How to Start an LLC in North Carolina: Cost and Registration Steps

North Carolina may not seem like the obvious choice, but the state is actually considered to be one of the best places for business opportunities.

According to Lending Tree, North Carolina has been determined to be the best state for small business owners, while its impressive second place on the CNBC list of top states for business proves that North Carolina has plenty to offer with its workforce opportunities and access to capital.

We also recommend to consider the local North Carolina company Gorman and Associates.

All this to say that North Carolina is an excellent place to get your enterprise up and running. But if you’re new to the process of business formation, especially if it’s an LLC or PLLC, it’s likely you don’t have a good idea of where to begin.

With this article, we aim to provide the basics of North Carolina LLC formation for all promising new business owners, including:

• How to file the main formation documents to register a North Carolina LLC;
• How to draft an operating agreement for your LLC;
• State regulations for LLCs and other compliance rules;
• Formation fees and other recurring business maintenance costs.

Step 1: Name your North Carolina LLC

The first item on your formation agenda is to pick an appropriate name for your North Carolina LLC. Keep in mind that it’s not enough for an LLC name to be suitable only from your point of view as the company owner. When deciding on a name, you must above all consider the state’s regulations as outlined in the North Carolina General Statutes section 55D-20.

Words You Have to Use

All North Carolina LLCs must state their business designation by using any of the following indicators:

• limited liability company;
• L.L.C.;
• LLC;
• ltd. liability co.;
• limited liability co.;
• ltd. liability company.

Most importantly, North Carolina LLC names should be unique. The state requires new businesses to choose names that are clearly distinguishable from those already in use by registered entities in North Carolina.

If your name is already taken and you have to alter the name in some way, remember that the changes should be significant. Changing letter cases or adding one article won’t be enough to deem the name distinguishable.

Example:

For instance, you plan to start a cleaning business under the name “Carolina Professional Cleaning, LLC” but the state search shows that the name is already registered to “Carolina Professional Cleaning, Inc”.

Even though the business structures are different, you will still need to alter the name by changing the order of words or adding new ones such as “NC Cleaning Network, LLC” or “Carolina Professional Residential Cleaning, LLC”.

Words You Can’t Use

Under subsection “c” of  the North Carolina General Statutes section 55D-20, LLCs are prohibited from using words that imply any relation to licensable and heavily-regulated industries unless explicitly authorized to do so.

Always make sure to check if your LLC requires special licenses to operate in North Carolina. In many cases, naming restrictions directly follow your licensing status very closely.

Fortunately, the North Carolina Secretary of State’s website provides a list of word prohibitions, as well as their connections to state licensing boards and agencies. The restrictions concern words related to banking, trusts, real estate, as well as a list of licensable professions.

Research the LLC Name You Want

As stated before, it’s important to pick a name that hasn’t already been registered. You can find out whether your preferred name is available by using North Carolina Secretary of State’s business search tool.

North Carolina DBA: Using an Assumed Business Name

Even if you didn’t manage to grab a perfect name for your LLC formation, you can always register a fictitious name also called DBA (“doing business as”). In North Carolina, DBAs are referred to as assumed business names which can be attributed to your LLC for commercial use as trade names.

DBA registration is mostly done locally by filing an assumed business name certificate. According to the North Carolina General Statutes Section 66-71.4, a DBA may be used in one or multiple counties.

You won’t have to file your assumed name certificate in every county. A single filing with your home county’s office of the register of deeds will be enough.

You can also register multiple DBAs, though be careful how you file them—the state allows only five assumed business names in a certificate attributed to a single LLC.

A more expanded outline of the DBA filing can be found in the North Carolina Assumed Business Name Act, including the items that must be included in the assumed business name certificate.

A DBA certificate should detail the following information: 

• The assumed business name you wish to use;
• The LLC’s original registered name;
• The purpose of the LLC;
• The LLC’s street address;
• List of counties where the LLC plans to conduct business under the assumed business name.

