Starting a corporation in North Carolina has several benefits. The state has higher education, a healthy housing market, highly competitive local labor markets, and relatively attractive taxation.
The following step-by-step guide will show you how to start a corporation in North Carolina.
1. Select a name for your corporation
The first step in getting your North Carolina corporation off the ground is deciding on a business name. Additionally, the business name must comply with state naming requirements.
General corporate name guidelines
When naming a North Carolina corporation, keep the following guidelines in mind:
- Your North Carolina corporation name must be different from any other existing business in the state of North Carolina
- Your North Carolina business name must contain the word corporation, Inc., limited, company, or an abbreviation of any of these words
- In the event that you plan on using any of the following words, prior approval will need to be obtained: banker, bank, banking cooperative, trust, co-op, mutual, architect, architectural, architecture, engineer, certified public accountant, insurance, engineering, drug, pharmacy, prescription drug, Apothecary, RX, surveyor, realtor, surveying, survey, and wholesale
The North Carolina state statute provides additional guidance on naming a North Carolina corporation.
A trademark is a name, word, symbol, or combination of all of these aspects that are adopted and used by a personal business to distinguish goods sold, made, or distributed by the company. Therefore, trademarking a North Carolina corporation name will protect it from intellectual property misuse and theft.
If you plan to register a trademark, you should know that the North Carolina trademark statutes restrict or prohibit the registration of a new trademark that is too similar or the same as any other existing trademark in the state. Therefore, it is recommended that you perform a trademark name search on the Secretary of State’s website to ensure that the name is indeed available and not in use by another business entity.
Once you’ve established that the name is indeed available to be trademarked, apply via the United States Patent and Trademark Office to have your North Carolina corporation name registered as a trademark.
A business’s entity name is indeed its legal name. This is the name that you use on all formation documents and correspondence with the federal and state government. So the entity name of your North Carolina corporation is, in fact, its legal name.
DBA (Doing-business-as) name
New business owners need to consider whether they would like to register a DBA in the state of North Carolina. A DBA is short for (doing business as) name. This registration process is necessary if you intend on doing business under any other name aside from the entity name.
You need to first check that the DBA name you’re planning on registering is still available and hasn’t been taken by another business entity in the state. Once you confirm this, you can go ahead and register your DBA with the office of the Register of Deeds in the county where you plan on doing business.
2. Nominate a registered agent
North Carolina corporations are required to have a registered agent. The registered agent must be nominated before you can register your corporation with the Secretary of State.
Registered agents are often referred to as statutory, service of process, or resident agents. However, they all fulfill the same purpose, irrespective of the names they are called. The primary purpose of a resident agent is to receive government correspondence and service of process in the event that the corporation is sued.
It’s possible to nominate any natural person as your corporation’s resident agent; however, the person will need to meet a few basic requirements such as:
- The North Carolina resident agent will need to be of the legal age
- The North Carolina resident agent will need to maintain availability during normal business hours to ensure that they don’t miss out on accepting important legal documentation from the state
- The North Carolina resident agent must have a physical address in North Carolina where business activities are conducted
3. Appoint initial directors at the organizational meeting
To legally form your corporation in the state of North Carolina, you’ll need to hold an organizational meeting where a few corporate tasks are completed.
Some of those tasks include selecting initial directors, creating and approving bylaws, determining your corporation’s share structure, and also executing an incorporator’s statement.
When it comes to appointing initial directors, you’ll need to appoint at least one. The corporate director will oversee the operations of the North Carolina corporation until you call the first shareholders’ meeting.
A corporate director is also in charge of repealing, amending, and adopting the corporate bylaws. They will also need to be in charge of the election, supervision, and removal of corporate officers.
4. File Articles of Incorporation
Your North Carolina corporation is legally formed once the Articles of Incorporation or Certificate of Incorporation has been filed with the state’s office. This document officially creates your corporation and, therefore, will need to cover some basics such as:
- The North Carolina corporation’s effective date
- The North Carolina corporation’s names and addresses of incorporators
- The North Carolina corporation’s corporate officer’s addresses and names
- The number of authorized shares the corporation is allowed to issue
- These street address and name of the corporation’s registered agent
- The North Carolina corporation’s business name and physical address
Additionally, note that the Articles of Incorporation Form issued by the state of North Carolina allows you to state if the corporation issues more than one authorized share series or class. In the event that your corporation plans on issuing a multiple share structure, then you need to add an additional schedule to the Articles of Incorporation prior to submission.
When it comes to submitting the articles, you have three options available. Firstly, you can choose to upload a PDF of the articles online with the Secretary of State. Alternatively, you may submit your articles by mail or in person to the following addresses:
State of North Carolina
Department of the Secretary of State
Business Registration Division
P.O. Box 29622
Raleigh, NC 27626-0622
State of North Carolina
Department of the Secretary of State
Business Registration Division
2 South Salisbury Street
Raleigh, NC 27601-2903
5. Create and approve bylaws
Filing corporate bylaws with the state is not a requirement in North Carolina. However, since the bylaws make the rules and priorities clear for all members of the corporation, it is necessary. Ultimately, the bylaws determine how the corporation is going to be operated.
