind for your North Carolina LLC, you'll want to check that it’s available by using the Secretary of State’s business name search. You may also want to search through local and online business directories, as well as North Carolina’s trademark database and federal trademark database, to ensure that no other business is using your preferred name.
After finding an available name, you can reserve the name for up to 120 days by filing an Application to Reserve a Business Entity Name with the Secretary of State. The name reservation fee is $30, and you can file online, by mail or in-person (if you're located in or near the Raleigh area).
Professional LLCs in North Carolina
Different from a traditional LLC, a professional limited liability company is a specific type of LLC that can be formed only by members of licensed occupations, such as doctors and attorneys. In North Carolina, if you're looking to start a PLLC, at least one member of the company must hold a license to practice the occupation.
Your PLLC’s name should end with “professional limited liability company,” “PLLC,” or “P.L.L.C.” PLLCs will file a different formation document with the Secretary of State, but otherwise, the setup process for PLLCs is similar to that for regular LLCs.
North Carolina LLCs with trade names
In some instances, your business might want to operate under a trade name — also called an assumed name, fictitious business name, or “doing business as” name — that’s different from the company’s legal name.
For example, your business’s legal name might be “Jane Smith Gardening and Landscaping Services, LLC,” but you might want to operate informally as “Jane’s Gardens.” In this case, you’ll need to ensure that the trade name “Jane’s Gardens” is available on the Secretary of State’s assumed name database.
You’ll also need to file an assumed business name certificate at the register of deeds in your county, along with a $26 filing fee.
2. Select a registered agent
The next step to starting an LLC in North Carolina is designating a registered agent. The duty of the registered agent is to accept official mail and government notices on your business’s behalf and forward them to you. They can be an individual who resides in North Carolina or a commercial entity. The agent must maintain a physical address in North Carolina (not just a P.O. box).
It is possible for you, a business partner or a friend or family member to serve as the registered agent for your LLC, but that person’s name will appear in public records. For more privacy and convenience, most small business owners opt to use a commercial provider as their resident agent.
3. Obtain North Carolina business licenses, if applicable
After you've selected a registered agent, you'll want to determine if you need a business license to operate your LLC in North Carolina. If you're wondering, "Is a business license required in NC?", the answer is generally no. North Carolina does not require a general business operating license at the state level. Instead, most licensing is handled at the city or county level.
Therefore, you'll want to consult your local government agency to determine if you'll need to meet any licensing requirements. Additionally, businesses in certain industries might need a state license. The North Carolina Department of Commerce has a business license search which you can use to check the requirements for your business.
You can also contact a business counselor for free who can advise you more about licensing requirements in North Carolina.
Finally, businesses that sell taxable goods or services must register for a sales and use tax number from the North Carolina Department of Revenue. You’ll be required to collect sales tax from your customers, file tax returns and remit the tax to the state on a monthly, quarterly or annual basis. The filing frequency depends on the amount of tax you collect from customers.
4. File your LLC articles of organization
The next step to starting an LLC in North Carolina is to file your LLC articles of organization (Form L-01) with the Secretary of State. Once approved by the state, the articles of organization will officially grant your LLC the authority to operate in North Carolina.
The following information will be needed to complete the North Carolina articles of organization document:
Business name and address.
Name, address and signature of all LLC members.
Name and street address of the registered agent (no P.O. boxes).
Desired effective date of the LLC’s formation, if not the date of filing.
if you’re in a professional occupation and are forming a PLLC, then you’ll file PLLC articles of organization (Form PLLC-02).
Once you've completed the articles of organization document, you can file online, by mail or in-person. You'll also need to pay the $125 filing fee. For the fastest processing, you'll want to file online.
After you've filed, the Secretary of State will look over your articles of organization to make sure all the required information is provided. Assuming everything is accurate, they will file a copy of your articles in the state records and return the original to your registered agent’s address.
Generally, it takes about five to seven business days for the Secretary of State to receive, process and return your documents.
Foreign LLCs Operating in North Carolina
If you've already formed your business under the laws of another state and now want to operate in or expand to North Carolina, the process is slightly different. In this case, you’re considered a foreign LLC and must file a certificate of authority (Form L-09) with the Secretary of State. The filing fee is $250.
You’ll also have to attach a certificate of good standing from your home state to this form.
5. Create an LLC operating agreement
Once you've filed your articles of organization and they've been processed and returned by the Secretary of State, you've officially formed an LLC in North Carolina. However, there are a few additional steps you'll want to take to complete the process.
Start by drafting an LLC operating agreement. This document describes the daily operations of your LLC, as well as the rights and responsibilities of each member. North Carolina business owners are not obligated to create an operating agreement, but having one creates guidelines that govern your LLC throughout the life of your business.
At a minimum, here’s what you should include in the operating agreement for your North Carolina LLC:
Description of your LLC’s products or services.
Each member’s name and address.
Each member’s asset contributions to the LLC, voting rights and profit share.
Whether your LLC is member-managed or manager-managed.
The manager’s name and address if the LLC is manager-managed.
The LLC’s meeting schedule and voting procedures.
The procedure for admitting new members to the LLC.
The procedure for electing a manager if applicable.
Terms and procedures for dissolving the LLC.
Every member of the LLC should have an opportunity to review and sign the operating agreement, ideally after consulting with a lawyer. After every member signs, you can store your operating agreement with other business records. Because North Carolina doesn't require this document, you don't have to file it with the state.
6. Comply with federal, state and local regulations
Now that you've formed your LLC, you'll want to review and follow the various federal, state and local regulations that may apply to your business. Although the specifics will vary based on your business's location and industry, overall, these regulations might include:
Getting an EIN: It's very likely that your LLC will need a federal tax ID number, also known as an employer identification number. This number will be used for your federal taxes, among other purposes. You can apply for an EIN from the IRS online.
Employer guidelines: If your North Carolina LLC has employees, you'll need to follow particular regulations as an employer — including new hire reporting, withholding payroll taxes, paying unemployment taxes and purchasing workers' compensation insurance.
Paying taxes: Unless you choose otherwise, your LLC will be taxed as a pass-through entity, meaning each member will pay LLC taxes on their personal tax return for both federal and states income tax. On top of income taxes, you might have additional tax responsibilities including self-employment taxes, payroll taxes (withholding income tax and FUTA taxes), sales taxes, etc.
7. File your annual report and keep your LLC in good standing
Once you've done everything required to start your LLC in North Carolina, be sure that your business retains an active status and remains in good standing with the state.
This means filing an annual report with the Secretary of State. The annual report gives you an opportunity to update any business information that’s on file with the state.
You can file your annual report or online or by mail. If you file online, you'll need to pay a $202 filing fee. If you file by mail, on the other hand, you'll pay a $200 filing fee. The annual report is due April 15th of each year after the year of creation of your LLC.
Additionally, be sure to pay your taxes on time, maintain any and all business licenses and abide by any applicable regulations discussed above, in order to keep your business in good standing with the state of North Carolina.
Moreover, you'll want to ensure that you hold regular member meetings and document decisions in writing when a member or manager acts on behalf of the LLC.
Starting an LLC in North Carolina FAQ
This article originally appeared on Fundera, a subsidiary of NerdWallet.