How to start a North Carolina LLC

An LLC is a type of business that helps protect its owners (called members). This means that if the business owes money or gets sued, the members’ personal assets, like their house or car, are usually safe. 

In the state of North Carolina, an LLC is defined as “an entity formed under [Chapter 57D] (or former Chapter 57C of the General Statutes) that has not become another entity or form of entity by merger, conversion, or other means”(§ 57D-1-03(19)). That means an LLC in North Carolina is a company created within the state or a company that becomes subject to North Carolina’s state regulations surrounding LLCs (Chapter 57D).

If that sounds like a lot of legal jargon – that’s because it is! What you need to know is that LLCs are popular with business owners because they are simple and flexible to run. They have fewer rules compared to comportations and the owners can choose if they want to manage the business themselves or appoint managers to do it. 

Another benefit is how taxes work: LLC owners can pay taxes through their own personal tax returns, or they can choose to have the business pay taxes separately, like a corporation. This gives owners more choices in how they handle taxes as their business grows.

Why should I register for an LLC in North Carolina?

You may want to register for an LLC in North Carolina when:

• You own or want to start a business in North Carolina, or want to expand an existing business into North Carolina, and want to stay legally compliant. 
• You own or want to start a business, and want more flexibility on how you will manage the business or pay taxes than a corporation would provide.
• You want to protect your personal assets from potential liability resulting from business you conduct in the state of North Carolina. 
• You own or want to start a business, and want to register in North Carolina to open accounts, lease or buy property, secure funding, or hire employees.

Do I need to file my LLC in North Carolina if I live in another state?

Any LLC that does business in North Carolina must register with the State of North Carolina. North Carolina does not outline any specific actions that constitute transacting business, however, these actions, among others, are not considered to be doing business in North Carolina:

• Maintaining or defending any proceeding or effecting the settlement thereof or the settlement of claims or disputes.
• Holding meetings of its members, managers, or other company officials or carrying on other activities concerning its internal affairs.
• Maintaining bank accounts or borrowing money in this State, with or without providing security for repayment or other performance and without regard to the frequency of such transactions.
• Maintaining offices or agencies for the exchange or other transfer and registration of all or any class or portion of its membership or other equity or beneficial ownership interests or securities, or appointing and maintaining trustees or depositories with relation to its membership or other equity or beneficial ownership interests or securities.
• Soliciting or procuring orders, whether by mail or through employees or agents or otherwise, where the orders require acceptance to be made outside of the territory of this State to become binding contracts.
• Making or investing in loans with or without security, including servicing of mortgages or deeds of trust through independent agencies within the territory of this State, conducting foreclosure proceedings and selling or acquiring property in foreclosure sales, and managing or renting property acquired in foreclosure sales in connection with and in furtherance of efforts to sell and otherwise liquidate such property, provided no office or agency of the foreign LLC is maintained in this State.
• Taking security for or collecting debts due the foreign LLC or enforcing any rights the foreign LLC may have in property subject to or otherwise providing security with respect to the repayment or other performance of the debt obligations.
• Transacting business in interstate commerce.
• Conducting an isolated transaction completed within a period of six months but not repeated transactions of a similar nature.
• Selling property or services through independent contractors.
• Owning real or personal property. (2013-157, s. 2.)

LLCs based in North Carolina are called "domestic LLCs," and out-of-state LLCs are called "foreign LLCs." Foreign LLCs and domestic LLCs may have different filing and compliance requirements -- Rocket Lawyer can help you navigate foreign LLC registration, regardless of where you live.

How to start an LLC in North Carolina

1. Find a unique name for your North Carolina LLC

The state of North Carolina requires that the names of all LLCs in the state:

• Must include an entity designator.
• Not imply a different business purpose than the one listed in the Articles of Organization.
• Are not too similar to existing LLCs in the state. You can search the state of North Carolina's database of business entities in the state to ensure your business' name is unique.

Rocket Lawyer can help you determine whether your business' name is eligible for registration in North Carolina and may be able to help you reserve the name before you file your LLC.

