How to Start an LLC in North Carolina: Steps and Annual Report

How do you start an LLC in North Carolina?

File articles of organization with the North Carolina Secretary of State for $125, naming a registered agent at a North Carolina street address (G.S. 57D-1-22). The LLC exists once the filed articles take effect. From then on it owes an annual report of $200 every April 15, starting the year after formation.

1. Check the name is free and contains "LLC", "L.L.C." or "limited liability company" (G.S. 55D-20); reserving it is optional, costs $10 and holds it for 120 days (G.S. 55D-23).
2. Choose a registered agent and registered office in North Carolina.
3. File the articles online through the Secretary of State, which lists 5–10 business days for new entities and says online is faster.
4. Get an EIN if the LLC needs one: see EINs for single-member LLCs.
5. Put the members' operating agreement in writing; North Carolina does not file it or require it to be written (G.S. 57D-1-03). The state-neutral steps are in how to form an LLC.
6. Open a bank account in the LLC's name and keep its money apart from yours: see business bank accounts.
7. Register with the Department of Revenue before paying wages or making taxable sales, and with the Division of Employment Security when you hire.
8. File the annual report each April 15 and the state income tax return that matches the LLC's federal tax classification.

The case stops being simple when the LLC has two or more members, a married couple included (a partnership return, and tax the LLC may owe for members living outside the state), when it elects S corporation or C corporation tax (franchise tax every year), when a member lives outside the US, or when the business is a licensed profession that must form a professional LLC.

Gather before filing: each member's or organizer's name and address, the registered agent's name and North Carolina street address with its county, the principal office address, a short description of the business, and an estimate of first-year profit so the tax classification can be chosen with numbers.

What goes in North Carolina articles of organization, and what are the fees?

Articles of organization must give the LLC's name, each signer's name and address and whether they sign as a member or an organizer, the registered office's street address and county, the registered agent's name, and the principal office address if there is one (G.S. 57D-2-21). The Secretary of State's fees are set by statute.

Source: G.S. 57D-1-22. For the full first-year bill, including an agent service and state taxes, see LLC cost by state.

Who can be the registered agent for a North Carolina LLC?

A North Carolina registered agent is either an individual who lives in North Carolina or a company formed or authorized to do business here. Either way, the agent's business office must be the registered office (G.S. 55D-30). A member can serve if they meet that test. Changing the agent or office costs $5. An LLC left without an agent for 60 days can be dissolved (G.S. 57D-6-06), so replace a departing agent promptly. Broader agent questions are in the registered agent guide.

When is the North Carolina LLC annual report due?

The first annual report is due April 15 of the year after the calendar year in which the articles took effect, and every April 15 after that, for $200 (G.S. 57D-2-24). The date does not move with the formation month, so an LLC formed in December owes its first report about four months later.

The report confirms the registered agent and office, the principal office, the company officials and a short description of the business; if nothing changed, the LLC can certify that instead of restating it. The Secretary of State warns about vendors selling "priority" or "early" annual report filing for fees on top of the state fee, and says to file online after the first of the year (Secretary of State).

Articles may name a delayed effective date up to 90 days after filing (G.S. 55D-13). Articles filed in late December but effective in January start the annual report clock a year later; the LLC also does not exist until that date. Professional LLCs (PLLCs) are excluded from this annual report section (G.S. 57D-2-24); this page does not cover them.

What happens if a North Carolina LLC misses its annual report?

The Secretary of State may administratively dissolve an LLC whose annual report is more than 60 days late (G.S. 57D-6-06). The Secretary first mails a notice; if the LLC does not fix the problem within 60 days of that notice, it is dissolved. The same process applies to fees unpaid for 60 days and to 60 days without a registered agent or office.

The LLC Act's fee list sets no separate late fee for the report. The risk of missing it is dissolution: a dissolved LLC must wind up (G.S. 57D-6-07), and getting back means an application for reinstatement ($100) stating that each ground for dissolution has been fixed, such as by filing each missing report with its $200 fee (G.S. 55-14-22). The steps are in reinstating your company.

Which North Carolina tax return does the LLC file?

A North Carolina LLC files the state return that matches its federal tax classification. By default the IRS treats a one-member LLC as disregarded (ignored as separate from its owner for income tax) and a two-or-more-member LLC as a partnership. Either can elect corporate tax on Form 8832, effective up to 75 days before or 12 months after the filing date (IRS), or S corporation tax on Form 2553, filed in the year before or within 2 months and 15 days after the start of the year it should cover (Form 2553 instructions). The IRS treats the switch as the LLC moving its assets and debts into a corporation for stock, so check the federal result before filing (Form 8832 instructions).

Federal forms are from the IRS; the full list is in which returns your business files.

A one-member LLC's profit flows into the owner's federal adjusted gross income, which is the starting point of Form D-400 (D-401 instructions). The individual rate is set by year in G.S. 105-153.7; use the rate for the year the profit is earned.

A multi-member LLC doing business in North Carolina files Form D-403 by the 15th day of the fourth month after its year ends, April 15 for a calendar year (D-403A instructions). Two traps: a late D-403 draws an informational-return penalty of $50 a day up to $1,000 even when no tax is due, and the LLC generally must pay North Carolina tax on a nonresident member's share (G.S. 105-154). That payment is the member's own tax, not an extra one: the LLC can charge it to that member and reports it on the member's NC K-1 for the member to claim; a nonresident individual whose only North Carolina income is that share need not file if the LLC paid in full (D-403A instructions). A nonresident member that is not an individual can instead sign Form NC-NPA, filed with each year's D-403 by its due date including extensions, so the LLC need not pay for it.

