Create an LLC

How to start an LLC in North Carolina

If filing an LLC in North Carolina is on your plate, then you're in luck! We've compiled all that you need to know about starting an LLC in North Carolina in this guide.

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A Limited Liability Company (LLC) is a formal business entity that combines the features of a sole proprietorship and a corporation. Like a sole proprietorship, an LLC offers pass-through taxation to avoid being taxed twice. And, like a corporation, it also offers limited liability protection from responsibilities like debt, taxation and bankruptcy.

LLCs can be owned by multiple individuals, businesses and organizations, except for banks and insurance companies. All firms or persons operating an LLC are referred to as members. Although starting an LLC is not too complicated, the requirements will vary depending on the state where the company is being organized. To learn how to file your LLC in the state of North Carolina, follow the step-by-step instructions below.

North Carolina LLC fee breakdown

To create an LLC in North Carolina, specific fees will have to be paid to secure certain documents with the state. These include:

1. Fee to file the LLC’s articles of organization: To create an LLC in North Carolina, articles of organization must be filed with the Secretary of State. This costs a one-time fee of $125.

2. North Carolina annual report fee: Although this is not a start-up fee, all LLCs in North Carolina are expected to file a report annually with the Secretary of State. Submitting this report by paper costs about $200, or $202 to file online.

3. Cost to register a foreign LLC in North Carolina: This cost only applies to LLCs that are already established in other states and intend to expand into NC. The LLC would have to be registered as a foreign LLC, which costs $250.

4. Fees for certified document copies: This fee is paid to the NC Secretary of State to obtain certified copies of the LLC's filed documents. The fee is $30. 

5. Fee for the LLC's certificate of existence: This fee of $10 is also paid to the NC's Secretary of State to obtain the LLC's certificate of existence, which is also known as North Carolina's certificate of good standing. This certificate proves that the LLC exists and is registered with the state. It is often required when seeking to obtain a loan.

6. Fee to reserve a business entity name: In situations where it will take longer than expected to create an LLC in North Carolina, the LLC members can reserve a business name with the NC Secretary of State. This costs $30.

7. Fee to register an “assumed business name”: People seeking to create an LLC in North Carolina can apply for an assumed business name certificate at the office of the Register of Deeds in the appropriate county. This costs $26. An assumed business name allows the business to use a somewhat less formal name while operating in the state. 

Steps to create an LLC in North Carolina

To start your own LLC in North Carolina, you will need to follow these steps:  

1. Name your NC LLC

As with every other business entity, you must start by choosing a brand. This is basically what naming the company does: it provides the company with an identity even before it is registered, since no one can refer to a company without a name. When naming an LLC in NC, there are specific guidelines provided by the state to ensure that the name is acceptable. These guidelines are: 

a. Availability of the name in the state: You must check that an existing business is not using the name you want for your LLC. If the name is unavailable, you will not be allowed to register the LLC. It is crucial to check with the Register of Deeds office in the county and surrounding counties1. You should also check the Chamber of Commerce list, and the city's business directories both online and locally within the state, to be sure that the name you have chosen is available.

b. North Carolina rejects the use of certain words in naming an LLC unless documentation is provided to prove that the company is legally qualified to render the services implied. These words are: Cooperative/co-op, engineer/engineering, insurance, surveyor/survey/surveying, realtor, mutual, apothecary, drug, pharmacy, trust, bank/banker/banking, Rx, prescription drug, realtor, Certified Public Accountant or abbreviations of the likes, and others listed on the NC's Secretary of State Website.

c. Hire a firm that offers trademark search services or an attorney to conduct a search in the US Patent and Trademark Office to ensure no similar trademarks are registered.

d. Ensure that the words that make up your company name are registrable as service marks or trademarks under NC law. Do the research or call the Trademark Registration website of the state's Secretary of State for confirmation. 

e. All LLCs in the state must contain one of these words: Limited liability company, LLC, ltd., liability company, or limited liability co.

f. Create a business website: Although this is not a state requirement, it is important to create a website for your business around the time of formation. This will help you secure a domain that matches your company’s name for when the need arises in the future, and help you decide if you should choose another name should the domain name be unavailable.

2. Choose a registered agent in NC 

A registered agent is a business, individual, or entity that stands as the point of contact between the state and the company.2 A registered agent is a lawful requirement for all LLCs in NC and is responsible for communicating with and receiving paperwork from the state, as well as receiving services of process in lawsuits against the company.  

A registered agent will also help the company keep track of payments, fines, and reports due, ensure that the LLC's dealings and credentials are kept private, ensure that all the company's members can attend to other issues and duties, and even take some time off work. Also, a registered agent is required if an LLC intends to expand into other states to enable the LLC to keep the demands and requirements of the states. 

