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The state of North Carolina is home to a vibrant business community, spanning diverse industries such as aerospace and defense, automotive manufacturing, biotechnology, education, farming, and financial services. It can be an exciting place to start a business, including a limited liability company (LLC). This guide will walk you through the steps of setting up an LLC in North Carolina and help you maneuver the complexities of the process.
How to start an LLC in North Carolina
What is an LLC?
A limited liability company, or LLC, is a common type of business entity in the United States and is popular among small business owners. LLCs account for more than 35% of all businesses nationwide, according to the National Small Business Association. A major advantage of running a business as an LLC is that this business structure provides a degree of personal asset protection—meaning you aren’t held financially responsible for most business debts or legal claims brought against your LLC. Owners are known as “members,” and LLCs formed by one owner are called single-member LLCs, while those formed by more than one owner are called multi-member LLCs.
Is an LLC right for you?
There are two questions to ask yourself when deciding whether the LLC structure is the right choice for your North Carolina business:
- 1. Do you have personal assets in need of protection? If so, forming an LLC in North Carolina can help shield those assets from creditors or litigants in the event your business faces bankruptcy or legal action.
- 2. Are you looking to limit your tax liability? Unless your LLC elects to be taxed as a C corporation, it is considered a “pass-through” entity in North Carolina—meaning the business is subject to a single round of taxation (personal income tax), as opposed to so-called “double taxation” (corporate and income tax). These LLCs will not pay corporate taxes, and will instead be taxed one time at the owners’ personal income levels.
1. Choose a business idea for your LLC
The first, and perhaps most important, ingredient toward a successful North Carolina LLC is having a solid business idea. This step is about more than just figuring out whether you’re going to sell a product, service, or combination of both. It’s also about understanding your LLC’s positioning in the North Carolina business landscape—determining whether you will be selling direct-to-consumer or to other businesses. Here are other considerations about the overall direction of your North Carolina LLC:
- Who is your customer? A key puzzle piece of your North Carolina LLC is understanding your target market and customer. You can learn this by conducting a competitive analysis of other businesses in your market, analyzing marketplaces where similar products or services are sold (like Amazon), surveying prospective customers, or researching industry trends.
- What is your projected profitability? Like any business, the survival of your North Carolina LLC depends on its profitability. To get to that point, there are a few questions to consider asking yourself: What will pricing look like? Will products or services be bundled or packaged? Does a subscription model make sense? What is the break-even point? And lastly, how many products or services will have to be sold before covering costs and making a profit?
2. Name your North Carolina LLC
After settling on an idea, there’s another crucial decision to be made: What are you going to name your company? A good name is essential for a variety of reasons, including building brand recognition. Generally, a name effectively communicates what the business does in a short, catchy, and memorable way. It’s important that the name align with your LLC’s mission. These are the specific rules for naming your LLC in North Carolina:
- Your North Carolina LLC’s name must contain the phrase “limited liability company” or a variation of its abbreviation, LLC or L.L.C.
- Your LLC may not contain words that would confuse it with any governmental agency— federal or state—like the IRS or North Carolina Department of Motor Vehicles.
- Your LLC name must be unique. It can’t be shared with any other registered North Carolina business. To check the name’s availability, conduct a search with the North Carolina Secretary of State’s website.
3. Create a business plan
A workable business plan will include your LLC’s name and a brief description of what you plan to market. Additional components include a thorough market analysis, an outline of the managerial and broader organizational structure, descriptions of products and services you plan to market, a profile of your target customers, and plans for marketing, logistics, and financials.
4. Get a federal employer identification number (EIN)
A federal employer identification number (EIN), also known as a federal tax ID, is a nine-digit number assigned to businesses by the IRS for tax purposes. It functions similarly to a person's Social Security number. Obtaining an EIN is necessary if your North Carolina LLC has more than one member. Likewise, expect to need an EIN if you choose to hire employees or elect to have your LLC taxed as a corporation instead of a pass-through entity. You can obtain an EIN online through the IRS website.
5. Obtain your North Carolina certificate of registration
North Carolina will issue a certificate of registration confirming the existence of your LLC after you’ve filed certain formation documents and had them approved. Collectively, these are called articles of organization, also known as articles of incorporation, and they should include the following:
- The LLC’s name
- The intended duration of the LLC’s operation (this can be “perpetual,” meaning operating indefinitely, until voluntarily dissolved)
- Name and address of the person filing the articles
- Name and address of the registered agent
- Description of the managerial structure (for example, is the LLC managed by the members or a hired manager?)
- Business email address
- Names and addresses of all members
A $125 filing fee must be paid upon submission of the articles.
