Sitting in the middle of the eastern seaboard, North Carolina reflects many cultural influences in the United States. All through the state, you can find economies supported by agriculture, tourism, and the financial services sector. In a state like this, you can make almost any new business work.
If you want to start an LLC in North Carolina, though, you’ll need money. As long as you know what you’re doing, you can keep the price reasonable and get good tax write-offs out of it. We’re here to help you figure out where you need to spend your money, as well as optional purchases you’ll want to make that can make your life easier, both now and in the future.
This article will help you make a budget for starting an LLC in North Carolina. Be sure to also check out our How to Start an LLC in North Carolina article for more general information.
- The required costs for every LLC
- Extra costs we recommend you incur
- The different ways you can form your LLC, as well as the pros and cons of each
Total North Carolina LLC Cost – $125
The North Carolina Secretary of State requires you to file articles of organization to create an LLC. This filing will cost you $125, and it’s the bare minimum you have to pay to get started.
Keep in mind that you will likely need to do more than just legally form your business. Many owners find that they need to pay local costs for licenses and permits. There are also several optional services that are often crucial to getting a company off the ground. We’ll discuss these in greater detail below.
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How Much It Costs to Start a North Carolina LLC
Just as with anything else, paying the least you can get away with is not a great idea when starting your LLC. There are likely many costs that you’ll need to think about if you want to make your experience easier and more efficient.
Articles of Organization Filing Fee – $125
Your LLC's articles create the company. Without them, the company doesn’t exist. After they’ve been filed, it can buy, sell, borrow money, and conduct other lawful business. Thus, making sure that you have this document correctly drafted and filed is your first major step.
Maybe you think drafting the articles sounds hard, but it doesn’t have to be. The North Carolina Secretary of State provides a fill-in-the-blank pdf form, complete with instructions, on its website. While you’re there, you can also file the articles online.
Of course, if you, your LLC formation service, or your lawyer want something more involved, you’re free to draft your own. But keeping things simple with the state’s form is a good way to get started.
North Carolina LLCs – Optional Costs to Consider
Starting a business involves more than just paying money and forming a company. You also need to think ahead regarding the needs of your LLC, and how to ensure its health and survival when the unexpected happens. To cover your bases, here are some different costs we strongly recommend you think about incurring.
Expedited Processing Fee – $100 to $200
The state reports a processing time of five to seven business days for these filings. Because that can translate to over a week in real time, 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 the articles.
For the fastest service, you should submit your documents online. Be aware that if you choose this option, there is an extra $3.00 fee.
Business License – $5 and up per year
Your LLC may or may not need a license, depending on what kind of work it does and where it’s located. In Raleigh, for example, there is no general business license, but you do have to get a license for selling beer or wine, giving massages, or certain other activities. Contact your county and city governments for your exact requirements.
Resident Agent Fee – $100
Every state has some version of a resident agent law. This one isn’t any different. A resident agent is a person or company you name that makes their address publicly available. You need to have a resident agent so that, if the state or someone else needs to contact your company, there is one place they can always go.
This also means that your agent will receive the legal papers if your LLC is ever sued. That might not be fun to think about, but if it happens, you need to know as soon as possible.
Many owners are tempted to serve as their companies’ agents. This is usually not a good idea. It involves making your address public and being constantly available just in case someone wants to sue your company.
It’s an easier and cost-efficient plan to hire a North Carolina registered agent service for your company. These agents usually charge $100 per year and take care of all your company’s registered agent needs. It’s money well spent.
Operating Agreement — Variable
An operating agreement sets down the rules of your LLC. It says how the people in charge should do their jobs, when meetings must be held, how members can enter and exit the company, and almost any other matter you might need to address.
North Carolina won’t force your LLC to have an operating agreement, but it is a very good idea to get one. Without a binding contract, you have much less control over what happens to your company if and when something unexpected happens.
If you choose to have an operating agreement, the good news is you don’t have to file it with the state. You can write it yourself, but unless you are a lawyer or know exactly what it’s supposed to look like, we don’t recommend that option.
A lawyer would likely charge you by the hour for drafting a North Carolina LLC operating agreement. While that contract would likely be a good one, that could also run you at least a few hundred dollars. You can have a good one drafted, though, for as little as $39 when you use a formation service.
DBA fee — $26
Not all LLC owners will be able to get exactly the business name they want. If you find yourself in that situation, it’s not a big deal. All you need to do is file for an 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.
A difference between this form and the articles is that you must file it with the county where you do business, not the Secretary of State’s office. The Secretary has made it easier, though, by setting up a statewide system and database to make the process uniform across all counties.
Just use the form certificate and instructions, and you will be good to go. Your county register of deeds will charge you a $26 filing fee, and that’s it.
Name Reservation Fee — $10
Maybe you have a great business plan and the perfect name for your LLC, but you’re not quite ready to start yet. If you want to make sure that a certain name is still available when you want it, you can file an Application to Reserve a Business Entity Name with the state. The filing fee is $10.