As long as they meet the age requirement of 18, one of the company's owners can serve as the registered agent. However, this will require the individual to be available in one set location during business days and business hours. It is mandatory that the registered agent of an LLC in NC resides in the state, or is registered in the state if it is a business entity, and works within usual business hours. You can also hire a registered agent from companies that offer such services.

3. File North Carolina articles of organization

North Carolina articles of organization are a series of documents concerning the company that must be filed with the NC Secretary of State to allow the business to be legally established. Articles of organization will clearly spell out the responsibilities and liabilities of the company, the name of the business, and the names and responsibilities as well as control that each member of the LLC maintains.  

In NC, filing articles of organization is relatively easy, as the state provides the company with a form to fill in all the required documentation, and the company is allowed to download the form and send it to the NC Secretary of State via mail or fill out the form online. Information needed for the articles of organization includes the name and address of the company, the registered agent's information, the effective date, the name and business address of the company's members, the company's registered address as well as email address, the organizers, the signatures of the LLC's members, and the date of the articles, amongst other required details. The articles of organization are usually approved within 7-15 days, depending on how it is submitted. 

North Carolina single-member LLC filing requirements: A single-member LLC is owned by only one individual. The requirements for filing articles of organization for a single-member LLC include the name and address of the company, name and address of the owner, the registered agent's name and address, and the street address and county of the company's registered office.

North Carolina multi-member LLC filing requirements: A multi-member LLC is one owned by multiple owners, or members. In this case, all members are responsible for making decisions concerning the LLC, although they function in different capacities. The requirements for filing articles of organization for a multi-member LLC are basically the same as that of a single-member LLC, except that information such as the name, address, and capacity of every member is required. 

4. Receive a Certificate of Formation from NC

A certificate of formation is the certificate issued to the company by the state after filing the company's articles of organization. This certificate is usually sent to the company via the company's registered agent, confirming that the LLC legally exists, is registered in the state, and complies with the state's rules and requirements. In NC, the certificate of formation is referred to as a certificate of existence3 and is issued by the Secretary of State. It can be requested by mail, email, fax, phone calls, online, and in person.  

The NC certificate of existence usually contains the company's date of incorporation and confirmation that the company is within good legal standing and is allowed to operate in NC. It is crucial that LLCs obtain a certificate of existence as it is usually required when the company intends to expand to other states, open a bank account, seek funding, secure business insurance, renew licenses and permits, and transfer or sell parts of the business.  

5. Create an NC operating agreement

An operating agreement is a formal document made within the company that clearly states the mode of operation of the company.4 This document is expected to contain the company's name, duration of operation, address, the company's rules and regulations, as well as how the company will be managed, how it will allocate profits and losses, how its members will vote, how a member may be removed, and how the company will be dissolved if need be. 

Although an LLC's operating agreement is not to be filed with the state, it is essential that every LLC has one, as the document will aid in running the company, prove ownership of the company, ease misunderstandings among members, enable the company to act above NC's default laws, and strengthen the company's limited liability status. Both single and multiple-member LLCs within the state should own operating agreements, as it will aid the LLC in running smoothly. 

In the case that an LLC in North Carolina does not document a brand new operating agreement, the company's articles of organization, company agreement, and bylaws will then make up the company's operating agreement. 

6. Get an EIN number

Every LLC in NC is required to procure an employer identification number (EIN) and in some cases a Tax ID Number (TIN).5 The EIN is necessary to enable the company to pay taxes, open bank accounts, hire employees, and work with other companies. The requirements for an EIN are the full names and addresses of the company's members as well as their social security numbers.  

All LLCs in NC must obtain an EIN, even if they do not intend to employ workers. Single-member LLCs, too, must obtain an EIN, except if the LLC intends to be taxed as a corporation or a sole proprietorship. The EIN is provided by the Internal Revenue Service and can be applied for via phone calls, mail, fax, or online.

All LLCs in NC that have an EIN must also obtain a state tax ID number which is issued by the state government and enables the company to identify with the state government, hire employees within the state, and sell taxable goods. 

7. Get NC business licenses and permits

Companies in NC are required to own certain licenses and permits, but they depend on the services the company intends to provide. LLC members are advised to confirm with municipal, town, and city clerks to inquire if there are local licenses to be acquired before the LLC can operate within its jurisdiction.  

LLCs that offer professional services such as accounting, healthcare, architecture, therapy, engineering, counseling, forestry, law, and so on will have to obtain licenses required for operation in their fields, as well as a certificate of authority from the NC Secretary of State. This license lasts until it is withdrawn by the state and does not require any certification, exam, education, experience, or physical requirements, but the LLC must have no criminal record. It costs $250 to apply for this license with the state but costs no fee to renew the license.  

Do you need a business license for an LLC in NC? 

Your business may require a license to operate in your jurisdiction, depending on the industry, but there is no federal business license required to operate a business in North Carolina. 

