Form an LLC
Step 1) Verify & Secure Your LLC Name
First off, in order to launch a successful North Carolina LLC, you need to give it the right name. Your business name needs to be catchy for branding purposes and legitimate for legal purposes. We go into depth on this topic in our LLC naming guide, but we’ll go over the legal basics below.
Legally, your business name must:
- Contain the words limited liability company or limited company, or the abbreviation LLC or L.L.C.
- Not contain restricted words or phrases (these often include words like bank, attorney, and university) without the proper approval.
- Be distinguishable from any other entity or trade name registered in North Carolina.
If you’re having trouble coming up with a name that captures your brand, don’t let that stop you from forming your LLC. For now, you can focus on the legal requirements and consider filing for an assumed business name after you’ve nailed down your branding.
What To Do:
Once you’ve decided what you’d like to call your LLC in North Carolina, do a business name search to find out whether or not it’s in the cards. If your business name is available, you’ll be able to lock it down when you file your Articles of Organization.
Quick Note: Before you commit 100% to a name, you should see if there’s a decent URL available. Use Weebly to search your options. If there’s a quality domain name for purchase, we advise buying it right away because even if launching a business website isn’t on your radar right now, it’s going to be soon.
Step 2) Designate A Registered Agent
When you file your Articles of Organization, you will be asked to appoint a North Carolina registered agent.
Your registered agent will be responsible for receiving important legal documents like tax forms and service of process notices on behalf of your LLC. Your registered agent can be an individual resident of the state or a company that’s legally authorized to represent businesses in North Carolina.
North Carolina does give you the option to act as your own registered agent, but many business owners choose to appoint a professional instead. Here are a few things to think about before you decide to act as your own:
- You’ll have to maintain normal (9 am - 5 pm) business hours at the address you provide.
- If you run your business from home, you’ll be required to make your personal address public.
- You must keep up on important notices, dates, and deadlines.
- You could be served in front of your family or coworkers.
What To Do:
If you’re considering acting as your own registered agent, do some research, starting with our registered agent guide. If you decide you’re up for the task, go ahead and list your own name and address on your Articles of Organization.
If you’re leaning toward hiring a professional, we recommend doing so through an online LLC formation service. Many of these companies (like Northwest) offer up to one year of registered agent service free when you form your LLC with them.
Step 3) File Articles Of Organization
Download and file the Articles of Organization (Form L-01) with the NC Sec. of State’s Office through mail or Online Filing System only when you’re ready. If you’re going to reserve the name do that BEFORE filing the articles which declare the basics of your LLC for the public record:
- LLC name and address (if you have a principal location),
- Complete name of North Carolina registered agent and address,
- Hours of operation and nature of business.
- Complete name and address of signatories in the articles.
Action Step: File your articles of organization with the North Carolina Secretary of State.
Filing Fee: $125
Step 4) Get An EIN
The Employer Identification Number (EIN), or Federal Tax Identification Number, is essentially a social security number for your company. State and federal agencies use this number to track your business activity.
Your EIN will come in handy when it’s time to:
- Open a business bank account
- File Federal and State taxes
- Hire employees
We think the best way to get an EIN is by using the free online application on the IRS website. We prefer this method because it’s the most efficient, but if you’d prefer to apply via phone, fax or mail, read through our guide to find out how.
Step 5) Draft An Operating Agreement
Creating an LLC operating agreement is the only way for you and your members to fully define your roles and lock down your LLC’s management and ownership structure. Having this document in place will also give you all something to return to if a dispute or lawsuit arises.
Your operating agreement should outline the following:
- each member’s responsibilities
- how new members will be admitted
- how existing members may transfer or terminate their membership
- how profits and dividends are to be distributed
From there, you can add as many provisions as you want, provided they are not in conflict with North Carolina business law. To access a free operating agreement and learn more about how this document works in North Carolina, click here.
