A Simple Guide on How to Form an LLC in North Carolina

Starting an LLC in North Carolina will require you to follow these steps to ensure you are meeting all requirements that are put in place by the secretary of state:

1. Choose a business name - Your business name will be required to be unique and distinguishable enough from other active businesses in the state, as well as including a designator in the name like "LLC" or "Limited Liability Company".

2. Appoint a registered agent - All LLCs that are formed in North Carolina will need to have an active and updated registered agent. This person will be responsible for receiving any service of process or important documents that are sent to your business by the secretary of state.

3. File your articles of organization - This form will be the document that officially forms your business in the state of North Carolina. It will include your business information, registered agent information, and ownership information.

4. Draft an operating agreement - Your operating agreement will outline the roles and responsibilities of the business owners of the LLC. This also will detail the processes for decision making, ownership percentages, and more.

5. Obtain an EIN - Your EIN will be issued to your business by the IRS, and typically acts as a social security number specific to your business. This number will be used whenever you go to file taxes, hire employees, or open a business bank account.

6. Opening a business bank account - This will be important for maintaining the separation of personal and business finances, which allows you to enjoy the liability protection that is granted to owners of the LLC to protect their personal assets.

7. Maintain compliance and keep your business in good standing - Keeping your business in good standing will include things such as filing annual reports, keeping your business information updated and current, and registering for any specific business licenses that are required by businesses in your industry.

This guide will feature the common steps that are involved in forming an LLC in North Carolina and how to continue to keep your business in good standing. When you decide to form a new business in North Carolina, you can either complete this process yourself or you are able to hire a service, like Firstep, to handle this whole process for you so you can focus on your business activities. LLCs are commonly popular to provide owners the limited liability protection that comes with them, as well as certain tax benefits.

Step 1: Choosing a Name For Your LLC

Before you file your articles of organization, you will need to choose a business name that is available and that contains "LLC", "Limited Liability Company", or "L.L.C.". You will need to search on the state database to see what businesses are active or still have their name on hold. In North Carolina, businesses that have been administratively dissolved have their name on hold for 5 years, and if voluntarily dissolved the hold is only 120 days.

Your business name will need to be distinguishable enough from other names to avoid any confusion. The business name search tool on North Carolina's website will help you find what names are potentially available, and what isn't. It's also important to be aware to avoid any implications that your business is government affiliated or a part of regulated industries such as using "bank" or "insurance" when this is not your business industry or you do not have the required qualifications.

Step 2: Appoint a Registered Agent

Another important thing to do before officially forming your new LLC will be to decide on who will be your registered agent for the business. Your registered agent will be responsible for receiving any service of process or legal documents that are sent to your business. It's important to appoint a trusted and responsible person as your registered agent as missing these documents can lead to default judgements that will typically be harsh against your LLC.

Your registered agent is required to be 18 years or older, have an active address in North Carolina, and be available at that address during regular business hours, which is Monday - Friday 9am-5pm. You can choose to be your own registered agent, have a trusted friend or family member do this, or hire a registered agent service. Using a registered agent service allows you to have a trusted service that will handle these documents that are sent to your business and their job is to notify you in a timely manner.

Step 3: File Your Articles of Organization

Now that you have chosen your LLCs name and have your registered agent, you are ready to officially file your articles of organization to form your business. To do this, you will need to go to the state website, and select the business registration tab. If you do this on your own it will cost $125, with a $3 online filing fee. A filing service like Firstep is able to handle this process for you and collect all the documents associated, just for the cost of what you would typically pay to the state.

The process for forming a North Carolina LLC has around 30 steps, but this process can be very simple. You will need to submit your official LLC name, input your registered agent information, and your business principal address. Next, you will be asked to give information on the organizers of the business and their roles, and the officials of the business. Then, you will be asked for an email address to send any notices or updates to on the status of your LLC, and sign the form to ensure validity. Lastly, you will be asked to review and correct any information on the form and if you would like to expedite the filing, then you will be taken to the payment section. As mentioned before, the total will be $125 along with a $3 online filing fee.

After submitting your articles of organization for review, there will be a processing time that you will need to wait for to get your LLC approved. This is typically around 10-15 business days, but depending on how busy the Secretary of State office is it can be shorter or longer. Once the filing has been approved, you will be sent an email that includes your approved articles of organization that is certified by the state. It's important to save this document in a safe place, either online or printed off, but preferably in both ways to ensure you do not lose access to it.

Step 4: Draft an Operating Agreement

With your LLC officially formed in the state of North Carolina, your next step should be to draft an operating agreement. These are not required by the state, but can be extremely helpful to new LLCs. An operating agreement will detail the roles and responsibilities of the owners of the business, as well as the processes for how you will run your LLC. This document is also important for outlining ownership percentages, voting rights, and rules for major decision making. Your operating agreement can possibly be requested by potential vendors, partners, or banks when trying to open a business bank account to ensure your LLC is properly set up and organized professionally.