8. Open a business bank account for your North Carolina LLC

After obtaining an EIN, your LLC can open a bank account for safekeeping of funding, profits, and all other company finances. With a bank account, your LLC can apply for and obtain loans when required as well as pay salaries and bills. Make sure to take out time to decide what bank to open an account with, as not all business banks offer the same benefits. 

Requirements for opening a bank account for an LLC in North Carolina include the name and address of the business, the EIN or a Social Security Number (SSN), the company's establishment date, the country the company operates in, the company's articles of organization, and date of birth of all company members. 

Having obtained a bank account, it would greatly profit the LLC to also get:

  • A business credit card: A credit card allows your business to carry out its regular purchases with ease. Also, a credit card can aid your LLC in keeping track of its expenditure, so it can be easily recorded when needed for either an annual report or an end-of-year finance record. Credit cards often offer extra cashback or rewards that can help your business save money.
  • Business insurance: Obtaining business insurance aids your LLC in managing all risks that may arise and ensures more security. Insurance options available for businesses include general liability insurance; which protects the business from lawsuits and other legal opposition that the LLC may face; and Workers Compensation Insurance that provides cover for employees in the case of injuries, illnesses, and even deaths. All LLCs in North Carolina with over 3 employees are required by state law to have workers' compensation insurance. And lastly, professional liability insurance provides insurance for LLCs offering professional services and covers them in cases of error or malpractice. 
  • A business accountant: Having one or more professional individuals whose primary focus is to manage the finances of the company is vital, as it helps navigate through costly errors in paying taxes and fines. A business accountant will keep an eye open for the areas that the LLC seems to be overspending unknowingly and can save costs. Also, all financial reports, salary payments, budgets, and bookkeeping records should be done by or with the help of a business accountant. Of course, to save costs, a member of the LLC can serve as the company's accountant, provided that they are a professional in the accounting field.

Frequently asked questions

1. How much does it cost to start an LLC in NC?

The significant cost of an LLC in NC is the cost of filing the company's articles of organization, which is $125. Other costs required include: A registered agent fee, which is $50-$300; a fee to register a foreign LLC in NC, which is $250; a fee for filing the company's annual report, which is $200; and fees for obtaining certificates and documents, which may range from $10-$30.

2. How do I start an LLC for free in NC?

Unfortunately, creating an LLC in NC for free is impossible, as certain documentation to be filed with or obtained from the state requires payments. These documents include the LLC's articles of organization and certificate of existence, among others. Also, depending on the LLC's services, the licenses the company must get will require payments. 

What you can do as a business owner is reduce the cost of creating an LLC in North Carolina. This can be done by lowering the number of professionals or employees hired by the LLC until there are enough funds to hire more. For example, the LLC can have one of its members function as the company's accountant instead of hiring one. The LLC can also file its annual report by paper and save about $2 on every report. Also, after obtaining an EIN for free, the LLC can apply for loans and grants offered within the state to fund its creation. 

3. How do I remove a member from an LLC in NC?

Suppose a member of an LLC is willing to leave the company. In that case, there are few processes involved. Although they can voluntarily leave, other members would need to apply to have the individual's information removed from the company's documents filed with the state and banks. Members may also have to resort to the terms of the company's operating agreement and any relevant resolution.

Based on their operating agreements, most LLCs take a vote among the members to determine whether the erring member should be removed. This is usually done if and when the member to be removed and the rest of the members of the LLC have failed to come to a resolution concerning the issue. 

4. Where can I find NC Secretary of State forms?

Forms required from the Secretary of State to create an LLC in NC can be obtained from the NC Secretary of State website. All forms can be obtained from the website, or you can request the forms via mail, fax, email, or in person.

5. Where can I apply for a North Carolina LLC online?

To create a North Carolina LLC online, the first place to go would be the NC's Secretary of State's website, where all forms and further guidelines are available. If you would like to skip the paperwork, you can also choose an LLC formation service like Nearside.

References

  1. 12 July. 2022:
    https://www.sosnc.gov/Guides/launching_a_business/feasible_use_of_the_name
  2. 12 July. 2022,
    https://www.offshorecompanycorp.com/company-formation/jurisdiction/north-carolina-usa?gclid=CjwKCAjw2rmWBhB4EiwAiJ0mtfMefjM9hUxlm7LJLf7wvLwY7u5V6E_A-jM3nYcXJkyg2KkXxaT34RoCtFkQAvD_BwE
  3. 12 July. 2022, https://www.zenbusiness.com/north-carolina-certificate-existence/
  4. 12 July. 2022,
    https://www.forbes.com/sites/allbusiness/2020/02/26/llc-operating-agreement-drafting-guidelines/?sh=41b7314158ce
  5. 12 July. 2022,
    https://www.irs-taxid-numbers.com/apply-online/north-carolina-tax-id-ein-number-application-manual/
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