Can a North Carolina LLC pay the state income tax itself?

Yes, if it files Form D-403 or CD-401S and elects for the year: a multi-member LLC checks the "Taxed Partnership" election on page 1 of Form D-403, and an LLC taxed as an S corporation answers "Yes" to the "Taxed S Corporation" question on Form CD-401S. The election is made by the return's due date, including extensions, and cannot be made or revoked after the original return is filed (D-403A instructions; CD-401S instructions). The entity pays at the individual rate, 3.99%, on its North Carolina income except the shares of members taxed as partnerships or corporations, and generally must pay estimated tax during the year. Members who are individuals cannot then claim that tax on their own returns; instead they deduct their share of the income the entity was taxed on (D-401 instructions). A one-member disregarded LLC has no D-403 and cannot elect. Who can elect and whether the election helps are covered in pass-through entity tax by state.

LLC vs S corp in North Carolina: what changes if the LLC is taxed as a corporation?

An S corporation is a tax election, not a different North Carolina company: the LLC stays an LLC with the Secretary of State and keeps filing the annual report. An LLC that elects corporate tax is a corporation for North Carolina franchise tax (G.S. 105-114) and corporate income tax (G.S. 105-130.2), so it owes franchise tax every year, at least $200 (NCDOR rates). An LLC taxed as a partnership or disregarded pays no franchise tax.

• C corporation: files Form CD-405 and pays corporate income tax of 2% on North Carolina net income plus franchise tax figured on its net worth, no more than $500 on the first $1,000,000 of it (CD-405 instructions; G.S. 105-122).
• S corporation: files Form CD-401S and pays franchise tax, but never corporate income tax (G.S. 105-130.3). Without the Taxed S Corporation election above, it must pay tax on a nonresident shareholder's share, counted as that shareholder's own tax, unless it files the shareholder's signed Form NC-NA with the return for the first year the person is a shareholder (G.S. 105-131.7). North Carolina has no separate S election; it follows the federal one (CD-401S instructions).

Both returns are due by the 15th day of the fourth month after the year ends. Whether an S election pays off depends mostly on federal self-employment and payroll tax, weighed against this franchise tax, the extra filings and the salary working owners must be paid through payroll: see should you elect S corporation status and S corporation owner salary.

Does a North Carolina LLC need sales tax or withholding accounts?

A North Carolina LLC that sells taxable goods or services must get a sales and use tax Certificate of Registration before selling (NCDOR). One that pays wages needs a withholding account, because the Department requires an account ID to file and pay. Both accounts can be opened through the Department's online business registration, which charges no fee (NCDOR registration). An employer generally also owes unemployment insurance tax, with its own account and quarterly reports at the Division of Employment Security (DES). The $100,000 threshold is only for sellers based outside the state; a business in North Carolina registers from its first taxable sale. If the LLC does not pay over sales tax it collected or income tax it withheld, the Department can assess a manager, or a member or company official responsible for paying it, personally, with at least a year longer to do so than it has for the LLC (G.S. 105-242.2). Selling into other states is covered in when you must collect sales tax.

Example

These examples are illustrative, in US dollars.

A Raleigh developer forms in November

A software developer files articles in November and pays $125. Her first $200 annual report is due April 15 of the next year, about five months later, and again every April 15 after. The LLC has one member and no election, so it files no North Carolina income tax return of its own. Her $80,000 profit is on her federal return and flows into her Form D-400.

A two-member LLC in Charlotte

Two partners split a $120,000 profit equally. The LLC files Form D-403 by April 15 and gives each member a North Carolina K-1 (the statement of each member's share) showing $60,000, which each reports on their own D-400. If one partner had moved to another state, the LLC would generally pay North Carolina tax on that partner's share and report it on that partner's NC K-1 as a payment the partner claims on their own return, not a second tax.

The same LLC elects to be taxed as a C corporation

The Charlotte LLC files Form 8832, the IRS election to be taxed as a corporation, effective January 1. Its D-403 for the year before is its last; from January 1 it is a C corporation for tax and files Form CD-405. On $120,000 of North Carolina net income at a 2% rate, corporate income tax is $2,400. Its net worth tax base is $100,000, which at $1.50 per $1,000 would be $150, so the $200 minimum franchise tax applies. The $200 annual report to the Secretary of State is still due every April 15. Had it elected S corporation tax instead, it would file Form CD-401S and pay the $200 franchise tax but no corporate income tax, and the profit would still pass to the members' own returns.

Different for you?

• Two or more members, a married couple included, or a member outside North Carolina: the LLC files Form D-403 each year, issues K-1s and may owe tax on a nonresident member's share; see spouse and family LLCs or get help with business tax returns.
• Weighing an S or C election: read should you elect S corporation status, then get business formation help for the election and help with business tax returns for the franchise tax and returns that follow.
• Considering the pass-through entity election: see pass-through entity tax by state, or get help with business tax returns before the D-403 or CD-401S is filed.
• A licensed profession: a professional LLC (PLLC) follows its licensing board's rules and is not covered here; get business formation help.
• You are in the US on a visa (F-1, H-1B, H-4): read starting an LLC on a visa before you file.
• You live outside the US: follow US LLCs for non-residents.
• The LLC missed annual reports or received a dissolution notice: see reinstating your company, or get business formation help to file the missing reports and the reinstatement.
• Comparing other states, or forming in Wyoming or Delaware instead: an LLC formed elsewhere but doing business in North Carolina generally must also register here; see which state to form in, registering in another state and LLC annual fees and reports by state.
• Just formed and need the full checklist: see after you form your company, including whether a BOI report is still required.