Thinking about having your side hustle be your main business?
Or maybe you want to avoid working for others and start making something you can call your own?
Starting a business in North Carolina is easy if you decide to form an LLC.
Due to its favourable taxes, talent pool and booming economy, North Carolina is climbing the ranks for entrepreneurs. If you decide to start an online company, a shop in your area or freelance for clients, the advantages of an LLC can help you take risks confidently.
The guide will outline the process of registering an LLC in North Carolina, from the first decision to every important step.
Table of contents
- Why Start an LLC in North Carolina?
- Step-by-Step: How to Start an LLC in North Carolina
- LLC Formation Costs in North Carolina
- Maintaining Your North Carolina LLC
- Manage Finances with Wise Business
- Frequently Asked Questions
- Final Thoughts
Why Start an LLC in North Carolina?
The choice to establish an LLC in North Carolina makes sense for business owners, given the low starting costs, easy way to establish the business, and business-friendly climate. First, North Carolina gives both small and medium-sized businesses some of the lowest corporate income tax rates out there. Additionally, the state does not require most LLCS to pay franchise tax. The skilled labour, economic development, and solid infrastructure in North Carolina help businesses in many industries to succeed. Creating an LLC offers ways to safeguard your assets and provides flexible ways to run the business. You can quickly and easily register your LLC online through the North Carolina Secretary of State.
Step-by-Step: How to Start an LLC in North Carolina
Forming an LLC in North Carolina is relatively straightforward if you follow the steps below:
1. Choose Your LLC Name
Any LLC name you pick needs to be different from all other businesses in the state. You should add “Limited Liability Company” or the abbreviations “LLC” or “L.L.C” to your name. Check on the North Carolina Secretary of State’s website to make sure your name hasn’t already been taken.
Another good thing to do is pick a name that clearly states your business’s purpose and is simple to recall. Try to avoid names that sound much like those of other companies, since this might confuse your customers. A short reservation of your name is possible for three months, at a small price, if you want to start the process later.
Helpful Hint: Business name generators can help develop unique name ideas available in North Carolina.
2. Appoint a Registered Agent
A registered agent is responsible for getting the legal documents that are sent to your LLC. Both individuals and businesses serving as agents are allowed to do business in North Carolina.
Any insurance agent you pick must be based in North Carolina and able to be contacted during standard business hours. Some people choose to be their registered agent, but many decide to hire a professional company for better protection and adherence to the law. The importance of this job comes from the fact that not locating required documents could have legal consequences.
3. File Articles of Organization
You use this form to officially establish your LLC with the North Carolina Secretary of State. You can send your application either via the internet or by postal service.
Do not forget to write your LLC’s name, the details of your registered agent, and how your LLC will be managed. If you do it online, the filing fee currently costs $95; if you do it by mail, it costs $100. After approval, the state will consider your LLC to be established. It is recommended that you print this document to have it in your files.
4. Create an Operating Agreement
An operating agreement tells you how your LLC is managed. It includes the rules for who owns the business, who they are responsible for it, and how profits and losses will be distributed. It may avoid fights between members and preserve your limited liability rights. Having an operating agreement is necessary for single-member LLCs as well.
5. Get an EIN (Employer Identification Number)
You can think of an EIN as a Social Security number for your business. A business needs it to set up a company’s bank account, hire workers, and pay federal taxes.
You are able to apply online for free via the IRS website. If you’re a one-person business LLC, you may not need an EIN, but getting one still helps you keep your business and personal funds separated. It builds more trust with the banks and vendors you deal with.
LLC Formation Costs in North Carolina
Maintaining Your North Carolina LLC
Every two years, you have to file a Business Entity Report to keep your LLC in compliance. You will be charged $32 if you apply online and $50 if you apply by mail.
You have to renew all your business licenses, update your documents as needed, and change the registered agent if necessary. Following the regulations allows your LLC to enjoy its legal benefits.
1. File Annual Reports
To maintain their business status in North Carolina, LLCS have to submit an annual report to the Secretary of State each year. The report helps the state know the current location of your company, who is acting as your registered agent, and the details of your management.
Due date: April 15 every year
Fee: $202 (plus $3 if filed online)
File here: NC Annual Report Filing
Although you have the option of filing by mail, it is faster to use the online method. If you do not meet the legal deadline, this may cause your LLC to be terminated by the authorities.
2. Stay Current with Licenses and Permits
Local cities and counties might have their own set of business licenses and permit rules, in addition to the state’s. You should contact your local city or county government to see what rules are relevant for your business location.
The price you pay depends on the industry and the city where your business is located. One-time permit costs $25 for businesses in Marion, and the annual license fee is also $25. Keeping all your business licenses up-to-date prevents penalties and pauses in what you do.
3. Pay Taxes
The rate of corporate income tax in North Carolina is 2.5%, which is the lowest anywhere in the nation. LLCS, however, are treated as pass-through businesses, so their profits aren’t taxed under the business; instead, they’re declared on owners’ tax returns. A flat tax of 4.5% is used for personal income in North Carolina Department of Revenue.
If you have employees, it is necessary to withhold taxes, withhold and pay FICA taxes according to federal and state wage and labor laws. Failing to fulfill your tax payments may result in fines and running into legal trouble.
Manage Finances with Wise Business
Cross-border transactions with international clients or vendors can soon cause your LLC a lot of hassle and extra costs. Wise Business simplifies the process in a way that is easy for users. Thanks to a high Trustpilot ranking of 4.3, companies all over the world have faith in its services. Since there are no minimums and no monthly fees, Wise is an economical choice for young and growing businesses. It fits in well with famous accounting systems like QuickBooks, Xero, and Sage. In addition, Wise allows your LLC to use different currencies and make overseas payments, which makes managing finances from different places more convenient and affordable.
Frequently Asked Questions
1. How long does it take to start an LLC in North Carolina?
When you file your taxes online, it typically takes anywhere from 3 to 5 business days, but when filing by mail, you can expect it to take up to 2 weeks or longer. If you need your LLC approved faster, expedited processing can be purchased for an added fee.
2. Do I need a registered agent for my North Carolina LLC?
Every LLC in North Carolina must have a registered agent located at a physical address so legal documents can reach the company during normal hours. You can handle your LLC registration yourself or hire a professional service to assist you.
3. What happens if I miss filing my annual report on time?
If you do not submit your annual report by April 15, you may face late fees, penalties, and your LLC could get officially dissolved by the state, leaving you without your business’s benefits and protections.
4. Are there any specific licenses or permits required to operate in North Carolina?
Requirements for getting a license will depend on your line of work and the local area. Before starting, you must get in touch with your local city or county authorities to get all the required licenses and permits.
5. How is my LLC taxed in North Carolina?
Because most LLCS are pass-through, their income is reported on the personal tax returns and not on the LLC. Rather, the profits are declared on their personal income tax papers. Both corporations and individuals that pay North Carolina personal income taxes are subject to a flat 4.5% rate.
Final Thoughts
It makes good sense to setup an LLC in North Carolina due to its low fees, welcoming business climate, and support system.
When you follow the above advice and stay on top of reports, licenses, and taxes, you will see your business succeed in the long run.
If you want your business to go international, look into Wise Business to make dealing with finances outside your country much simpler.
