Many entrepreneurs choose to start an LLC in North Carolina because of its excellent business climate. In 2021, the state was ranked as one of the top states in the U.S. to start a business. North Carolina LLC formation can be intimidating as the state carries its own regulations and fees. The below 5-step guide provides an easy-to-follow walkthrough so you can start your business with confidence.
Step 1: Choose a North Carolina LLC Name
When choosing an LLC name in North Carolina, the name must adhere to the following state regulations:
- The LLC name must not be similar or the same as an already registered business name. A name check can be done via the North Carolina Secretary of State name search.
- The name must contain one of the suffixes; “Limited Liability Company”, “L.L.C”, “LLC”, “ltd. liability co.”, “limited liability co.”, or “ltd. liability company”.
- The name may not be offensive or imply that the business is for criminal purposes.
- The name may not include words that imply the business provides a service not qualified for example “bank” or “university”.
A name can be reserved for 120 days by filing an “Application to Reserve an Entity Name” with the state at a cost of $30.
Step 2: Appoint a Registered Agent in North Carolina
North Carolina law requires all LLCs’ to appoint a registered agent. The registered agent is an individual or business entity that receives all legal documentation from the state on behalf of the LLC.
The registered agent must have a physical address within the state of North Carolina as a resident or permission to operate in the state if it is a business entity. A post box number is not allowed as all notices need to be handed to an actual person.
Step 3: File Articles of Organization
The Articles of Organization (Form L-01) are filed with the North Carolina Secretary of State and include all details of the LLC necessary to register the business. The filing can be done online and carries a fee of $125. Information needed for the filing of the Articles are:
- The LLC name
- The name and address of each LLC member
- The name and address of the registered agent
- The address and phone number of the LLCs’ main office
- The effective date of Articles
- The signature of the person filing for the LLC.
Step 4: Draft an Operating Agreement
Although not required by law, it is highly recommended to create an operating agreement. It is an internal document that specifies:
- how the LLC will be managed,
- how profits and losses are divided,
- members contributions and shares,
- and processes for closing down the LLC.
The operating agreement can be tailored to include any additional information or processes deemed necessary. The more thorough it is, the better equipped the LLC will be to make important business decisions.
Step 5: Obtain an Employer Identification Number (EIN) in North Carolina and other Tax Obligations
Even if the LLC has no employees, it must still obtain an EIN from Inland Revenue Services (IRS) if it has more than one member. A one-member LLC only applies for an EIN should it choose to be taxed as a sole-proprietorship or corporation. The application can be done online and is free.
Some businesses will require a business license in order to operate in the state, depending on the location and purpose of the business. To find out whether a license is required, the state board and commissions’ website can be checked.
If the business employs people or will be selling goods and collecting sales tax, the LLC must register with the North Carolina Department of Revenue (DOR). The registration can be done via the DOR website which also includes North Carolina tax registration information.
Now that the LLC is registered it is a good idea to open a business bank account and apply for business credit. A separate bank account ensures that there is no confusion between business and personal finances.
It is also wise to look at business insurance options in order to protect the business and its assets. Although members are not personally liable for LLC debts, many businesses have had to close their doors due to unforeseen events and not having business insurance in place.