One of the first steps to formalizing a new business is creating a formal legal entity. In almost all cases, the best type of legal entity for a small business is an LLC in their home state. LLCs have better tax treatment than corporations. Additionally, for most small business owners, forming a company in Delaware isn’t worth the extra fees and the prospect of long-distance litigation in another state.
This guide is for simple LLCs with one owner. If you have investors, partners, or other partial owners, you’ll also need an operating agreement.
Before you file
First, you’ll need to have a company name to put on your filings. This name must contain “LLC” or similar words that put others on notice of your LLC status.
Additionally, you’ll need a name that is not too similar to the name of any pre-existing companies that provide similar services, in order to avoid trademark issues. You can check for similar companies with similar names at the state-level using the NC Secretary of State website here. Then you can search on the federal level using the United States Patent and Trademark Office here.
Trademarks law is complicated. However, in a nutshell, you are making sure your company name won’t cause any confusion in the marketplace with other similar companies with similar names.
Make the Filing
Once you’ve chosen a name and you’re ready to file, go to the North Carolina Secretary of State Forms page. Where it says “For: Business Entities Common” change it to “Limited Liability Companies” and download the Articles of Organization form. Fill out the form and write a check for $125 in filing fees. Then mail it to Business Registration Division PO Box 29622, Raleigh, NC 27626-0622. In a few weeks you’ll receive a confirmation in the mail.
After the LLC is formed
You should consider getting an employer identification number (EIN), registering your trademarks, and some other legal formalities beyond the scope of this guide. What you should know about your new LLC is that each year you’ll need to file an annual report and pay a $200 government fee.
The low cost and small administrative burden of LLCs is part of the appeal. However, if you fail to file an annual report for three consecutive years, the Secretary of State will dissolve your LLC. Then, you’ll need to do additional filings to ask for re-instatement.
Filing an LLC is cheap and easy. Most non-lawyers can simply fill-out and mail the form to create their LLC. However, you may need help from a lawyer if the LLC has multiple owners, you want to register a trademark, or for other more complicated tasks. If you have any questions about this guide, please contact us.