How Much Does It Cost to Start an Llc in North Carolina
The Limited Liability Company (LLC) is a popular entity structure for many businesses starting in the state of North Carolina. The LLC provides personal liability protection and has the potential to save money on taxes. With our step-by-step guide, you can learn how to form an LLC in North Carolina without an attorney.
Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner's personal assets.
Related: How Does an LLC Protect You ?
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Cost to Form an LLC in North Carolina
To form a Limited Liability Company in North Carolina, file the Articles of Organization with the North Carolina Secretary of State. The LLC filing fee is $125, and approval is typically around one week. For an additional $100, you can opt for a filing in under 24 hours.
If you have questions, contact the North Carolina Secretary of State at 919-814-5400.
Steps to Form a North Carolina LLC
Start by downloading the Articles of Organization Form L-01. Enter the information into the form. If you file online, upload the saved PDF, otherwise mail in the form to the Secretary of State.
Businesses that offer professional services such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. have the option of filing for a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to the LLC outlined below.
Step 1: LLC Name
Enter the name you want for the LLC. The name of the LLC has to differ from other entity names registered with the Secretary of State. Check on available North Carolina LLC names before filing to be sure the one you want is available.
Additionally, the name of the LLC must include one of the following phrases or abbreviations (also referred to as designators) at the end of the business name:
- Limited Liability Company
- Ltd. Liability Co.
- Limited Liability Co.
- Ltd. Liability Company
- L.L.C.
- LLC
A comma may be used after the business name and before the designator. "Cowboy Cleaners LLC" and "Cowboy Cleaners, LLC" are both acceptable.
Before settling on a name, you may want to see if a domain name is also available to match your business name and website address.
If you plan to use a different name from the one you register (perhaps you want to run multiple businesses under the LLC), you can file an assumed name (sometimes referred to as a fictitious business name, trade name, DBA, or Doing Business As name). To register an assumed name, file the Assumed Business Name Certificate, along with the $26 filing fee with the Register of Deeds office in the county where the LLC is located.
Step 2: LLC Organizers
Enter the name and address of each person responsible for executing the Articles of Organization and whether they are a member, organizer, or both by checking the applicable boxes.
An LLC Organizer is involved with the formation of the Articles of Organization. The Organizer may or may not become a member, such as a mentor, attorney, or accountant, but the initial members will all be listed as organizers.
Step 3: Name of the Registered Agent
A North Carolina Registered Agent must be identified before forming an LLC for service of process. The Registered Agent can either be a resident of North Carolina or a Resident Agent service, have a physical street address and, be available during normal business hours.
You are not required to pay for a registered agent. Any individual meeting the requirements can be the agent; however, the agent's name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed. Hiring a registered agent service like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.
Step 4: Street Address of the Registered Agent
The Registered Agent must have a physical address in the state (PO Boxes are not allowed) and act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc. on behalf of the LLC.
Step 5: Mailing Address of the Registered Agent
If you prefer to receive mail from the Secretary of State at an address different from the street address in #4, enter the address. This address can be a PO Box or an address out-of-state. If the mailing address is the same, leave this section blank.
Step 6: Principal Office
There are 2 parts to Step 6. Section "A" is used if the LLC has a principal office, and Section "B" is used if the LLC does not have a principal office.
Section A – In this section, enter the street address, city, state, and zip code of the LLC's initial principal office. This address can be the LLC's physical address, or it can be the address where the business records are stored. You may not use a PO Box for the designated office.
Section B– This is usually selected if the principal office has not been secured yet. A principal office will need to be identified by the time the first annual report is due.
Step 7: Additional Provisions
This is an optional section and not used by most LLCs. Here you would include the business purpose or additional rules for the operation of the LLC.
Step 8: Company Officials
This section is optional but is used to list the company officials. This isn't necessary for a single-member LLC, but a multi-member LLC may find it easier to create an Operating Agreement to list the officials as it is much easier to update the Operating Agreement than it is to update the Articles of Organization.
Step 9: Business Email Address
This is another optional section for a business email address. The email does not have to be an official business email address, but the address entered will get a notification from the Secretary of State's office when LLC documents are filed.
Step 10: Effective Date
If you want the LLC to start on today's date, choose Yes, otherwise select No, and enter a date less than 90 days in the future to start.
If you want the LLC to start immediately, choose today's date. If you want to LLC to start later, enter a date less than 90 days in the future to start. The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business will not have any activity until the start of the year. By delaying until the following year, they will reduce the number of end-of-year filings.
In this section, you can indicate how long it will remain in existence. Most LLCs will choose a Perpetual duration; however, some businesses (usually investment-related) will have a specific closure date.
Step 11: Signature
Have an individual forming the LLC to sign and accept the terms and conditions. Click the submit button to save the information and proceed.
Step 12: File
At this point, the Articles of Organization can be mailed in or filed online. Online filings are approved a few days faster than the mailed-in forms.
If you want to file online, set up an account with the Secretary of State.
- Begin by visiting the North Carolina Secretary of State's website.
- Click on the "Sign-In" link and then select "First Time User."
- Select "I want to" in the top menu and then "Create a Business Online."
Step 13: Online Filing
Filing Type –Select Creation to form a Limited Liability Company.
Requested Entity Name –
Has the entity been created in another state or country? – The answer for a new business starting is likely no.
Entity Type – Choose "Limited Liability Company" from the drop-down menu.
Document Type – Choose "Articles of Organization Limited Liability" from the drop-down menu.
Customer Reference Number – Won't apply to most filers.
Return Email – Enter an email address to correspond with the Secretary of State during the formation process.
You don't have to form your LLC by yourself or pay an attorney!
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Tasks After Forming Your LLC
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare a North Carolina LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member's personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Related: North Carolina operating agreement template
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Elect the LLC's Form of Federal Income Taxation
One of the significant benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
- Partnership
- C-corporation
- S-corporation
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed ?
By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member's federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren't subject to payroll taxes, resulting in potential tax savings.
Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.
Also, note that an LLC that elects to be taxed as a corporation will also have to pay a franchise tax on the net worth of the business. The minimum franchise tax is $200.
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business's funds from the member's personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Driver's licenses of the members.
- Occasionally, the bank will request a North Carolina Certificate of Good Standing to prove the LLC is active and in good standing with the state.
Related: How to Open a Business Bank Account for your LLC
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting the business. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
- Sales & Use Tax Number – In order to sell products and certain services, registration with the North Carolina Department of Revenue will be necessary.
Related: What Business Licenses are Needed in North Carolina ?
Get Business Insurance
Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:
General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won't cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – mandatory in most states if you have employees, this insurance covers medical expenses that occur because of an accident or injury that happens to one of your employees while they're at work.
Related: 7 Types of Insurance Your Business May Need
File the Annual Report
LLCs are required to file an annual report with the NC Secretary of State. The annual report is due by April 15th of each year and has an annual state fee of $200.
Related: How to File a North Carolina LLC Annual Report
Common Questions When Starting An LLC
You can act as your own registered agent, provide you are a resident of the state and are generally available during normal business hours.
It's sometimes thought that the LLC and business license are the same, which they aren't. Business license requirements vary by location and the type of business being operated.
An out-of-state LLC wanting to do business in another state will have to register as a foreign LLC with the new state's Secretary of State.
Businesses that require state licensing and offer professional services such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. often must file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.
How Much Does It Cost to Start an Llc in North Carolina
Source: https://startingyourbusiness.com/how-to-form-an-llc-in-north-carolina/
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