Thankfully, the North Carolina Secretary of State has adopted new regulations of keeping records on assumed business names. As such, you can search all active DBAs in North Carolina regardless of the county. This also means that even if you register in one county, other jurisdictions will have this information available, making registration more convenient. 
To register a DBA, you must file the assumed business name form along with the service fee of $26 per filing.

Step 2: Appoint a Registered Agent for your LLC

Under the North Carolina General Statutes section 57D-2-40, every North Carolina LLC must appoint a registered agent and maintain them throughout the company’s duration.

A registered agent is an entity or individual responsible for receiving correspondence and legal documents like service of process on behalf of a business entity. Without a registered agent, no North Carolina entity is authorized to conduct business.

Service of process refers to the legal practice of serving a court summons to the defendant. In this case, an LLC would be the defendant, so the registered agent will receive any court notices on its behalf.

A registered agent, therefore, acts as a delegate of sorts who represents your LLC, so the state treats them as the primary point of contact. Technically, almost anyone can be a registered agent as long as they are over 18 and have a physical address in North Carolina.

This rule is part of what makes the choice of acting as your own LLC registered agent so accessible. Some entrepreneurs prefer it to the traditional agencies and attorneys due to financial convenience.

However, there are plenty of aspects to this method that are less convenient. Let’s look at the main pros and cons of being your own registered agent in North Carolina:

Pros

• Reduced cost: You don’t have to pay annual fees for LLC services;
• Simple set-up: You can use one set of addresses for registering as an agent;
• No middle man: You will get all deliveries in person.

Cons

• Privacy issues: A registered agent must make their information public;
• Inconvenient schedule: Registered agents have to remain at their registered office address at all times during business hours. This means you don’t get to have breaks or sick days;
• Disruptive situations: Being served a summons from a creditor in the middle of a client meeting can be both embarrassing and damaging, but it’s what could happen if you act as your own agent;
• Spam and junk mail: Publicly available addresses mean that you will get no shortage of spam;
• Liability risk: It will be your responsibility to make sure you don’t miss an important delivery. And if you do, the consequences will also be yours and yours alone. 

The best way to ensure you never miss any legal papers and vital correspondence from the state is to hire a professional registered agent service. A good number of LLC formation companies even offer this service for free for up to a year. The average registered agent fee is about $100.

If you don’t know which professional agency to choose, be sure to check out our Best Registered Agent ranking to get a better idea about your options.

It’s worth noting that expanding your LLC to other states guarantees you will need separate agents in each new state, meaning that acting as your own agent is impossible in a case like this.

Step 3: File Your North Carolina LLC Articles of Organization

As stipulated by the North Carolina General Statutes section 57D-2-20, a North Carolina LLC is considered formed only if it files the articles of organization with the Secretary of State.

If you want your formation documents to be in order, you can always let a professional service handle it. For more information about formation providers, see our article on Best LLC formation services.

What to include in my North Carolina Articles of Organization?

The Secretary of State provides a ready form for the articles of organization and other formation documents on their website.

Additionally, the North Carolina General Statutes Section 57D-2-21 lists the items that must be included in your LLC articles of organization. Your formation document should specify:

• The LLC name;
• Names and addresses of LLC organizers/members;
• The county and street address of the LLC’s principal office;
• The name and address of the registered agent;
• If the LLC is classified as a professional liability company that provides professional services;
• Additional provisions that you otherwise might include in the operating agreement (more on that in Step 4).

North Carolina LLC Filing Fee

The articles of organization have a mandatory service fee of $125 per filing. More information on business registration costs can be found on the North Carolina state fees page.

North Carolina LLC Processing Time

The processing time, also known as “examination” in the Secretary of State’s terminology, can vary between five and seven business days for standard filings. To counter that, the state offers expedited services that could reduce the overall formation time. You can two expedited options:

• 24-hour processing: $100;
• Same-day processing: $200.

Note that the same-day option requires you to submit the articles of organization before noon on the day you wish the documents to be approved.