Maintain Your LLC's Personal Asset Protection
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
You can protect your business with these two steps:
1. Opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
2. Getting a business credit card:
- Helps you separate personal and business expenses.
- Builds your company's credit history, which can be useful to raise capital later on.
Reduce the Liability of Your LLC
Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance are:
- General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
- Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers against claims of malpractice and other business errors.
- Workers' Compensation Insurance: A type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths. In North Carolina, businesses with three or more employees, excluding business owners, are required by law to have workers' compensation insurance. Get a free quote with ADP.
If you plan to hire employees, stay compliant with the law by following these steps:
- Verify that new employees are able to work in the US
- Report employees as "new hires" to the State
- Provide workers' compensation insurance for employees
- Withhold employee taxes
- Print compliance posters and place them in visible areas of your work space
Find out more information from North Carolina's Department of Labor.
As a new LLC, you will need to stay compliant with permits, licenses, taxes, and state filings like your annual report. This is serious business; failure to comply can lead to fines, tax penalties, and dissolution (the end) of your LLC.
Business Licenses and Permits
To operate your LLC, you must comply with federal, state, and local government regulations. The details of business licenses and permits vary from state to state, so make sure you research carefully and plan accordingly.
Find out here how to obtain necessary licenses and permits for your business or have a professional business licensing service do it for you:
Federal: Use the U.S. Small Business Administration (SBA) guide.
State: Use North Carolina's Business Development Website.
Local: Contact your local county clerk and ask about local licenses and permits.
If you are selling a physical product, you’ll typically need to register for a seller's permit through the North Carolina Department of Revenue website.
This certificate allows a business to collect sales tax on taxable sales.
Sales tax, also called "Sales and Use Tax," is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.
Here’s a sales tax guide to find out more.
If you have employees in North Carolina, you will need to register for Unemployment Insurance Tax through the North Carolina Division of Employment Security. You will also need to sign up for Employee Withholding Tax through the North Carolina Department of Revenue.
North Carolina requires all LLCs to file an annual report. If you miss state filings like the annual report, you could face fines or even automatic dissolution. A quality registered agent service can help protect your assets by keeping track of filing requirements for you.
Mail to: Secretary of State PO Box 29525 Raleigh, NC 27626
Due Date: Due each year by April 15th.
Late Filings: North Carolina does not charge late fees if you miss your filing deadline. North Carolina will dissolve your LLC within 60 days for failure to file an annual report.
Easy Action Steps for Staying Compliant:
- Check on and comply with licensing and permit requirements.
- Check on and comply with tax requirements.
- Stay up to date on state filing deadlines, especially the annual report.
Reduce Administrative Burden
There will be many demands on your time once you start your business. With that in mind, it’s a good idea to streamline your workflow and reduce administrative overhead from the get-go. The two most important business tasks to get help with are:
Getting your books in order right up front will save you headaches in the future. At the very least, you can have a professional set-up your bookkeeping and accounting for you. This will save you money and time in the long run.
There are all-in-one services that will do your bookkeeping, invoicing, and tax filing all for one monthly fee. Mazuma ($95/month) is a reliable all-in-one tax service.
2) Employee Payroll
If you have employees, a payroll service will save you a lot of time and also save you from having to become an expert on state compliance or employee tax withholdings and filings.
Gusto is a a reliable and good payroll service for small businesses.
Need Help Forming an LLC?
When you’re starting a North Carolina LLC, it might be worth getting professional help.
You have several resources at your disposal, and it’s up to you to decide which you’d benefit from the most. That said, here are three of the most popular LLC formation services and our reviews of them:
–Northwest ($49 + state fee) = Best Price & Overall Value
– LegalZoom ($79 + state fee) = Best For Brand Recognition
Note that this guide for forming a North Carolina LLC isn’t a legal document or legal advice. It’s for informational purposes and the information above is subject to change. For specific legal questions regarding how to form an LLC in North Carolina, consult with a business attorney. We recommend K. N. Price Law.