A North Carolina entrepreneur may choose to set up a business as a limited liability company (LLC). This type of legal structure gives the owner benefits of the limited liability features that typically come with a corporation as well as the amazing tax perks and flexibility of operations a partnership offers.

Each state has different guidelines to form an LLC. Here are the guidelines to start a LLC in North Carolina.

Getting Started

Naming the LLC

The first and most important step in creating a LLC is to choose a name. In the state of North Carolina, the name of an LLC must contain the words Limited Liability Company or the abbreviation for those words which would be L.L.C. or LLC. In addition, certain words that are already being used by Federal or State agencies are strictly prohibited such as the word ‘bank’. If restricted words are chosen, the owners are required to file additional paperwork for approval.

Once a name is chosen, a search must be performed to ensure the name is available and is not being used by another North Carolina company or agency. A search can be performed to see if a business name is available in North Carolina.

Assuming a website will be designed for the business, it is a good idea to search now to see if the desired URL and domain name is available.

Choosing a Registered Agent

A registered agent, sometimes referred to as a Statutory Agent, must be selected for the LLC. A registered agent is a third-party individual who is designated to accept tax and other legal documents on behalf of a business. North Carolina requires that the registered agent reside in the state. It is recommended that the registered agent be a reliable third-party instead of a partner in the LLC.

Filing the Articles of Organization

The legal document necessary to file the Articles of Organization for a North Carolina LLC is Form L-01. Articles of Organization must include the following:

  • Company Name
  • Members (Owners)
  • Principal Office Address
  • Registered Office and Agent Managers
  • Optional Provisions
  • Powers

The Articles of Organization Form L-01 must be signed by all members and filed with the N.C. Department of the Secretary of State. The fee is $125 and is non-refundable.

Create Operating Agreement

The state of North Carolina does not require an Operating Agreement to form an LLC

Running Your Business

Getting Your EIN

What’s an EIN?

An EIN is an employee identification number, issued by the Internal Revenue service. Sometimes it is also called a Federal Tax Identification Number. It’s a unique number issued to each business.

You’ll need an EIN to

  1. Open a business bank account.
  2. File Federal and State Taxes
  3. Hire employees.

Before you get your EIN:

  1. Make sure your new business has been properly formed before applying.
  2. Be wary of paid sites. EINs are free direct from the IRS.

How do I get an EIN?

  1. Apply online: The easiest way is to apply online for an EIN. Note, the IRS website has office hours, and is only available Monday through Friday, 7am to 10pm. Yes, we also agree this is one of the most ridiculous things we’ve ever seen.
  2. Call: You can call 1-800-829-4933, between 7am to 7pm of your time zone, Monday to Friday.
  3. Snail Mail – You can download the form and mail it in.

Keep Business and Personal Accounts Separate

  1. Get a business bank account for your business. This will help you protect your personal assets from potential creditors and lawsuits, and will also make life A LOT easier come tax time.
  2. Get a business credit or debit card. This will help you keep your expenses separate and easier to track.

Accounting

No matter what business you run, accounting software and processes is a must for any small business. If you have an accountant, ask them which software they work with and recommend.

A good accounting system is necessary to:

  1. Track income and expenses, so you can easily see if you’re making money
  2. Makes filing income taxes so much easier.

Always try and find something that will:

  1. Sync with all of your bank and credit card accounts automatically – not just downloads, but auto sync.
  2. Automatch vendors, customers and other accounts.
  3. Let you accept credit cards and ach drafts with ease.

Employee Taxes

Businesses with employees in North Carolina must register with the IRS as well as the state’s Department of Revenue and set up accounts for Unemployment Insurance Tax and Employee Withholding Tax.

A North Carolina business with employees is required to withhold and pay employee income taxes to the NC Department of Revenue (NCDOR). An LLC must register with the NCDOR then pay the Employee Withholding Tax on a regular periodic basis, typically quarterly.

In addition, North Carolina LLC rules require a business to pay State Unemployment Insurance (UI) Taxes. The North Carolina Division of Employment Security (DES), overseen by the state’s Department of Commerce, manages the UI Taxes in North Carolina.:

Selling Goods and Services

Businesses selling goods and services to customers in North Carolina are required to collect and pay sales tax. This is done by registering with the NCDOR and making periodic tax payments. The amount due is determined by submitting the Sales Tax Returns to the NCDOR.

Industry Tax

Businesses falling in a specific industry, such as cell phone providers and liquor stores must also register for and pay the Industry Tax to the NCDOR.

Insurance

Worker’s Compensation Insurance

Worker’s Compensation Insurance is required for all North Carolina LLCs with employees. This state mandated insurance provides coverage for employees who are injured on the job or suffer from a work-related illness or disability. The North Carolina Industrial Commission regulates Worker’s Compensation insurance in the state.

State General Liability Insurance

A North Carolina LLC should obtain General Liability or Commercial Insurance. This protects the business assets and pays any costs for legal claims.

Keeping Your LLC Compliant

Every North Carolina LLC must file an Annual Report with the Secretary of State by April 15 of each year for a fee of $200. If the Report is not received by the April 15 deadline, ‘Notice of Grounds for Administrative Dissolution’ will be sent from the Secretary of State, which warns that the Annual Report must be completed within 60 days.

How to File a Foreign LLC in North Carolina

A Foreign LLC does not mean that it was created in another country, the term refers to any LLC that is formed in a state other than North Carolina. The North Carolina LLC Act requires a Foreign LLC to register with the state of North Carolina if selling goods or services in the state and must collect State Sales Tax.