Once you’ve applied, the reservation is good for ten years.
Domain Name — about $20 per year
In this day and age, small businesses need a presence on the Internet. The first step in creating a good website is to get your own domain name. While this might have been pricey in the past, it is now quite affordable.
You should secure your domain name as soon as possible, even if you don’t have plans for a website right now. If you don’t, a competitor could buy your ideal domain and its variations to block you from using them. Domain squatters also sift through newly registered LLC names and will buy their domains only to relist them with huge markups.
In general, a domain ending in .com will be more expensive than a .net or .info domain, and some names will likely be taken, meaning you will have to do some searching (and maybe compromising).
A domain name from GoDaddy.com or a similar registrar may cost you between $20 and $50 per year, with regular specials and sales where you can get substantial discounts.
Registering with the State Tax Office — Free
All LLCs should register with the Department of Revenue so that they can pay their taxes, like employer withholding tax and sales and use tax. Note that, according to the state’s checklist, you will need to obtain a federal employer identification number for your LLC. (See the next section for how to get one of these.)
For further details about any taxes that could be due for your LLC, contact the North Carolina Department of Revenue.
Getting an Employer Identification Number (“EIN”) — Free
An EIN is a number created by the Internal Revenue Service and assigned to a business for paying taxes. (Think of an EIN as a social security number for a business.)
While some LLCs don't need them, in North Carolina you do need one to register your LLC with the Department of Revenue. Even if you didn’t need it, we would still recommend that you get one. Many banks won’t allow your LLC to have its own business bank account unless it has an EIN. Having an EIN can also simplify the process of getting credit.
You can apply online and get an EIN for free in minutes, or you can apply for one through the mail or fax. Whatever you do, don’t pay someone else to get an EIN for you. It’s too easy to pay someone else to do it unless it is part of a broader service package.
Read More: How to get an Employer Identification Number in North Carolina
Foreign LLC Qualification Fees — about $100 per extra state
If your LLC does well, you may want to expand to new locations. If one of those places is in another state, you’ll have to pay to do business there. You won’t have to re-form your company, but you will have to register with the Secretary of State there and pay some extra fees.
The exact fees will depend on the state in which you are registering. As a rule of thumb, expect to pay about $100 in filing fees to register your limited liability company as a foreign LLC in another state.
Writing Formation Costs Off
Whether or not they are required fees, all of these costs are vital. Thus they can be deducted from your taxes as startup costs. The IRS and the state, though, handle these costs differently, so it will be important to confirm details with your LLC’s accountant.
The IRS has a lot of guidance on this matter, and you should compare your specific costs to the materials on the IRS website.
Keep in mind that, in most cases, an LLC is taxed as a pass-through entity. In other words, your income and deductions will go on your personal taxes, rather than a separate income tax for the LLC. The IRS allows LLC owners to deduct $5,000 of their startup expenses in the first year.
North Carolina allows $25,000 of deductions but has fairly complex rules about breaking those down and splitting them over the next five years.
Mayumi forms an LLC in Raleigh to run a Japanese restaurant. She names her LLC Mayumi’s Katsudon LLC. Like many katsudon restaurants back in Japan, her place is very small, and she does all the cooking, cleaning, and service.
Mayumi doesn’t want to deal with legal paperwork in her business, but she wants to make sure she is protected. She gets an LLC formation service to help her with an operating agreement and then hires a resident agent service to receive legal papers and service of process for her restaurant.
As she designs the menu, Mayumi realizes that she would like to serve Japanese barbeque on weekends, so she wants to change the business name to reflect that. So, she gets a DBA for Mayumi’s Katsudon and BBQ. She also decides that she wants to sell beer and wine on-site and gets a license to do that.
Finally, to advertise to the Japanese diaspora in the area as well as everyone else, Mayumi buys a web domain and includes a site that is written entirely in Japanese.
His formation costs are as follows:
- North Carolina LLC Articles of Organization: $125
- Resident agent company fee (first year): $100
- North Carolina LLC Operating agreement draft: $39
- DBA fee: $26
- Beer and wine license (first year): $30
- Web domain costs (first year): $50
For income tax purposes, both the state and the IRS will tax Mayumi directly. In other words, she will get income from the LLC, and from that, she will pay her personal income taxes.
The total amount of Mayumi’s deduction in this example is $370. Before the deduction, her total taxable income for the year was $35,000. After the deduction, the taxable income went down to $34,630. Because Mayumi is in the 12% tax bracket, that means she saved $44.40 in federal income taxes this year, plus other deductions she may have had.
North Carolina's tax rate is 5.25%. Under North Carolina’s rules, though, Mayumi would probably have to split her deduction over five years, making the amount of her deduction less than $4.00 each year.
Thus, if she is in it for the long haul, it may be worth it to spend more money upfront for her business so she can get more deductions down the road. For example, if she did want to get an attorney to draft an operating agreement, that deduction could be used against future income from the business.