The easiest and fastest way to form your LLC is to apply online. In addition to the standard $125 filing fee, you will also need to pay a $3 transaction fee.

Step 4: Draft your North Carolina LLC Operating Agreement

The operating agreement is a set of internal regulations meant to manage the conduct of the LLC itself and its members, their responsibilities, rights, and other duties in relation to the entity and each other.

It’s not a hard requirement to draft an operating agreement in North Carolina, but it’s nevertheless a highly recommended step.

There is no uniform template for the operating agreement, but most examples of these administrative documents include the following items:

• LLC members rights and obligations: Details each member’s duties and legal rights within the company;
• LLC’s purpose: Here you shall state the business activities your LLC plans to engage in;
• Rules of conduct: Responsibilities and authority appointed to each member, manager or equivalent;
• Capital contributions and percentage interest: How much each member contributed to the initial capital and the ownership shares of each LLC member;
• Profit distribution: The method of allocating profits and losses to each member;
• Meeting schedules and voting procedures: How to conduct scheduled board meetings, members’ voting rights, and the LLC’s voting system;
• Replacing and hiring members: Procedures for hiring new members and other procedures for changes in LLC membership;
• Transfer of ownership: How ownership shares are transferred and allocated;
• Dissolution: Procedures for closing the LLC to avoid North Carolina default laws;
• Amendment rules: Rules for making changes in the initial operating agreement.

The North Carolina General Statutes 57D-2-320 also provides a list of things that an operating agreement cannot do. In general, an operating agreement cannot defy the North Carolina law or restrict the rights and protections of the LLC and its members.

As was mentioned in the section on the articles of organization, North Carolina LLCs are technically allowed to include items typical of an operating agreement in their formation document instead. This is generally inadvisable as the two documents may end up containing conflicting provisions.

Another reason for creating an operating agreement as opposed to relegating all your internal regulations to your articles is convenience. If you want to amend the existing rules in the articles, you will have to make corrections each time and refile the articles. Such amendments cost $50 per filing. When you have a separate operating agreement, you can alter it legally without any state filings.

Step 5: Get an EIN (Employer Identification Number) for Your North Carolina LLC

An Employer Identification Number or EIN is a nine-digit code issued by the IRS to business entities for the purpose of tracking their tax activities. In a way, an EIN is like a Social Security Number for businesses.

While not all LLCs might need an EIN at the beginning, in most cases, you will require one sooner or later. If you aren’t sure whether to register an EIN at this point of your LLC formation, consider the following:

• Do you run a multi-member LLC?
• Does your LLC have employees?
• Is your LLC taxed as a corporation?
• Does your LLC need a business bank account?

Even if only one of these applies to your LLC, it still indicates that your business will likely need an EIN to operate legally.

Fortunately, the registration process is simple. All you need to do is send an online application on the IRS website. If you prefer to work with physical documents, you can apply by mail or tax using the IRS form SS-4.

Note that this service is completely free of charge. The trouble is, some LLC formation agencies try to inflate their prices by charging extra for this filing, so it’s best to stir clear from such providers.

First Tasks After Registering your North Carolina LLC

After you finish with your formation documents and other basics, your next step as a new LLC owner is to ensure your business runs effortlessly. Let’s look into a few things that could make your LLC’s operations easier.

Open a Business Bank Account

While sole proprietors often use their personal accounts to run their business, this method is highly inefficient for LLCs as a whole and multi-member companies in particular.

The main advantages a business bank account can provide include:

• Account management: If you mix your business and personal activities in your personal bank account, separating each transaction could prove to be a hassle come tax season. Keeping a separate business account makes for a cleaner bookkeeping process;
• Credit: You never know when you might need funding for your LLC, and having a business bank account automatically gives you more financing opportunities through your bank’s business line of credit;
• Personal asset protection: If you want to retain the LLC’s ability to shield your personal assets, keeping your business transactions separate from your personal activities is the only way to do it.

