North Carolina is a vibrant, diverse, and quickly growing state. As it builds its population and grows in cultural influence, it will present more and more exciting business opportunities. In short, it’s a dynamic place to start your small business.
If you’ve decided to form an LLC here, you might have found a lot of information on the Internet. It can be hard to tell what rules you need to follow. That’s why we’re here — to strip away the confusing stuff you don’t need and distill the process into simple, easy-to-follow steps.
In this article, you’ll find all the tools you need to start an LLC in North Carolina, including:
- Tips on drafting and filing the documents you need for your North Carolina LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
Step 1: Name your North Carolina LLC
Your first job is picking a good name for your LLC. This isn’t too hard, but you do need to follow North Carolina’s rules. The requirements for LLC and other types of business are listed in North Carolina General Statutes section 55D-20.
Words You Have to Use
An LLC in North Carolina must have a name that identifies it as an LLC. You can easily do that with the words “limited liability company” or “LLC/L.L.C.” If you like, you can also use the less common abbreviations “ltd. liability co.”, “limited liability co.”, or “ltd. liability company.”
Section 55D-21 further says that the name of your LLC must be distinguishable from the names of other businesses in the state. (Keep in mind that includes businesses like corporations and partnerships as well as LLCs!) The name must also be distinguishable from DBAs used by other businesses and names that have been reserved.
The law does not give a lot of guidance as to how you should do this. Generally speaking, you must have a name with one or more completely different words than any other company’s name.
If you want to open a liquor store called “Raleigh Packages, LLC,” you won’t be able to use that name if there is a company named “Raleigh Packages, Inc.” If, however, you changed your LLC’s name to “Raleigh Liquors and Packages, LLC,” that would be fine.
Words You Can’t Use
The North Carolina Secretary of State has compiled a thorough list of words that you cannot use in your company’s name. Some of these words, like “bank,” are commonly found in the laws of other states as well. Others, like “wholesale,” are less commonly restricted.
The common theme with all of these words is that they relate to businesses regulated by North Carolina’s government.
If you want to use any of the words prohibited by the state, use the links provided by the Secretary of State in their table above to get in touch with the correct state agency. You may then be able to get approval for the name you want.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
Of course, you also can’t name your business anything that would lead people to think it is part of the government. “North Carolina Tax Collector’s Office, LLC,” for example, would likely never be approved.
Research the LLC Name You Want
Once you have chosen a name, check that it’s available with the Secretary of State’s business entity search. This search is flexible, allowing you to search for an exact name or just parts of one.
You should use this function to conduct multiple searches and make sure that the name you want is not too similar to any other company’s name in the state.
North Carolina DBA: Using an Assumed Business Name
Some LLC owners will be able to get exactly the business name they want under North Carolina’s naming rule. Many won’t, though. If you are in the latter group, it’s not a big problem. All you need to do is file for a fictitious or assumed business name (also known as a DBA), and you can use that name for your company.
North Carolina’s Assumed Business Name Act (PDF) details the very common process by which you can get this done. Section 66-71.4 states that you have to file an assumed name certificate in the register of deeds office in the county where your LLC does business.
If your LLC does business in more than one county, you don’t have to file a certificate in every county. Just filing in one of them will satisfy the law.
Your certificate must contain:
- Your DBA
- The real name of the person engaging in business with the DBA
- What kind of company your LLC is
- The street address of your LLC’s principal place of business
- Each county where you’ll be using the DBA
Though you must file with your county, the Secretary of State’s office has recently set up a statewide system and database to make the process uniform across all counties.
They also provide a form certificate and instructions. Keep in mind that your county register of deeds will charge you a $26 filing fee.
Step 2: Appoint a Registered Agent for your LLC
North Carolina General Statutes section 57D-2-40 requires your LLC to have a registered agent and office in the state. A registered agent is your LLC’s point of contact with the public. They receive correspondence and service of process for your LLC.
Service of process is a legal term for business letters or legal papers. In other words, your agent is there for the state or the public to communicate with you.
Though your registered office can be the same as your place of business, it doesn’t have to be.
If your LLC is sued, your registered agent is the fastest and most reliable way for you to find out. The agent and office are listed on the Secretary of State’s website for this purpose.
If a person filing a lawsuit can’t find your agent, they can try to serve you in other ways, but there is a risk that you might not learn about the suit until it is too late. In that case, you could lose the lawsuit by default judgment. (A default judgment happens when you lose because you didn’t answer.)
The law gives you options about whom you can appoint as your agent. You can name any business in the state as your agent. Any North Carolina Resident at your registered office can also serve.
Of course, this means that you can also be your LLC’s North Carolina registered agent. Just because you can, though, doesn’t mean you should.
Hiring a company is a much wiser move. A registered agent company lets your LLC use the company’s address for its registered office. The agent then gets your important letters and service of process and passes it on to you.