Because these tax issues are difficult, she should speak to her accountant about the best way to get the best deduction for the longest time.
Finally, keep in mind that if Mayumi had more than $5,000 in expenses, she would likely be able to claim those, but not all in the first year. Instead, she would have to break out her deduction over multiple tax years on her federal return as well as her state return.
Cheapest Way to Start an LLC in North Carolina
Now that you have a basic idea of the costs, we’ll now turn to the cheapest way to get your LLC formed while still accomplishing all you need. Here are your options.
Formation Service – $39 + state fees
A business formation service is a popular and inexpensive way for new LLC owners to get started.
These companies are dedicated to helping entrepreneurs bring their visions to life. They have not only the knowledge of all the state laws you need to know, but also forms, documents, and procedures to make your life as easy as possible.
Formation services are quick and complete ways to handle formation needs for most LLCs.
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
While formation services can be great for most people, they are not always the best choice. Some cons for these services are:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
Attorneys are licensed, reliable, and powerful resources for business formation. They are also quite expensive. Some business owners might have a lot of money to spare, but most don’t. Paying an attorney by the hour means that the bill can quickly grow to thousands of dollars when a formation service can often get you the same result for much less.
A business owner with more resources, though, could benefit from having an attorney if their business was at all complicated. For that reason, some owners choose to go this route.
Despite the expense, sometimes hiring a lawyer is the best choice.
- Lawyers help you manage risk. An LLC with complicated legal issues needs a lawyer. In our example above, if Mayumi were opening an import/export business rather than a restaurant, it might be good to have a lawyer take a look at her plans to make sure she complied with the law.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
For most people, getting an attorney comes with considerable downsides that outweigh any benefits.
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very caring people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Many people, after searching the Internet for the information they need, decide to try forming their new LLCs themselves. This process can give you a lot of personal expertise, but remember that time is money. If you are spending hours on your business formation, that’s time you’re not spending on the substance of your business.
In most instances, then, it is more cost-effective to just pay an LLC formation service, with confidence that everything has been done correctly, rather than try to reinvent the wheel yourself.
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t figure out the value of your time, a DIY solution is the cheapest option.
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that then costs them more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual North Carolina LLC Fees: How Much Will it Cost to Maintain your LLC?
Even after you’ve formed the company, there are annual costs for which you will have to budget. These include both government fees and amounts paid to third parties, like:
- Local Business License, depending on exact location: varies by business and location
- Annual report fee: $200
- Registered agent fee: $100
- Domain name: $20
Also, any small business should have an accountant. Costs for accounts vary significantly, but you should spend an average of $2,000 to $3,000 per year on an accountant in most cases.
How Much are LLC Taxes in North Carolina
As noted above, North Carolina treats most LLCs as pass-through entities, meaning that a 5.25% income tax rate will be applied to your earnings. If you elect to have your LLC taxed like a corporation, though, it will pay a 5% tax. If you are considering this kind of tax treatment, talk with your accountant about the pros and cons.
However your business pays income tax, though, you will probably have other taxes as well. For example, if your LLC hires workers, you will have to pay employment taxes. If it sells goods and services (and it almost certainly will), you'll also have to collect sales and use tax.
The Department of Revenue website will have complete information about any taxes you’ll have to pay.
North Carolina LLC Formation Costs Quick Links
- Business Link North Carolina — Business Licenses and Permits
- City of Raleigh — Permits and Licenses for Businesses
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- NC Department of Revenue — Income Tax Adjustments for Code Section 179 Expenses
- NC Department of Revenue — Register a Business
- NC Department of Revenue — Sales and Use Tax Information
- NC Secretary of State — Application to Reserve a Business Entity Name
- NC Secretary of State — Assumed Business Name (DBA) Information
- NC Secretary of State — Assumed Business Name (DBA) Certificate Form
- North Carolina Secretary of State — Business Registration Forms for LLCs
- NC Secretary of State — Expedited Service Information
- NC Secretary of State — Fee Schedule
- NC Secretary of State — Filing Annual Reports Online
- NC Secretary of State — Filing Paper Copies of Annual Reports
- NC Secretary of State — Form Articles of Organization
- NC Secretary of State — Online Business Filings
North Carolina LLC Formation Costs FAQs
How much does it cost to start an LLC in North Carolina?
The minimum cost is $125. This is the filing fee for your LLC’s articles of organization.
What is the cheapest way to start an LLC in North Carolina?
A do-it-yourself approach will have the lowest price tag, but it isn’t the cheapest in terms of your time. The best balance of price and time, for most people, is to use a formation service.
Do I need to hire an attorney to form an LLC in North Carolina?
No. Most people will not need to invest the considerable expense and time of hiring a lawyer. A formation service or a DIY approach will work for most business owners.
Can I pay to form an LLC more quickly in North Carolina?
Yes. Formation services will generally complete formation tasks faster than business owners acting on their own. If you need the state to hurry up and process your articles more quickly, you can also pay an extra $100 or $200 to make that happen.