LLC in North Carolina: Basics
If you’re looking to start your own business in North Carolina, forming a limited liability company (LLC) might be the best option for you. Not only does it provide protection for your personal assets, but it also offers flexibility in management and pass-through taxation. In this guide, we’ll go through the entire process of getting an LLC in North Carolina, step by step.
Understanding the Benefits of an LLC in North Carolina
Starting a business is a big decision, and choosing the right business structure is crucial to its success. One popular option for entrepreneurs in North Carolina is the Limited Liability Company, or LLC. There are many benefits to forming an LLC, including:
Limited Liability Protection
One of the main reasons people choose to form an LLC is for its limited liability protection. This means that the owners, also known as members, are not personally responsible for the company’s debts and legal issues. Instead, only the LLC’s assets are at risk. This protection can give business owners peace of mind and protect their personal assets in the event of a lawsuit or bankruptcy.
For example, let’s say you own a small retail store and a customer slips and falls on the premises. If the customer sues your business and wins, your personal assets, such as your home and car, could be at risk if you operate as a sole proprietorship or partnership. However, if you operate as an LLC, only the assets of the business would be at risk.
Another benefit of an LLC is its pass-through taxation structure. This means that the business itself does not pay taxes on its income. Instead, the income is passed through to the members, who report it on their personal tax returns. This can simplify the tax filing process and potentially save money on taxes.
For example, let’s say your LLC earns $100,000 in profit for the year. If you operate as a sole proprietorship or partnership, you would be responsible for paying self-employment taxes on that income. However, if you operate as an LLC, the income would be passed through to the members, who would report it on their personal tax returns and potentially pay a lower tax rate.
Flexibility in Management
An LLC provides flexibility in management because it can be run by its members or by a designated manager. This allows for more control over the company’s decision-making process. Members can choose to be involved in the day-to-day operations of the business or delegate responsibilities to a manager.
For example, let’s say you and a friend decide to start a landscaping business. You may choose to run the business together as members, sharing responsibilities and decision-making. Alternatively, you may choose to hire a manager to handle the day-to-day operations while you focus on other aspects of the business.
Overall, forming an LLC in North Carolina can provide many benefits for business owners. From limited liability protection to pass-through taxation and flexibility in management, an LLC can be a smart choice for entrepreneurs looking to start a new business or protect an existing one.
Step 1: Choose a Unique Name for Your North Carolina LLC
Choosing a name for your North Carolina LLC is an important step in starting your business. Your LLC name will be the first thing that people see and hear about your business, so it’s essential to choose a name that is memorable, unique, and reflects your brand.
When selecting a name for your LLC, there are some requirements that you need to keep in mind. First and foremost, your LLC name must include “LLC” or “Limited Liability Company” at the end. This is to inform the public that your business is a limited liability company and not some other type of business entity. Additionally, your name cannot be too similar to an existing business name in North Carolina. This is to avoid confusion among consumers and to protect the existing business’s brand. Finally, your name cannot include certain restricted words such as “bank” or “insurance” unless you have the appropriate licenses to operate in those industries.
Name Availability Check
Once you have come up with a name that meets the requirements, you’ll need to check if it’s available in North Carolina. You can do this through the North Carolina Secretary of State’s website. It’s important to note that just because a name is available in North Carolina doesn’t mean it’s available in other states. If you plan on doing business in other states, you’ll need to check if the name is available in those states as well.
Name Reservation (Optional)
If the name is available, you may choose to reserve it for up to 120 days. This can be done through the Secretary of State’s website for a fee. Reserving your name ensures that no one else can use it while you’re in the process of forming your LLC. It’s important to note that name reservation is optional, and you can skip this step if you’re ready to move forward with forming your LLC.
Choosing a name for your North Carolina LLC can be exciting and challenging. Take your time to come up with a name that reflects your brand and meets the state’s requirements. Remember that your LLC name will be with you for a long time, so choose wisely.
Step 2: Appoint a Registered Agent in North Carolina
Appointing a registered agent is a crucial step in forming an LLC in North Carolina. The registered agent serves as an important point of contact between the LLC and the state government.
Who Can Be a Registered Agent?
While the LLC’s members can serve as the registered agent, it is often recommended to appoint a third-party individual or business as the registered agent. This is because the registered agent’s information is publicly available on the LLC’s formation documents, and using a third-party can help protect the members’ privacy.
Additionally, the registered agent must have a physical address in North Carolina and be available during normal business hours. This ensures that important legal documents can be properly received and forwarded in a timely manner.
Responsibilities of a Registered Agent
The registered agent’s primary responsibility is to receive and forward important legal documents to the LLC’s members. This includes documents such as lawsuits, tax notices, and other official correspondence from the state government.
However, the registered agent can also serve as a valuable resource for the LLC’s members. They can provide guidance on compliance with state regulations, as well as offer assistance with filing annual reports and other necessary paperwork.
It is important to choose a registered agent who is reliable and experienced in handling legal documents. This ensures that the LLC’s members can focus on running their business while the registered agent handles the administrative tasks.
Step 3: File Articles of Organization with the North Carolina Secretary of State
Now that you have chosen a name and registered your LLC with the North Carolina Department of Revenue, it’s time to file the Articles of Organization with the North Carolina Secretary of State. This is an important step in the process of forming your LLC, as it officially establishes your business as a legal entity in the state.
Information to Include in the Articles of Organization
The Articles of Organization is a document that officially forms the LLC in North Carolina. It is important to include all necessary information in this document to ensure that your LLC is formed correctly. The document includes important information such as the LLC’s name, address, registered agent, and members. You will also need to include a statement of purpose, which outlines the nature of your business and its goals.
When filling out the Articles of Organization, it is important to be as accurate and complete as possible. Any errors or omissions could delay the processing of your application or even lead to the rejection of your LLC formation.
Filing Fee and Processing Time
There is a filing fee required for the Articles of Organization in North Carolina. The current fee is $125, which must be paid at the time of filing. It is important to note that this fee is non-refundable, even if your LLC formation is rejected for any reason.
The processing time for the Articles of Organization can take up to 10-15 business days. However, if you need your LLC formation expedited, you can pay an additional fee for faster processing. This fee varies depending on the level of expedited service you require.
Online vs. Mail Submission
You have two options for submitting your Articles of Organization to the North Carolina Secretary of State: online or by mail.
Online filing is typically faster and more convenient, as you can complete the process from the comfort of your own home or office. To file online, you will need to create an account on the North Carolina Secretary of State’s website and follow the prompts to submit your application and pay the filing fee.
If you choose to file by mail, you can download the necessary forms from the Secretary of State’s website. You will need to complete the forms, attach the filing fee, and mail them to the address listed on the website. It is important to note that processing times may be longer for mail-in applications.
Now that you know the steps involved in getting an LLC in North Carolina, it’s time to get started! Remember to take your time and consult with a professional if necessary. Starting your own business is an exciting journey, and forming an LLC can offer important benefits and protections. Good luck!
This article was originally written on May 17, 2023 and updated on June 1, 2023.