Perhaps the main reason for opening a business bank account is to ensure your LLC is able to apply the concept of the corporate veil to protect your personal securities. If you can’t prove that your LLC is a separate entity from you as an individual, the corporate veil can be “pierced” which means you become vulnerable to lawsuits that are initially brought against the company itself.

In theory, if your LLC is sued by creditors, your personal assets are out of reach and cannot be seized by the court order. However, if you don’t maintain a business bank account for your LLC and therefore can’t provide sufficient proof that the company has nothing to do with your personal finances, the court can potentially allow the creditors to requisition your personal assets to pay the LLC’s debt.

This is precisely why business bank accounts are vital for your personal protection. The concept also applies to single-member LLCs. Technically, sole owners can use their personal bank accounts, but it’s more convenient to separate your business transactions and have a separate credit for your LLC.

Get Business Insurance For Your North Carolina LLC

Another essential part of maintaining your LLC’s stability is purchasing the appropriate insurance policies. In some cases, North Carolina LLCs are even required to obtain a specific kind of insurance depending on their status as an employer.

The most common types of business insurances are:

• General business liability insurance: As the name suggests, this is a basic policy designed to protect your business against property damage and personal injury incidents;
• Commercial auto policy: Applies to LLCs that use transport (trucks, vans, cars) in their lines of business such as for direct delivery or distribution; 
• Workers compensation insurance: This is the one policy that becomes mandatory for North Carolina LLCs with three or more employees;
• Professional liability insurance: If you provide professional services that require licensing, you might want to buy this policy to protect yourself against professional negligence lawsuits; 
• Business income coverage: Sometimes, you might need to maintain your business rent and cover other fees while the business itself has to temporarily shut down or your industry is experiencing a serious slowdown;
• Business property insurance: This is a more comprehensive policy that covers property damage (includes equipment, rented or owned spaces, inventory, etc).

Keep Your North Carolina Company Compliant

Compliance is a necessary aspect of business maintenance. Every LLC registered in North Carolina has to operate legally, and to prove that everything is in order, business owners must follow specific state regulations.

North Carolina Business Permits and Licenses

There is no general business LLC license requirement in North Carolina, but your LLC will most certainly need one or more licenses and permits from your county and municipal authorities.

The scope of license requirements depends on your location and the industry in which your LLC operates. In most cases, you will need to register with different agencies to obtain these licenses and permits. You can find out more about each licensing board and regulatory agency on Business Link North Carolina website.

North Carolina Tax Requirements

If your LLC has a default pass-through system of taxation, your business doesn’t pay income state tax directly. Instead, LLC members report their profits and losses (according to their share) on their personal returns.

Companies that sell goods and services are eligible for sales and use tax, while LLCs that employ workers are required to pay FICA taxes including unemployment insurance and withhold the necessary amount of these taxes from their workers’ paychecks.

You can find out more about state tax requirements on the North Carolina Department of Revenue website.

Federal LLC Tax Filing Requirements

The same pass-through principle applies to federal income taxes. If your LLC has elected the default system, you don’t need to pay the federal income tax the way C-corporations do.

Members of pass-through LLCs report their individual profits and losses using form 1040, Schedule C. If your LLC has elected a corporate tax system, it has to follow the S-corp or C-corp filing rules.

Annual Report and Other Filing Requirements

All North Carolina LLCs must submit annual reports to the secretary of state no later than April 15 of the following year. Annual reports are designed to inform the state of any changes that have occurred since the previous filing or, alternatively, confirm that none have occurred.

According to the North Carolina General Statutes Section 57D-2-24, annual reports should cover the following items:

• The LLC name; 
• Place of registration;
• The street address and phone number of the primary business office;
• The street address of the registered agent and their registered office;
• Statement of change if the registered agent information has changed since the previous filing;
• Names of key LLC members, as well as their titles and business addresses;
• The LLC’s purpose and a general description of what type of business the company conducts.

Annual reports can be filed online or by mail using paper forms. Each filing comes with a $200 fee regardless of the application method, though online filings are much faster than traditional postage.