Therefore, you need to include the following information in your North Carolina corporation’s corporate bylaws:
- How your North Carolina corporation is going to be operated
- The roles and responsibilities of the Board of Directors
- How annual meetings will be held
- How voting procedures will be carried out
- How corporate officers and corporate directors will be elected
- How corporate records will be stored and maintained
- How company disputes will be resolved
- How the corporate bylaws will be added or amended in the future
- The date of the annual shareholders meeting you
- The process of negotiating contracts
- The fiduciary duties to the corporation
- What constitutes a quorum for voting purposes
- You may use the following bylaws templates to customize and suit your North Carolina corporation’s bylaws.
6. Select a share structure
The unit of ownership of a corporation is represented by a share of stock. Therefore, each share of stock depicts the percentage of ownership of the corporation. For example, if your North Carolina corporation issues stock or issues one share of stock to a stock owner, then that individual then owns 100% of the corporation.
Shares may also be structured into classes, with each class known as a share class holding different privileges and rights. Corporations in the state of North Carolina may have multiple classes, and each class can hold any number of shares.
7. Obtain an EIN
North Carolina corporations will need to apply for an Employer Identification Number, also referred to as an EIN. The Employer Identification Number is a government-issued ID and essentially acts as a business ID. Obtaining an Employer Identification Number is essential when it comes to opening business bank accounts, hiring staff as well as fulfilling tax purposes.
Additionally, even S corporations are required to have EINs for tax reporting purposes. A C Corporation is considered a separate legal entity and also requires an EIN for tax reporting purposes.
In order to obtain an Employer Identification Number, you can visit the IRS website and follow the step-by-step application process once your North Carolina corporation is officially formed. Prior to requesting an Employer Identification Number, you must have already legally formed your corporation in the state. This is because you’ll be required to provide your corporation’s formation date as well as its legal business name.
When applying for the Employer Identification Number, the applicant must disclose their Taxpayer Identification Number or Social Security Number and the name of the principal officer. This individual will be known as the “responsible party.” Unless the person applying for the Employer Identification Number is a government entity, the responsible party should be an individual or natural person.
Applying for an EIN is completely free of charge, and you may complete the online application or download the IRS Form SS-4 and submit it to the Internal Revenue Service.
8. File North Carolina state taxes
Depending on your business structure, you may be liable for one or more corporate taxes in the state of North Carolina:
- Corporate income tax: Corporate income tax applies to traditional C corporations. Personal income is usually taxed at a rate of 5.499% in the state.
- North Carolina franchise tax: This is the tax of the privilege of doing business in the state and applies to both S corporations as well as traditional corporations. It’s essentially a tax on an aspect of a corporation’s net worth.
- Employer taxes: You need to register with the North Carolina Department of Commerce’s website if you are hiring employees for your North Carolina corporation.
- Sales tax: All corporations will need to register for a seller’s permit with the North Carolina Department of Revenue’s website if they are selling a physical product.
9. North Carolina business licenses and permits
While North Carolina doesn’t have a general business license, depending on the type of corporation you’re forming, you may require other licenses and permits to legally operate your business in the state:
- Professional license: The admission of certain professionals is regulated by licensing boards in each state. Therefore professionals are responsible for maintaining their licenses in order to remain in good standing with the regulatory board. Some of the professions that are regulated in the state include lawyers, architects, nurses, accountants, geologists, veterinarians, and more. So if you’re running a professional corporation, ensure that you keep your professional license active and current.
For more information on relevant licenses and permits for your business, refer to the Economic Development Partnership of North Carolina.
10. Annual report requirements in North Carolina
Corporations in the state of North Carolina must file an annual report each year by the 15th day of the fourth month after the close of the corporation’s fiscal year. Annual reports may be filed online or by mail with the North Carolina Secretary of State.
11. Costs of starting a corporation in North Carolina
The filing fees below apply to all North Carolina corporations:
- Name reservation: $30
- DBA name: $26
- Articles of Incorporation: $125
- Annual report: $23
- New Mexico Certificate of Good Standing: $15
Next steps after forming a corporation
After forming your North Carolina corporation, there are a few additional steps you’ll need to implement to ensure that your business is protected and continues to run effectively:
Get a business bank account
It’s important to separate your large or small business finances from your personal finances and expenses. Ultimately, this allows you to simplify and streamline the accounting processes and business tax filings as well. Additionally, opening up a business credit card will help build your North Carolina corporation’s credit score to allow you to obtain more loans and higher credit limits as and when needed.
Every business type has its advantages and disadvantages. However, one of the advantages of a limited liability company over a sole proprietorship is that members’ liability is limited to the amount of their investment. When you form a sole proprietorship, you are liable for the debts incurred by the business.
A nonprofit corporation is a tax-exempt organization that’s often formed for charitable, religious, artistic, literary, educational, or scientific purposes. It is essentially a business form in which shareholders and trustees do not benefit financially.
Corporations are incorporated entities formed to limit the liability of their owners or shareholders. Therefore, shareholders are not personally liable for the debts of the corporation. Debts may only be collected by going after the assets of the corporation.
When a C Corp. brings in profit and then allocates that profit to shareholders as dividends, is when double taxation occurs. The reason why it’s referred to as double taxation is the profit is first taxed on the corporate level and then again on the individual level.
When you form a corporation, the owner’s personal assets are protected from creditors. Therefore, in the event that your business is sued, your personal assets cannot be seized to pay off the debt.