As your business grows, operating agreements can be helpful with certain issues that will come up such as owners joining or leaving the business, making decisions when votes are split, and adding extra protection when it comes to the personal liability protection. These things are useful to have in writing as the LLC grows, and you can always come back and change or update the document whenever you need to.

Step 5: Obtain an EIN (Employer Identification Number)

Now that your business has been officially formed, you have a valid registered agent, and your operating agreement has been drafted, it's time to get an EIN for your business. An EIN, or employer identification number, is issued by the IRS and used for tax purposes, hiring employees, or dealing with outside vendors or partners. Your EIN will only be issued to your business one time, and it will not expire, ever.

When applying to open a business bank account, you typically will be required to present your EIN number to be able to finish setting up your account. You can either obtain your EIN on your own, or you can have a service like Firstep obtain this for you on your behalf. Even if you already have gotten an EIN number, but don't remember it or have lost the documentation, you can still retrieve this. This can be a lengthy and complicated process, so this is one of the services we offer. However, whether it's your first time getting an EIN or you are retrieving your old EIN, it's extremely important to save these documents in a safe place.

Step 6: Opening a Business Bank Account

Once you have officially formed your LLC and received all the necessary documents along with it, an important next step will be to set up a business bank account. This will be used for keeping your personal and business finances separate to ensure you are continuing the liability protection that is offered to owners of LLCs in North Carolina. Setting up a specific bank account for your business will also make tracking your business's available funds easier and give you added credibility when dealing with outside vendors or partners. Instead of having these vendors make payments made out to you personally, you are able to have them make these out to your actual business which is a more professional and simpler way to manage your business funds.

The protections that are granted to business owners are commonly referred to as the corporate veil, and act as a shield for your personal assets in case there are any debts or lawsuits imposed on your LLC. This shield will ensure these debts and lawsuits are not able to come after your personal assets such as your home, retirement, savings, or car. The corporate veil will stay in place as long as your business is operating legally and you are keeping your personal and business finances separated. This can be done without making a specific bank account, but it is extremely hard if you are using your personal bank account for business transactions as these funds become blended which can lead to a lot of confusion.

Protecting your personal assets, easily tracking your business funds, and giving your business added credibility are all advantages to setting up a specific business bank account. As your business grows, this becomes even more important as it will be extremely difficult to manage a large amount of cash flow with one bank account while still keeping your personal and business finances separated.

Step 7: Maintain Good Standing For Your LLC

The ongoing compliance of your LLC is one of the most important things you can do to ensure you maintain good standing and keep your business active. This includes things such as filing annual reports on time, and renewing any required business licenses that are related to your business and industry.

Annual Report

In North Carolina, LLCs are required to submit annual reports each year and they are due by April 15th. These reports can be submitted online through the business renewal page, which will cost $203 with all the fees included. These can be done by mail, for $200, but the processing time will be much longer. Typically, when submitted online these reports will be processed within a few hours but can take until the next day when it is busier times of the year.

Your LLC annual reports are a great time to update any outdated information related to your business such as your address, ownership information, and registered agent information. After you have received notification that your report has been approved, you will be able to search your business using the business search tool, and download your certified reports from your business page. You can submit these on your own, or have Firstep handle the process for you each year through our annual report renewal subscription to ensure you never miss a report again.

Missing annual reports can lead to being administratively dissolved by the state of North Carolina, which causes large amounts of fees imposed on your business to get yourself back into good standing. When dissolved, your business is unable to legally conduct business and you need to take care of this as soon as possible. To avoid this, filing your annual reports accurately and on time will prevent this action being taken on your LLC by the state.

Business Licenses

Depending on your business type and the industry you operate in, you might be required to get and maintain business licenses. This generally includes industries such as construction, healthcare, finance, and other professional services and industries. You will normally be required to renew these annually, but depending on your industry and county this may change. Be sure to understand your exact requirements for your specific situation before submitting anything to official websites.

FAQs on LLCs in North Carolina

How much does it cost to form and maintain an LLC in North Carolina

The cost to form a new LLC in North Carolina is $125, with an additional $3 fee to submit this online. To maintain compliance and file annual reports it will cost $200, with a $3 fee as well to file online and these are due by April 15th each year. These both can be submitting through the mail, but processing times may be extended to do this through the mail.

Where can I submit my articles of organization

To form a new LLC online in North Carolina, you can go to the business formation form on their website and follow the steps in the guide above to complete your registration.

What if I don't have a registered agent

A registered agent is a requirement in North Carolina, as well as most states. To submit your articles of organization you must have an active registered agent, and a valid North Carolina address to list for them. If you, or someone you know, does not meet these requirements you can hire a registered agent service to act as your registered agent for the LLC.

Do I have to live in North Carolina to form an LLC in the state

No, you do not have to live in North Carolina to form an LLC in the state. However, you will need to have a registered agent and active address to list to get your application approved.

Is it required by law for my LLC to have an operating agreement

No, it is not required by law to draft an operating agreement for your LLC. These are not filed with the state and do not impact your good standing. However, operating agreements can be very useful to businesses in ensuring all owners understand their roles, ownership percentages, and the decision making processes of your business.