6. Appoint a North Carolina registered agent
In North Carolina, you are required to appoint a registered agent for an LLC. A registered agent is a person or organization authorized to receive legal service of process and other official documents on your behalf. A registered agent in North Carolina can be a person, including an employee or member of your LLC, or a company that offers registered agent service. Your registered agent must be at least 18 years old and have a mailing address in North Carolina. If opting for a service, an agent must be on-site and available to accept documents during regular business hours.
7. Obtain business licensing and permits
To lawfully run your LLC in North Carolina, you may need to acquire certain business licenses required in the state. Although a general business license is not mandatory in North Carolina, it may be necessary to obtain one depending on the industry in which you’re operating. The state’s directory of occupational boards can help point you in the right direction.
8. Understand North Carolina tax requirements
LLCs in North Carolina can be taxed as corporations, limited liability partnerships, or single-member LLCs—like sole proprietorships. Depending on the type of tax structure elected for your LLC, you will have different tax obligations.
- Personal income taxes. Regardless of how you choose to form your LLC—as a pass-through tax entity or as a corporation—you and any business partners will pay taxes on income earned through the LLC at the personal-income level.
- Corporate taxes. If electing to form an LLC as a corporation, the LLC will pay taxes on all profits generated before they are distributed to shareholders, at which point they will be taxed again at the shareholders’ personal income levels. In North Carolina, the corporate tax rate is 5% of taxable income.
9. Prepare an operating agreement
An LLC operating agreement is a legal document that outlines the manner in which your North Carolina LLC will conduct business. It’s not required, but it provides a cohesive plan for internal operations and accountability, laying out who is obligated to do what, and when. At a minimum, areas to cover include:
- Your LLC’s name and primary address
- How long you plan to run the LLC, perhaps indefinitely
- Information on the LLC’s registered agent
- Information about the articles of organization
- The business’s purpose and mission statement
- An organizational chart, listing members and their respective investments in the LLC
- How profits and losses will be divided between LLC members
- The process for admitting new members, and offboarding outgoing ones
- An overall management plan for the LLC
- Various indemnification and liability provisions
10. Examine business insurance options in North Carolina
No matter how much planning you might put into forming your North Carolina LLC, the unexpected can happen—including facing financial losses. While LLCs offer a degree of personal asset protection, you may still want to purchase insurance for any gaps in coverage. Also, if you intend to hire employees in North Carolina, you will need to purchase insurance. Types of insurance a North Carolina business should consider include:
- Liability insurance. Covers your business for any legal actions resulting from accidents, injuries, or negligence.
- Commercial property insurance. Protects your business from costs associated with fire or weather damage, or theft.
- Professional liability insurance. Protects manufacturers, wholesalers, distributors, and retailers from liability in connection with unsafe products.
- Cyber liability insurance. Protects North Carolina businesses from costs associated with suffering a data breach.
- Umbrella insurance. Helps cover anything that may exceed policy limits on other insurance plans.
The Small Business Administration maintains a list of forms of insurance your new North Carolina business may need.
11. Understand financial considerations
Aside from insurance, you will likely also have to make other essential purchases to get your North Carolina LLC up and running. These expenses might include rent toward a physical retail space, a professionally designed website, advertising, computers and other business equipment, or software. You may also want to hire one or more lawyers, accountants, or other professionals. These costs can add up. Luckily, there existaccessible, fast options to obtain startup funding of this sort.
12. Market your LLC
A solid marketing plan for your North Carolina small business covers several key elements:
- Market research. It’s essential to understand your LLC’s target customer, which can be accomplished by conducting thorough market research.
- Advertising and promotion. Traditional paid advertising may seem dated, but it can still be a great way to get the word out about your product or service. You can create and pay to place these ads yourself, or hire an agency to do it for you.
- Social media. Most successful businesses have a robust social media presence across platforms including Facebook, Instagram, and YouTube, for example. Those in North Carolina are no exception. By publishing content consistently that aligns with your brand, your company can be in a better position to reap rewards: wider visibility and customer-base growth, among other benefits.
- Public relations. Develop strong relationships with media outlets, both in North Carolina and nationally, that can organically increase your LLC’s standing across customer communities.
- New business and customer retention. Leverage your marketing materials, digital tools, and platforms to build genuine relationships with customers. This can turn them into return customers, and encourage them to introduce friends, family, colleagues, and neighbors to your business—adding new customers.
Starting an LLC in North Carolina FAQ
How much does it cost to form an LLC in North Carolina?
Starting an LLC in North Carolina costs, at a minimum, $125 to register your business with the state.
Do you need a registered agent for your LLC in North Carolina?
Yes, all LLCs incorporated in North Carolina are required to name a registered agent with an in-state mailing address.
How do state taxes for work LLCs in North Carolina?
Unless LLCs elect to be treated as corporations, state taxes are applied to them in the same way federal taxes are—one time, at the personal income levels of its members.