2. Include your other LLC members (if any)

In North Carolina, you can in fact form as a one-person LLC. In this case, the LLC would be referred to as a single-member LLC (SMLLC), whereas if there is more than one owner, the LLC may be called a multi-member LLC. 

The main difference between single-member and multi-member LLCs lies in ownership structure and management. With a single-member LLC, you have full control over the business. In contrast, a multi-member LLC has multiple owners, each with a specific percentage of ownership as defined in the operating agreement. This means that in a multi-member LLC, owners share profits, losses, and tax responsibilities based on their ownership percentage.

3. Provide a North Carolina address

This will be used as your official LLC address. The address that you list may either be your home, an office, or another physical location, but it cannot be a PO box.

4. Choose a Registered Agent

A Registered Agent is the person or business responsible for receiving tax, legal, and government documents during regular business hours. It's important that every business has one. You can either serve as your own registered agent (if you have an North Carolina address) or choose one to do that service for you (if you are not located in North Carolina or would like an extra layer of privacy).

5. Register your LLC with the state of North Carolina

Once you have a business name and registered agent, you can register your business as a North Carolina LLC with the state of North Carolina by filing your Articles of Organization. This document may be referred to informally as an LLC's "Articles," or in other states, it may be called a "Certificate of Organization," "Certificate of Filing," or "Certificate of Formation."

6. Get an Employer Identification Number (EIN)

North Carolina LLCs are required to have a Federal EIN tax number. Think of your tax ID as the social security number for your company. It will be important for business contracts, tax filings, and all manner of documents down the line. Every company should have one to remain in good standing.

7. Pay the state filing fee

Every state has different fees for forming an LLC, which can also vary from one year to another.

Congratulations! After you have completed all these steps, you have formed your North Carolina LLC.

What to do after forming an North Carolina LLC

There are a few steps you need to take to maintain your North Carolina LLC:

1. Create an Operating Agreement: while not mandatory, this is very advisable. We can help you create your North Carolina LLC Operating Agreement online.
2. Hold a meeting: a first meeting with members of an LLC is not required by law, but it is highly suggested in order to get organized. Also, unlike corporations, LLCs are also not required to maintain Meeting Minutes, but these documents are also recommended as they provide records for important decisions made.
3. Pay taxes according to how you chose to be taxed: traditionally, LLCs are "pass-through entities." This means that you pay your business taxes on your personal tax form. That said, you can elect to be taxed like a corporation, if you choose to do so.
4. File an Annual Report: this is required of all LLCs in North Carolina and it is due on or before April 15 each year. Only managers or members can sign reports.

What is needed to keep records for my North Carolina LLC

The State of North Carolina does not have any regulations regarding specific documents that are to be kept by LLCs, but the state does require LLCs to provide the following documents to members upon request:

• A current list of the full names and last known mailing addresses of each member.
• Information pertaining to the status of the company and its financial condition.
• Copies of the company's federal, state and local income tax returns for each year.
• A copy of the articles of organization and any amendments thereto.
• Copies of any written Operating Agreements and any amendments put forth.
• Information pertaining to the cash and a description and statement of the agreed services or property contributed by each member as well as future contributions.
• The date in which each member became a member.
• Other reasonable information regarding the company's affairs.

Still have questions? Rocket Lawyer can help you with the process of forming a North Carolina LLC. Get started today!

  

Key takeaways Registering an LLC in North Carolina can give you a lot more flexibility than a corporation, as well as protection for your personal assets from potential liabilities. Even if you live in another state, you must register your LLC in North Carolina if you do regular business there, like selling things or having employees. After starting your LLC, it’s advisable to create an Operating Agreement and hold a first meeting. You will also need to file an Annual Report. Keep records of your North Carolina LLC, like the names of all members, tax documents, and your business rules. These help you stay organized and follow the law.

Additional resources

Learning how to enforce a contract is just one step. Explore these additional topics to learn more and take the next steps.

• What is an LLC
• How are LLCs taxed
• How to start an LLC
• Do I Need a Registered Agent?
• How and when to file an Annual Report