What is an LLC?
LLCs are business entities legally recognized as separate from the business owners by the state the company was filed in. Forming an LLC protects owners from personal responsibility for the business’s debts and liabilities.
What are the benefits of forming an LLC?
There are several advantages of forming an LLC. The main advantage is personal liability protection as mentioned above. Additional tax options are also available, including pass-through taxation where the business owner files the LLC profits on their individual tax returns. There is also the option to be taxed as either a C or S corporation, which may benefit LLC owners depending on various factors. They are also relatively inexpensive and easy to form. This article will cover how to form an LLC in North Carolina specifically. Please review our other articles designated for your state of interest for other states.
What are the steps for forming an LLC in North Carolina?
The process of forming a North Carolina LLC is relatively straightforward. Still, it can be challenging to navigate the specific regulations that pertain to the state that comes with ensuring that your LLC is compliant and able to operate legally. It may be beneficial to consult an attorney for assistance.
Step 1: Name your LLC
Selecting a business name is the first step in starting your North Carolina LLC. The name must comply with the naming requirements of North Carolina’s Secretary of State. Remember that you will also want to choose a name your potential clients can easily search. The naming guidelines for North Carolina are as follows:
- The name must have the phrase “limited liability company” or any abbreviation such as LLC.
- The name cannot have words that would confuse your business with a government agency such as the FBI, State Department, or Treasury.
- Certain words are restricted and require additional paperwork and a licensed person to be a part of your company. This includes banks, attorneys, or universities.
- Your name must also be unique from any other listed North Carolina LLC, limited liability partnership, corporation, or limited partnership. You can search if your business name is available through North Carolina’s Secretary of State business search found here.
It may be a good idea to reserve your desired LLC business name so that it isn’t taken during the process of filing and that you can be at ease that your application will not be denied for naming reasons. The filing fee to reserve a name is $30 in North Carolina and you can do so either online or via mail. The online application can be found here. To mail in the name reservation form, you can download the form here and mail it to the following address:Business Registration Division
PO Box 29622,
Raleigh, NC 27626-0622
Step 2: Find a registered agent
In North Carolina, you must nominate a registered agent for your LLC. The registered agent is an individual or a business entity assigned to receive some important LLC documents, including tax forms, lawsuit summons, and official government correspondence. In other words, the registered agent is your business’s point of contact with the secretary of state.
The requirements of who can be a registered agent are minimal. They include that they must be a resident of North Carolina or, if they are a registered agent service, be authorized to transact business in North Carolina. You can elect yourself or another individual within the company.
Step 3: File the Articles of Organization
The Articles of Organization or Certificate of Organization is part of the formal legal document needed when filing for an L.L.C. at the state level. It creates the rights, duties, liabilities, and other obligations between each member and between the members and L.L.C. You need the following information to complete the form:
- Entity Name
- L.L.C. address
- Service of Process Address
- Registered Agent
- Signature of L.L.C. owner
Business Registration Division
P.O. Box 29622
Raleigh, NC 27626
Once you submit your articles of organization, it can take up to two weeks to process. However, you can expedite this process for an additional fee.
Step 4: Create an Operating Agreement
You are not legally required to file an operating agreement in North Carolina. However, it is strongly recommended you do so anyway as it can provide many guidelines to follow in cases of disagreement between members. This can help smooth the process of starting a new business and reduce the chances of future conflict. Generally, this document will include the following:
- Percent of member interests in the L.L.C.
- Responsibilities and rights of all owners/ members
- Voting powers of all members
- Loss and profit share
- Meeting guidelines
- Next steps if a member wants to sell his/ her interest, dies, or becomes unable to continue their participation in the L.L.C.
Note that you do not need to file the operating agreement with the secretary of state. It is an internal document you should keep with your LLC records for reference in the future. Other states may legally require you to have an operating agreement, but not in North Carolina.
Step 5: Obtain an EIN
An E.I.N is an Employer Identification Number assigned by the IRS. This helps identify your business for tax purposes and is like a social security number for your newly minted LLC An E.I.N. must open a business bank account, file and manage federal and state taxes, and hire employees. If you previously operated under a sole proprietorship and already have an E.I.N., you will need to reapply for a new one. The IRS requires you to file for a new E.I.N. when converting to an LLC.
You can get an E.I.N. for free from the IRS. Click here for additional information. You can apply either online or through the mail.