How to form an LLC in North Carolina in 6 easy steps
If you’re thinking of starting a North Carolina business, you may be feeling pretty confused about where to even start. One of the first and most important steps you’ll need to take is figuring out if forming an LLC is right for your new business.
An LLC (or limited liability corporation) is a business structure that limits the personal liability of the business owners. So, in the case of bankruptcy or legal troubles, your personal assets can’t be seized as payment. Contrast that with a sole proprietorship, where your personal assets would be up for grabs.
Since an LLC isn’t considered a separate business entity like a corporation would be, you can file your profit and loss statements with your personal federal tax returns, which can save you all kinds of headaches on April 15th.
If you think an LLC is right for your business, you’re in luck! It’s relatively easy to start an LLC in North Carolina. You’ll just need to keep some documents in order and make sure you have your filing fees ready.
Below, we have a step-by-step guide to help you get your North Carolina LLC up and running!
1) Check if your business name is available
One of the first steps in LLC formation is making sure your business has a great name. You’ll want it to be unique and eye-catching since it’s the first thing about your business most people will see. You’ll also want to make sure it adheres to North Carolina’s naming conventions.
Your business name MUST include the term “limited liability company” or its authorized abbreviations (ltd. liability company, limited liability co., ltd. liability co, etc.).
You can’t have anything in your LLC name that implies that your business provides illegal products or services. So Card Sharks Unlimited is out of the question.
Suppose you’re using a restricted title in your LLC name (professional services, like “pharmacy,” “accountant,” or “hospital”). In that case, you’ll need to provide business licenses to prove that you are legally allowed to perform that service in the state of North Carolina.
Words that imply your business is a bank, trust, or co-op are out of the question as well since North Carolina forbids banking institutions from forming LLCs.
If you use a trade name different from your legal name (like how Dwayne Johnson also does business as The Rock), you may need to file a DBA.
A DBA (or Doing Business As) lets both authorities and the public know who is behind what business names, and helps protect against fraud. Filing a DBA also saves you from registering a new business and paying the state fees involved if you decide to do business under a different name.
Once you have the perfect LLC name, do a name search through the North Carolina Secretary of State’s website to verify that it’s free and clear. If it is, for a $30 filing fee, you can reserve the entity name with the North Carolina Secretary of State’s office for 120 days while you finish the rest of your LLC registration.
2) Find a registered agent
A North Carolina registered agent is a person or entity that is the state’s main point of contact with your business. Your registered agent will receive any government or legal documents that your company receives, like a service of process.
Your registered agent will need to be a resident of North Carolina with a physical address (no P.O. Boxes) and authorized to do business in the state.
You can act as your own registered agent, but while it seems like the simplest solution, it can lead to many problems.
For one, the registered agent needs to be available at the given address during all normal business hours to accept any legal documents. If your business doesn’t operate within normal business hours, or if you travel for your work, it’s virtually impossible to be your own registered agent.
Also, one of the main reasons a registered agent is needed is to receive a service of process, or in other words, a lawsuit. If you get served at your office address, in front of your clients, your reputation could take a huge nosedive.
Many businesses opt for hiring a registered agent service. These professional services will receive your legal documents at their own office address, and let you know when you have new mail. Some registered agent services even host your files digitally, so you don’t have to make a trip across Raleigh just to know your taxes are due soon.
3) Write your LLC operating agreement
An operating agreement details the terms of ownership and operation for your business. Suppose you have multiple members of your LLC. In that case, an operating agreement lays out what percentage of the business each member owns, and who is authorized to perform what functions within the company. You can also specify whether you have a manager-managed LLC or a member-managed LLC.
An operating agreement can help prevent any confusion or even infighting between LLC members if there are any questions about the business structure. An operating agreement can be helpful if you do end up in court for any reason since companies without an operating agreement are subject to rulings based solely on North Carolina law, which might not have the most favorable outcome.
North Carolina law doesn’t require your LLC to have an operating agreement, but it’s a good idea to have one, even if you’re a single-member LLC.
An operating agreement is especially important for single-member LLCs since it lays out exactly how your business is different from a sole proprietorship. If you end up in a lawsuit without an operating agreement in place, your personal assets may end up forfeited.
You can find a good template for a standard operating agreement online.
4) File your Articles of Organization
When you have a name and a registered agent, you’ll file Articles of Organization with the North Carolina Secretary of State. Here’s what you’ll need to have to make sure you fill it out correctly.
- The full name of the LLC (including “limited liability” or one of the approved abbreviations)
- The name and business address of each member or organizer of your LLC
- The name and street address (and mailing address, if different) of your registered agent. P.O. boxes are not allowed.
- Your LLC’s principal office address and phone number, if applicable
- Optionally, you can provide an email address if you’d like a confirmation email when your documents are filed
- A signature for all members or organizers of the LLC
Filing fees are $125. You have several options to file Articles of Organization in North Carolina. The fastest and easiest way is using the North Carolina Secretary of State’s “Business Creation Wizard.” The Wizard walks you step-by-step through the creation process, checks for common errors, and has a much faster turnaround time.
If you have customized articles you’d like to use in your application, you can still upload a PDF or apply by mail, though it can take up to ten business days to process.
5) Get your Employer Identification Number
Your Employer Identification Number (EIN) is basically like your business’s Social Security Number. It identifies your business to the IRS as a unique legal entity and allows you to include your LLC in your state income tax filing. Your EIN is what helps to keep your personal assets separate from your business assets, the main reason you probably got an LLC.
With an EIN, you can open a business bank account and apply for a business credit card. These are essential in keeping your personal assets safe. With a business bank account, you can keep your personal spending completely separate from your business, and make accounting and taxes much easier.
A business credit card can help you build your business’ credit score. While your business credit is different from your personal credit, it functions pretty much the same way; the higher your business credit, the bigger lines of credit you’re eligible for lower interest rates.
An EIN also allows you to legally hire employees if you find yourself in need of a little help around the office. Remember that if you hire employees, the State of North Carolina requires you to provide worker’s comp insurance.
Get LLC insurance in minutes by following these steps
Now that Your North Carolina LLC is up and running, keep it safe from the unexpected by getting LLC insurance with Huckleberry! Here’s how to get started:
- Head over to Huckleberry.com and hit the “Instant Estimate” button on the homepage.
- Type in your industry, and Huckleberry will show you the specific coverages they can offer.
- Answer a few questions about yourself and your business, like your location, estimated payroll, and revenue estimates. Nothing too complex is needed; we just want an overview of your business to ensure we have the right product for you.
- In the time it takes to get a cup of coffee, Huckleberry will have a quote ready for you with the coverage you need to keep your business safe and compliant.
- Still not convinced? Our quick rate estimator can get you a ballpark figure of what you’d pay for small business insurance.
Forming an LLC is just the beginning of your business journey. With the joy and satisfaction of running your own business comes fear and anxiety about the unexpected, whether it’s unseen financial troubles or catastrophic weather.
That’s why Huckleberry is here to help you get the North Carolina small business insurance coverage at the lowest rates possible. From worker’s comp coverage to liability protection, Huckleberry gets you the quality coverage you need as quickly and easily as possible.
Visit Huckleberry.com today for your free quote, and get back to the business you love.