How to Start an LLC in North Carolina
North Carolina has it all. There are beaches at Wilmington and the Outer Banks, mountains in the western part of the state, and cities like Asheville with plenty of things to do. There’s Mt. Airy, which the television town of Mayberry was based on, and the gorgeous Biltmore Estate. The economy is wildly varied as well. Research Triangle Park hosts more than 200 companies, with many of them pharmaceutical. Charlotte, home to Bank of America, is the country’s second-largest bank district. Other key economic leaders in North Carolina include food processing, technology, and vehicle parts. The state was 11th in the U.S. for the largest economy when considering gross national product (GNP) in 2018. The state GMP was $566 billion which was a 2.9% increase from 2017. Additionally, 81,000 jobs were added in 2018 for a 1.9% increase and reached a yearly average of more than 4.41 million positions.
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Those who want to make the most that North Carolina offers can start a limited liability company there. Forming an LLC requires entrepreneurs to follow state laws and procedures. Want to learn more? Use this step-by-step guide to set up your small business.
Starting a business involves several items in the process. The first for those wanting to start an LLC in North Carolina is to select a name for your LLC.
Name your LLC
Ready to search for a business name? Look to find out if it’s listed in the state’s business directory. Names that show up are unavailable. If your chosen name doesn’t appear, it’s yours to claim.
The first thing you should do to get started in business in North Carolina is to select a name for your LLC. As an LLC owner, you need a name to submit any paperwork.
Check name availability
A key aspect of picking a good name for your LLC is to make it unique. That is the primary rule for those doing business in North Carolina. The state wants all businesses to have distinctive names so they can’t be confused with other businesses.
All businesses are created and listed with the North Carolina Secretary of State’s office, so that is where you will start to find an original name. Write down some ideas for a name and then go to the free business name search tool to see if your ideas are distinguishable.
You can search either companies or assumed business names. An assumed business name is the same as a doing-business-as (DBA) name. You should search both ways. You can use the second search bar to search with your proposed name to see if there are businesses with similar names or you can search for an exact name. It doesn’t hurt to do both.
Once you search for a name or terms, a list of businesses with similar or exact names will generate. This will show you whether your desired name is already taken or available.
This page should be one you bookmark because it has links to forms, information, statutes, rules, and legislation you will need to see as you move along in starting your business.
Consider what makes a name memorable
Picking a good name for a business isn’t always easy. Some of the first ones you think of could already be taken. A good business name should be descriptive of the business and catchy enough to be easily remembered.
Some people get stuck trying to come up with a business name using a professional business name generator. These are automated services that are part of professional business services companies that can generate a list of possible names within minutes after you input some information.
You pay for the service and many times business name generators are part of an overall package that these companies have to get your business started.
Those who find a name they like still may not be ready to form a company. You can file a name reservation to protect anyone else from using it while you prepare the rest of the information to form your LLC.
You can reserve your business name in North Carolina by creating an account online and uploading an application electronically or downloading the application, filling it out, and mailing it. The name will be reserved for 120 days and the filing fee is $30.
Be sure the matching domain name and social media handles are available too.
Select a registered agent
Those wishing to start an LLC in this southern state must appoint a registered agent when filling out LLC formation documents. States require the names and contact information of registered agents in case your business must be served with legal documents like service of process.
North Carolina has some basic rules about who can be a registered agent. They include:
- The person must be a legal resident of North Carolina.
- They must have a physical address in the state, not a P.O. box.
- They must be legally approved to do business in North Carolina and have a mailing address identical to the registered office listed.
A business owner can be their own registered agent or you can ask a family member or a friend to take on the task.
Some people appoint their attorney as a registered agent and that works well because they would likely be called if they are served with legal documents.
Another option is to choose a registered agent service to do the task. There are services in North Carolina but there are also larger companies that can do business in the state. Some of these include Northwest Registered Agent, Incfile, and ZenBusiness.
These larger companies have some advantages in that they can do many of the paperwork tasks to get your business started including registering you with the state, getting your federal EIN, filing for your state tax number, and even picking a logo and slogan for your startup.
File Articles of Organization
The formal act of starting a business in North Carolina includes filing Articles of Organization. In this state. North Carolina is different as the state form for filing for business registration is called a cover sheet for corporate filings. The cover sheet is the same as filing Articles of Organization.
You must list a contact name, phone number, email address, business name, and type of document. You must also choose how to receive notifications of approval whether by email, delivery, or pick-up.
You can find out more about filing formation documents here.
The filing fee for filing a business registration depends on how fast you want it done. The standard fee for filing Articles of Organization is $125. Those who want their application handled within 24 hours of submission will pay an additional $100 and those who want same-day processing will need to pay an additional $200. Plus, the document must be received by noon in its proper form to get same-day service.
North Carolina processing time
Those filing Articles of Organization in North Carolina using the standard method will see their application processed between 7 and 10 days after filing. You can download your approval online, which makes getting your certificate faster.
Create an LLC operating agreement
North Carolina doesn’t mandate that LLCs have operating agreements. Yet, you should create one anyway to protect the business, yourself, and your LLC members.
An operating agreement sets a standard for how the LLC will be run and takes precedence over state laws. It sets a good foundation for your business and addresses aspects you might not otherwise think of but that could present problems later such as what to do with shares after the death of an LLC member or how to handle something like a natural disaster.
