How to Start an LLC in North Carolina (May 2024 Update)

Forming a limited liability company (LLC) can be one of the best decisions an entrepreneur makes when launching a new business. LLCs offer liability protection, tax flexibility, and relatively low startup costs compared to other business structures like corporations. While every state has its own guidelines and fees for starting an LLC, the process is straightforward in business-friendly North Carolina. This comprehensive guide will walk you through the step-by-step process to create your North Carolina LLC.

Why Form an LLC in North Carolina?

North Carolina ranks among the best states in the nation to start and grow a business. The Tar Heel State offers a low cost of living, moderate regulations, resources through universities and state-sponsored programs, and incentives for companies bringing jobs to NC. Plus, the economy features thriving finance, technology, and research sectors. Forming an LLC can help entrepreneurs take advantage of opportunities in North Carolina while limiting personal liability.

An LLC structure shields the personal assets of members from business debts and legal judgments—only the finances of the LLC itself are at risk. Meanwhile, profits and losses can “pass through” the business to members’ personal tax returns. This avoids the “double taxation” issues facing C-corps and S-corps. With flexibility over management structure, voting rights, and dividing profits, LLCs provide a customizable framework for launching your business.

Compared to the complicated requirements corporations face, North Carolina LLCs involve less paperwork and fewer formalities to begin operating. You don’t need physical business premises or elected directors and officers when first starting out. LLC fees in NC are also more affordable than incorporating. Still, your LLC will need to comply with various regulations once up and running. We’ll cover these requirements in more detail throughout this guide.

7 Steps to Forming Your North Carolina LLC

Follow these key steps to establish your LLC under North Carolina state law:

1. Choose and Verify an Available LLC Name

Your first task is picking out a unique name for your NC limited liability company. There are a few rules surrounding LLC names in North Carolina:

• The name must contain the words “limited liability company” or an abbreviation like LLC or L.L.C. You can also use variations like “ltd. liability co.”
• You cannot use words implying the LLC is another type of business, like corporation, incorporated, etc.
• Banking and insurance terms like “bank” or “insurance” require licensure to use in the name.
• The name cannot be the same or deceptively similar to an existing NC business name.

Verify your anticipated LLC name is available and distinguishable by using the Business Registration Division’s search tool. Also check potential website domains and online directories related to your industry. Reserve your name with the NC Secretary of State if desired, which costs $30 and protects the name for 120 days.

If you'll operate your company under a different DBA (doing business as), make sure to register the assumed name by filing a certificate at the register of deeds in your home county ($26 fee).

2. Appoint a Registered Agent

North Carolina requires all LLCs to continuously maintain a registered agent within the state. This agent's role is to receive service of process and official documents on behalf of your business. They must have a physical street address in NC where they can be reached during normal business hours.

You can act as your LLC’s registered agent or appoint a trusted friend or family member over 18. But most entrepreneurs prefer to hire a commercial registered agent service for convenience, privacy, and reliability—with costs starting around $100 per year.

3. Obtain Necessary Business Licenses

While North Carolina does not require a general business license to operate, many activities and occupations need specific state or local permits and registrations. For example, those planning to sell taxable goods or services need a Certificate of Registration (CR) sales tax number. You may also need licenses related to your industry, location, building codes, zoning regulations, and employment requirements.

Thankfully, North Carolina offers a helpful Business License & Permit Search Tool detailing prerequisites for your planned LLC activities. You can also speak with an advisor about licensing for free.

4. File Your Articles of Organization

To legally form your LLC, you must file Articles of Organization (Form L-01) with the North Carolina Secretary of State. This document makes your business an official entity recognized under state laws. It requires listing your NC LLC’s name, registered agent and their street address, principal office address, organizing members, and the signature of an authorized representative.

You can submit the Articles of Organization electronically for a $125 filing fee or through mail. Processing takes 5-7 business days before you receive confirmation that your NC LLC is officially registered with the state.

If your existing out-of-state LLC wishes to operate in North Carolina, you will instead need to file an Application for Certificate of Authority along with a $250 fee.

5. Create an Operating Agreement

An operating agreement serves as your LLC’s internal governing document—North Carolina does not require filing it publicly. We strongly advise drafting one to outline:

• Member percentages of ownership
• Distribution of profits/losses
• Members’ rights and responsibilities
• Voting procedures
• Structure for managing operations
• Rules for admitting new members
• Steps for dissolving the LLC

Work with an attorney when structuring complicated agreements for multi-member LLCs. Clauses should address conflict resolution procedures, buyout terms, withdrawing interests, etc. Modify later as needed while following specified voting processes.