You might be thinking that the job doesn’t sound hard enough to justify hiring someone else. Being your own agent can be tempting for a few reasons:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Those are solid points. But there are also a lot of reasons not to do it yourself:
- No privacy: Your name and address will be published on the Secretary of State’s website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your registered agent's address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Registered agent companies are an easy way to avoid these issues. They aren’t pricey, either. They usually cost around $100 per year. Their name and address, not yours, are listed on the Internet. Depend on your agent to make sure you don’t miss anything. That way, you can focus on your business.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
A professional service can also help if your LLC will do business in multiple states and you need to register as a foreign LLC. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your North Carolina LLC Articles of Organization
The most important step of forming an LLC is filing your articles of organization. Your articles are the birth certificate for your company. Under North Carolina General Statutes section 57D-2-20, your LLC doesn’t exist until the articles are filed.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my North Carolina Articles of Organization?
Section 57D-2-21 lists all the things that you must include in your articles:
- Your LLC’s name
- The name and address of each person signing the articles
- Whether each person signing is a member/owner of the company or is just organizing the company
- The street address (and mailing address if it is different) of your LLC’s registered office and the name of your registered agent
- The county where your registered office is located
- The street address (and mailing address if it is different) of your LLC’s principal office (i.e., where it does business)
- The county where your LLC’s principal office is located
- If your LLC is a professional limited liability company (e.g., a law firm) under section 57D-2-02, a description of the services you will provide
- Any other provision that you could put in an operating agreement (see Step 4, below)
You can use the basic fill-in-the-blank form on the Secretary of State’s website.
North Carolina LLC Filing Fee
According to the Secretary of State’s fee schedule, you must pay a $125 filing fee.
North Carolina LLC Processing Time
The Secretary of State reports a processing time of five to seven business days for these filings. Because that can translate to over a week, you may want to speed things up a bit. In that case, expedited service options are available for an extra state fee:
- Within 24 hours: $100
- Same-day: $200
If you use same-day processing, you must deliver your articles to the Secretary of State no later than noon on the day you need approval.
For the fastest service, you should submit your documents online. Be aware that if you choose this option, there is an extra $3.00 electronic transaction fee.
Step 4: Draft your North Carolina LLC Operating Agreement
Operating agreements are contracts between you and the other members of your LLC.
You are not legally required to have an operating agreement for your LLC, but it’s a good idea. A contract stating your company’s rules is important when you have business disputes, new people want to join your company, or something else unexpected happens.
Your operating agreement should have all the key facts about the LLC. If it has several different members, each of you might have a unique job. The operating agreement says what’s expected of each person. It should also say what happens if someone fails to do their job.
According to North Carolina General Statutes 57D-2-320, your LLC’s operating agreement broadly governs these areas:
- The internal affairs of your LLC
- The rights and duties of all current and future members/owners to each other and the company
Within these broad categories, most agreements cover these topics:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- If your LLC has a manager, they say what the manager can and must do. Managers have special duties to the company and the members. The operating agreement should state these.
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave and what happens to their membership interest.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
In most cases, operating agreements cannot change the North Carolina law about LLC entities or the Secretary of State.
You might remember from Step 3 above that section 57D-2-21 allows you to use your articles of organization for the same purposes as an operating agreement. Using your articles of organization this way, though, is not a good idea.
You want to have one document that lists the rules of your company. If you have two and there is a conflict, the law decides which document to use. In this case, you will lose the control that an operating agreement gives you, and you might lose money or business resources as a result.
Also, keep in mind that, if you put your LLC’s rules in your articles, you will have to amend those articles every time you change the rules, and that comes with a $50 filing fee every time.
If you have all your rules just in the operating agreement, on the other hand, there is no danger of a conflict. Nor does your operating agreement need to be filed with the state.
Therefore, we recommend that you put your LLC’s rules in an operating agreement instead of the publicly filed articles of organization.
Step 5: Get an EIN (Employer Identification Number) for Your North Carolina LLC
When you file your personal tax return with the IRS, you use your social security number as your unique ID. LLCs don’t have social security numbers, but the IRS still needs to keep track of them. Therefore, it uses EINs as ID numbers for companies.
Not all LLCs need an EIN. To see whether your LLC needs an EIN, ask yourself these three questions:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you will need an EIN.
The good news is that it’s not hard to get an EIN. The IRS has a detailed website on the topic and allows you to apply online. The whole application process takes about five minutes. Alternatively, you can also file IRS form SS-4 via mail or fax.
Because it’s so simple, you should never pay anyone to get an EIN for you unless they are throwing it in as an added benefit to a bigger service package.
First Tasks After Registering your North Carolina LLC
Congratulations! You now have a company. But before you jump into business, there are a few more things you should handle first.
Open a Business Bank Account
Your LLC needs its own bank account for a few reasons:
- Accounting: You’re in business to make money. You can’t tell if you’re making money unless you know exactly how much your company spends and deposits every month.
- Credit: Even successful companies need to borrow money. You don’t want to use your personal credit, though, for a business expense. Keeping your company’s money separate helps build up company credit that it can use for business purposes.
- Personal Asset Protection: Keeping your company’s money separate from your own is the whole point of even forming an LLC. Without a business bank account, you risk losing that protection.
