Nestled in the heart of the American Southeast, North Carolina has long held the reputation of being a hub for innovation, business development, and rich cultural heritage.
But what is it about the Tar Heel State that makes it so attractive? From its business-friendly environment and advantageous tax policies to its expanding economy and accessible resources for startups, North Carolina offers a harmonious blend of elements that cater to both nascent ventures and established entities.
When you decide to start a small business in North Carolina, you can register the business as a limited liability company (LLC).
An LLC is a legal business structure that lends you extra personal liability protection and operational advantages, unlike a sole proprietorship. Once you decide on an appropriate business structure, like an LLC, registering your operations is a matter of following several simple steps to comply with the North Carolina laws and regulations.
This article provides step-by-step instructions for opening an LLC in North Carolina.
Table of contents:
- Step 1: Choose a name for your LLC
- Step 2: Appoint a registered agent
- Step 3: File the North Carolina LLC Articles of Organization
- Step 4: Order certified copies of your LLC formation documents
- Step 5: Create an LLC operating agreement
- Step 6: Get an Employer Identification Number (EIN) from the IRS
- Costs to set up an LLC in NC
- Last steps
Step 1: Choose a name for your LLC
The first step to forming your LLC in North Carolina is picking an operating name.
The legal business name is present on all your company documents, invoices, website, and other touchpoints with the customers. Choosing a name for your LLC means you’ll need to develop a unique combination. If you pick a name that’s similar or the same as another business, you can be sued under trade name laws. There are ways to check if the business name you want to use is available:
- Start with your county and do local business searches of the Register of Deeds office to make sure the name is available.
- The North Carolina Trademark Registration site is also an excellent source to check if the LLC name is already registered as a trademark under state law.
- And you can use the North Carolina Secretary of State business search tool.
Also, keep in mind that North Carolina has several unique naming requirements for LLCs. Unless you obtain special permission from the licensing boards or state agencies, you can't include the following terms in your LLC name:
- Realtor
- CPA
- Bank
- Insurance
- Pharmacy
- Architect
- Trust
Other than that, the name of your Limited Liability Company must include only words that are legal and non-offensive. The name must also contain the words:
- Limited Liability Company
- Ltd. Liability Co.
- Limited Liability Co.
- Ltd. Liability Company
- LLC
- L.L.C.
Step 2: Appoint a registered agent
Once you’ve chosen a name for your LLC, you must select a North Carolina registered agent.
Your registered agent is a person or professional services business who agrees to be your point of contact with the state. This person or business will receive government notices on behalf of your business. For example, your registered agent will receive the subpoena or court papers at the designated office address if your business is sued. Note that P.O. boxes are not accepted. The registered agent must have a physical address in North Carolina.
Your registered agent must be a person who lives in North Carolina or a business whose principal office is in the state. Registered agent service providers specialize in helping businesses stay in good standing with local laws and regulations. A registered agent service charges a fee but provides privacy, flexibility, and availability that you may not have as a new business owner.
You can be your own registered agent
When people form new businesses, managing money is a top priority. For that reason, you can choose to be your own registered agent instead of hiring another individual or firm.
There are tradeoffs to serving as your own registered agent, including:
- Your street address becomes public if it’s your principal place of business.
- You may receive more marketing or junk mail from companies that purchase public mailing lists from the Secretary of State.
- If you’re served legal papers, your family, friends, and neighbors may witness this, which can be embarrassing.
- Anytime you move, you’ll have to update your mailing address with the Secretary of State and pay applicable fees.
Sure, there’s a fee to hire a registered agent service, but many business owners find the cost well worth the peace of mind knowing that business filings and official mail are received and handled timely.
Step 3: File the North Carolina LLC Articles of Organization
The Articles of Organization filing are required to form an LLC in North Carolina. This business document details the basic information about your company, such as:
- Your business name
- All LLC members (owners)
- Principal office address and mailing address of the business
- Registered agent address and contact details
You’ll complete Form L-01 on paper or online. The filing fee is $125 paid to the North Carolina Secretary of State.
Expedited processing is available too. For an extra $100, you can form an LLC in 24 hours. And for an additional $200, you get same-day service. Same-day service guarantees that the documents will be reviewed and filed (or rejected) by the end of the business day.
Step 4: Order certified copies of your LLC formation documents
Your approved Articles of Organization are your stamp of approval that your LLC is legally allowed to operate in North Carolina. Be sure to get a certified copy of all your formation documents. You'll want them for your business records, and banks may ask to see them when you open a business bank account or apply for a loan.
You submit your request online, and the cost for each certification starts at $15.
Step 5: Create an LLC operating agreement
An LLC operating agreement outlines how you’ll operate the business, how profits and losses are shared amongst LLC members, and which rights and duties each member has.
There are several templates online for members to use as a starting point. Operating agreements are internal to the LLC and are not required to be submitted or filed with the North Carolina Secretary of State.
However, it’s vital to draft one if you have one or more business partners.
Step 6: Get an Employer Identification Number (EIN) from the IRS
An Employer Identification Number (EIN) is like the Social Security number for your business. When you open a bank account or apply for business credit, banks will likely ask for your EIN.
If you plan to hire employees, your EIN is required to track your small business hiring activity and ensure you comply with payroll regulations. Multi-member LLCs are required to have an EIN. You'll also need one if you plan to hire employees, need to pay excise taxes, or operate in a federally regulated industry (like hazardous transportation or agriculture).
Obtaining an EIN is free by following the instructions on the IRS website. Once you complete the application, your EIN is available immediately for use.
LLC tax classifications
The sole proprietorship is the default tax classification for LLCs with one owner (also called a member). In this case, you don’t need to file extra federal tax forms since profits and losses from the business are included in your personal tax return.
LLCs with more than one member are taxed as a partnership. This requires a separate business tax return, and it's best to use a tax professional when tax season rolls around.
Costs to set up an LLC in NC
The costs to form your LLC in North Carolina will vary depending on its complexity and whether outside professional service providers are used. But here's a list of expenses you may have to pay to set up your LLC in North Carolina.
- Name reservation: $30
- Professional registered agent: $100 – $200 / annually
- Filing Articles of Organization: $125
- Expediting fees: $100 – $200
- Certified document copies: $15+
- Drafting operating agreement: $0 – $2,000
- GRAND TOTAL: $170 – $2,570
Last steps
You're nearly finished with the administrative work on setting up your North Carolina LLC. But here are a few items you don't want to overlook. They are critical for your company's success.
North Carolina has no state requirements around opening a business bank account upon LLC formation. Yet, since you must keep your business and personal finances separate, it’s a sound next step to make. Note: Limited liability company laws require you not to blend your business and personal finances. For example, you should not pay for business items out of your personal checking account or vice versa. This implies that your LLC isn’t truly a separate business entity. If you’re commingling funds and you get sued, you could lose the asset protection that an LLC provides, and your personal assets could be in jeopardy.
North Carolina doesn't require a general business license to operate an LLC in the state. But if you're operating in certain industries or professions, specialty licenses may be needed. For example, a hair salon will need a cosmetology license and a retail coffee shop will need a sales tax license and health and safety permits from the county.
Begin by checking your local county clerk's office to learn which permits or licenses you may need, or you can start a search using the North Carolina Department of Commerce occupational license database.
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Last updated: Apr 2024