An operating agreement should include things like:
- Listing LLC activities
- Listing decision-makers
- Identifying voter rights
- Listing member interest transfers
- Qualifying initial contributions
- Profit and loss management
- Management structure (like member-managed, manager-managed)
- LLC member compensation
- Bookkeeping methods
- Dissolution procedures
You can’t start your LLC without dealing with varying tax issues.
Get your EIN
All businesses, except for sole proprietorships, will need an employer identification number (EIN) assigned by the IRS. This is an important number because it is what’s used when you file taxes, hire employees, and open business bank accounts. It’s like a social security number for your business.
Now, it’s easier than ever to get an EIN because you apply through the Internal Revenue Service website. The site will assign your business and EIN after you answer a few questions about your business.
New businesses in North Carolina must also file with the North Carolina Department of Revenue. That can be done electronically and the DOR will issue you a state tax identification number.
You can get your EIN by visiting the IRS website.
Open business bank accounts
One of the first things you will do after you get your business registered with the State of North Carolina and get your EIN and state tax number is open a business checking account. You will need an account in the LLC name to deposit checks made out to the business as well as apply for a business loan.
Be prepared to open a savings account and perhaps a line of credit. It’s good to have a couple of business credit cards too to help pay for inventory and preserve cash flow.
It’s important to keep your business finances separate from personal accounts. This helps you track all your business expenses, makes accounting easier, and ensures that money isn’t commingled.
Review LLC tax rules in North Carolina
North Carolina has one of the lowest corporate tax rates in the nation with a 2.5% corporate tax rate. For tax purposes, most LLCs are set up as pass-through business structures, which means income taxes, federal taxes, and state taxes are paid via your personal tax return.
Sales tax in North Carolina
North Carolina also has low sales tax rates. The state has a 4.75% sales tax and local entities can charge up to 2.75% in local sales tax making for a combined average sales tax of 6.98%.
There are many tax credits and tax incentives that North Carolina offers these types of businesses. Each of the state’s counties is part of a tiered program system that provides help to spur economic activity in less prosperous areas of the state.
The state also offers the Job Development Investment Grant which offers cash grants to businesses based on performance. The One North Carolina fund is a discretionary cash grant program directed by the governor for competitive job creation projects.
North Carolina also has historic grants, business and energy tax credits, and grants for manufacturing companies available.
File an annual report
Business entities in North Carolina are mandated to file annual reports. These reports are a way to update information like a change in a registered agent or LLC members. The state handles the due dates for annual reports by industry so you should look up when your due date will be.
Annual reports, called a Statement of Information in other states, can be filed online, although a change in registered agent may require you to mail your form.
It costs $203 for LLC to file an annual report electronically. Doing so keeps your business in good standing.
A North Carolina annual report can be filed online here.
Get insurance for your LLC
One of the most important things you will do to protect your business is to get insurance. Three types of insurance will prove to be the most crucial and that is liability insurance, worker’s compensation, and property insurance.
General liability insurance isn’t mandated for businesses in North Carolina. However, it is important to have it. It protects you if someone sues your company and other vendors you do business with may require it. It is a highly affordable insurance for most businesses.
Worker’s compensation insurance is one that North Carolina requires under the North Carolina Worker’s Compensation Act. Any business employing at least three employees must either have worker’s compensation insurance or qualify to be a self-insured employer. This includes not only LLCs and partnerships but also corporations and sole proprietorships.
North Carolina doesn’t require property insurance for your business but it will be vital if you ever need to rebuild your shop or replace equipment due to fire, flood, theft, or vandalism.
Additional resources to help you set up a business in North Carolina
North Carolina has several resources to help get your LLC started. Some resources on the state website include:
Is North Carolina a good place to start a business?
North Carolina ranks as the number one best place to start a business in 2022, according to CNBC. Some of the things that make North Carolina desirable for business are a strong economy and a long history of innovation.
What are the perks of starting an LLC versus another type of business?
As the name suggests, an LLC offers personal liability protection, which can safeguard your personal assets. If the business is sued or goes bankrupt, for example, your personal assets won’t be used to settle the company’s debts.
What are some good businesses to start in North Carolina?
Several industries have strong possibilities. North Carolina is an excellent place for tech and research businesses. It’s also good for manufacturers or innovative businesses. Those who want a more retail-style business should look at opening a gym, a niche clothing boutique, a towing service, or a mobile bartending service.
What’s the top industry in North Carolina?
The industry that generates the most revenue in the state is automotive and heavy machinery. The research centers like the North Carolina Center for Automotive Research (NCCAR) offer a lot of support to this industry in both research and testing.
What are the most profitable sectors in North Carolina?
The most profitable industries in the state include agriculture, manufacturing, mining, fishing, and professional services.
What is the livable wage in North Carolina?
The livable wage in North Carolina for a single person is $17.14 an hour while a two-person household’s livable wage is $36.37 an hour.
What is the best-paying job in North Carolina?
The highest paying job in the state is consultant and sales representative. That job brings in an average of $208,837 a year. That is followed by a vice president of product and marketing, who earns an average of $204,285 yearly, and a revenue officer with an average annual salary of $187,021 a year.
What North Carolina city is best to live in?
Many cities in North Carolina offer charm and opportunity. The most popular cities are Raleigh, Charlotte, Chapel Hill, Winston-Salem, Durham, Willmington, and Asheville.
What is the challenge of starting a business in North Carolina?
The state has a highly competitive labor market. With a low unemployment rate of 3.6%, businesses must offer competitive wages and benefits to attract workers.
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