6. Obtain an EIN from the IRS

Though not strictly required, having an employer identification number (EIN) aids in separating your LLC’s business finances for tax and liability purposes. It functions like a Social Security Number specific to your company. Apply directly on the IRS website anytime—sole proprietors can even use their SSN instead.

7. File Annual Reports

You must submit an annual report detailing any changes and maintain company info each year to keep your NC LLC in good standing. Online filing costs $202, while submitting reports through the mail incurs a $200 fee instead. Filing each year by the April 15th due date prevents administrative dissolution.

Additionally, stay up to date on state and federal tax obligations, applicable regulations, and documentation for major LLC decisions to preserve your legal protections and licensure.

What Does It Cost to Start a North Carolina LLC?

Registering an LLC in North Carolina costs $125 to file your Articles of Organization, plus paying for a registered agent service (starting around $100 per year). You'll also need to budget for annual report fees of ~$200 each year after forming your business. Additional costs may include:

• $30 for reserving your desired LLC name for 120 days
• $26 to register an assumed "doing business as" name at the county level
• Various licensing, permitting, and registration costs depending on your activities
• Additional filing fees if registering an existing foreign/out-of-state LLC ($250)

While legal and compliance fees add up, forming an LLC still offers savings over incorporating. There are also ways to start an LLC on a budget: some formation services will file your Articles for free in exchange for using their registered agent and other paid services.

Benefits and Drawbacks of a North Carolina LLC

LLCs offer many advantages, especially for small business owners:

Pros of an NC LLC:

• Personal assets protected from business liabilities
• Choose how LLC is taxed; default is pass-through taxation
• Ownership structure flexibility for dividing profits
• Fewer formalities than corporations
• Perpetual existence regardless of owner changes
• Typically faster and cheaper to create than corporations

Cons to forming an NC LLC:

• Self-employment taxes on entire ownership shares
• Difficult to raise investment capital compared to corporations
• Higher overall North Carolina costs than LLCs in some states
• Annual fees and more complexity versus sole proprietorships
• Limited lifespan if members depart without procedural updates

How to Structure Your North Carolina LLC

One decision you’ll make when establishing an NC LLC is choosing between a member-managed and a manager-managed entity structure:

• Member-managed LLC: Each member can participate equally in running the operations and has voting power tied to ownership percentage. Especially common among spouses or small groups of partners operating jointly.
• Manager-managed LLC: Members appoint one or many managers responsible for daily management duties. Members focus more on high-level strategy and investments without day-to-day obligations. Allows outside experts to oversee specialized areas of operation.

For multi-member LLCs, create an operating agreement detailing each person’s responsibilities, share of ownership and profits, voting rights, and similar governance procedures.

Dissolving a North Carolina LLC

To close your LLC, file Articles of Dissolution (Form L-07) with the NC Secretary of State and pay a $30 fee. First conduct a member vote to dissolve unanimously as per state laws. Notify relevant governmental agencies like the IRS, pay off creditors, and distribute remaining assets to members per your operating agreement.

Consider the following tips when starting your LLC as well:

• Work with a small business attorney when structuring agreements for companies with multiple members or outside investors.
• Purchase the appropriate insurance coverage. Common policies include general liability, professional liability, cyber liability, workers compensation, and business interruption insurance.
• Open a free business checking account to keep your LLC’s finances organized and easier to track for taxes and compliance.

Next Steps After Forming Your North Carolina LLC

Congratulations—the paperwork is filed with the state and you have an official LLC! But plenty of work remains to build your successful business in North Carolina:

• Obtain an EIN from the IRS if you didn’t yet, even for single-member entities.
• Set up accounting software or bookkeeping systems to manage income, expenses, payroll, taxes, etc.
• Develop a business plan covering your operational processes, marketing, target customers, and finances.
• Seek any required financing, whether through loans, investors, business grants, or personal savings.
• Lease appropriate real estate or office space as needed for your activities.
• Hire employees or independent contractors to help provide goods/services.
• Make sure to meet all local, state, and federal regulations and permitting requirements.
• Open business bank accounts and credit card accounts separate from personal finances. For more information, take a look at our article on the key benefits of business checking accounts.
• Obtain the necessary insurance policies to protect your company’s interests.
• Build out a brand identity with a logo, professional materials like business cards, and a well-designed website to reach customers.

And most importantly—start selling and serving customers! Wishing you tremendous success with your North Carolina LLC.