Your LLC’s accounting must be precise. That means keeping detailed financial records about expenses and income. You can’t do that if you are mixing in your own information and money with that of the business. For the sake of simplicity and correct bookkeeping, getting a bank account is the answer.
The second reason for getting an account, credit, may not have occurred to you before now. In the future, you might need to make improvements, sign a new lease, or invest in new technology. When that time comes, the LLC should do the borrowing, not you.
The third point, legal protection, is perhaps the most important. The whole idea of having an LLC for your business is that if someone sues it, your own assets are not at risk. This company/individual separation is called the corporate veil. (Even though an LLC is not a corporation, it’s still called a “corporate” veil.)
If you treat your company’s assets like your own, the veil can be pierced, and you can lose all personal liability protection. So, for example, if you are taking the company’s money and using it to pay your household bills, you could lose all the legal protection that you got by forming your LLC!
Mixing assets is a risk you should not take. Getting a separate bank account for your company is an easy way to sidestep the issue.
Get Business Insurance For Your North Carolina LLC
Protecting your business is a lot like protecting your home, car, or health. You buy insurance for all of those things, so why not for your LLC as well?
Here are some types of insurance you should think about for your LLC:
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers compensation insurance: In most cases, if your LLC has three or more regular employees, North Carolina requires you to have a workers’ compensation policy to protect against on-the-job injuries. LLC members don’t count for this purpose.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your North Carolina Company Compliant
Now that you’ve done the hard work, you’re ready to get started. Remember, though, that your LLC does have ongoing legal requirements that it has to meet if you want to stay in business. Here are a few things you’ll need to keep in mind.
North Carolina Business Permits and Licenses
The state does not have a general business permit requirement. You should, however, check with your city and county governments about whether a local business license or permit is required.
Also, many businesses are regulated by different government entities in North Carolina. You should check with Business Link North Carolina to get information on what permits or licenses your business might need.
North Carolina Tax Requirements
Most LLCs in North Carolina are taxed as pass-through entities, meaning that income passes to the members, who then pay taxes to the state. You can elect different tax treatment if you wish. Speak to a licensed accountant if you would like to explore this possibility.
If your business has employees, you will have to pay employer taxes, including unemployment insurance. You’ll also have to withhold and pay employee income taxes.
Finally, if your business sells products in North Carolina, you will have to register and pay sales tax and use tax. Contact the Department of Revenue for more information.
Federal LLC Tax Filing Requirements
Your LLC is also considered a pass-through business entity for federal tax purposes. Profits or losses from your LLC should be on Schedule C of your personal tax return.
Annual Report and Other Filing Requirements
By April 15 of each year, an LLC must deliver an annual report to the Secretary of State’s office. The report must include:
- The name of your LLC
- The street address (and mailing address if different), including the county, of your LLC’s registered office and the name of its registered agent at that office
- If your registered office or agent has changed, a statement of that change
- The address and telephone number of your LLC’s principal office
- The names, titles, and business addresses of your LLC’s principal company officials (in most cases, its members)
- A description of your LLC’s business
North Carolina Business Formation Quick Links
- Business Link North Carolina — Business Licenses and Permits
- North Carolina Secretary of State — Filing Annual Reports Online
- North Carolina Secretary of State — Filing Paper Copies of Annual Reports
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- North Carolina Department of Revenue — Sales and Use Tax Information
- North Carolina General Statutes Chapter 55D — LLC Naming Laws
- North Carolina General Statutes Chapter 57D — North Carolina Limited Liability Company Act
- North Carolina General Statutes Chapter 66, Article 14A — Assumed Business Name Act (North Carolina DBAs)
- North Carolina Industrial Commission — Employers’ Requirement to Carry Workers’ Compensation Insurance
- North Carolina Secretary of State — Assumed Business Name (DBA) Information
- North Carolina Secretary of State — Assumed Business Name (DBA) Certificate Form
- North Carolina Secretary of State — Business Entity Search
- North Carolina Secretary of State — Business Registration Forms for LLCs
- North Carolina Secretary of State — Expedited Service Information
- North Carolina Secretary of State — Fee Schedule
- North Carolina Secretary of State — Guide to Feasibility of LLC Names
- North Carolina Secretary of State — Online Business Filings
North Carolina LLC FAQs
How much does it cost to start a North Carolina LLC?
It costs $125 to file your articles of organization. If you expedite your filing, it will cost an extra $100-$200.
What is the processing time to form my North Carolina LLC?
The standard processing time is five to seven business days. You can shorten that time to 24 hours or the same business day for an extra fee.
What are the benefits of a North Carolina LLC?
A North Carolina LLC protects your personal assets while giving you favorable tax treatment. You can also use an operating agreement to customize your business structure so it best serves the needs of you and the other LLC members.
Where do I check if my North Carolina LLC name is available?
Use the Secretary of State’s free online business search. Make sure you check multiple words and phrases from your proposed name to distinguish it from the names of other companies doing business in North Carolina.