Articles of Organization

The formation of a North Carolina LLC means that you have to file articles of organization with the North Carolina Secretary of State. Your new LLC's articles of organization must include:

• The LLC's name
• The name, address, and title (organizer or member) of each person executing the articles
• The initial LLC registered office's address (including county)
• The name of the LLC's initial registered agent at that address
• The address of the LLC's principal office

It must also specify whether the LLC will be manager- or member-managed, as well as whether the LLC is perpetual or of limited duration. If it has a set or "latest" date for dissolution, the period of the LLC's duration must be stated.

It can also list other items that are included in the operating agreement if the members so desire, so long as they don't conflict with state law. The filing fee is $125.

Your new LLC is officially deemed as "organized" after one original and one copy of the LLC's articles of organization are delivered to the North Carolina Secretary of State's officewith the filing fee, and that office then verifies that the articles are in compliance with state law. The articles must be signed by at least two organizers.

An organizer is allowed to be any natural person, or it may be a legal or commercial entity. The organizer is not required to be a member of the LLC, but there must be at least one organizer of some type.

The organizer who signs the articles must also list his or her name and title (the office by holding which he or she is entitled to sign it, such as organizer, manager, etc.). The North Carolina Secretary of State will certify both copies, but will then retain the original and return a signed copy to the LLC or its authorized representative. The articles of organization are effective as of the time and date they are filed, unless otherwise indicated

Registered Agent and Office

A North Carolina LLC must have a registered agent in the state-someone to receive official state legal and administrative correspondence on behalf of the LLC. An LLC registered agent may be an individual who resides in North Carolina or a corporation (whether originally formed in North Carolina or not) that is registered to conduct business in the state. The registered office may be a place of business for the LLC, but a post office box or mail drop is not allowed to be used as the agent's address.

Operating Agreement

The LLC's second most important document is its operating agreement, which can be changed by the members as set forth by the agreement itself or applicable state law. Having an operating agreement is not legally required by the state, but it's a vitally important internal document that sets forth how the LLC will run.

The operating agreement needs to list the LLC's members, how much each one has invested, how any profits will be distributed, and how much relative weight each member has when voting.

The operating agreement may also include requirements for meetings (notice, quorum, voting rules, etc.) and similar functions, but it doesn't have to. Usually, though, it does include operating constraints and allowances already contained in state law and policy. It also may contain constraints on the members' authority to change or repeal the operating agreement or a provision thereof. If there is more than one member, the operating agreement must initially be unanimously approved in writing.

Membership in the LLC

LLCs in North Carolina must have one or more members, and each member must be a natural person or a recognized business entity. A member can acquire an interest in the LLC when it is formed, or by a method specified in the operating agreement. Becoming a member usually requires a contribution of cash or property to the LLC, or it may take to form of services rendered to the LLC. However, a person may be admitted as a member of the LLC without acquiring a membership interest if the articles of organization or operating agreement allow it, or if all the members agree and the new member's admission is recorded in the LLC's records.

An LLC member can only resign as permitted in the articles of organization or operating agreement, which usually specify a minimum amount of time before a member is allowed to resign. LLCs have the right to pursue remedies for damages suffered by the LLC that are the result if a member's resignation.

Ongoing Requirements

North Carolina LLCs must file an annual report with the North Carolina Secretary of State that includes:

• The LLC's name and the state or country under whose laws it was originally organized
• A brief description of the LLC's business
• The street address (and mailing address if needed) and county of the registered office
• The LLC's in-state registered agent's name
• The mailing address and telephone number of the LLC's main office
• The names and business addresses of the LLC's managers

They also must keep the following types of records available for inspection at their office:

• Members' and managers' names and addresses
• Names and addresses of all assignees of financial rights other than a secured part, and a description of the rights assigned
• A copy of the articles of organization and amendments, if any
• Copies of the federal, state, and local income tax returns for the LLC for the past three years
• A copy of the operating agreement, along with any amendments
• Copies of federal, state, and local income tax returns for the LLC's three most recent years
• Financial statements required by state law
• Records of all proceedings of board and member meetings for the past three years
• A statement of all contributions made

Dissolution

An LLC is dissolved when any one of the following events occurs:

• Event(s) or a time specified in the articles of organization or operating agreement
• Written agreement to dissolve by all the members
• Event that makes it illegal for the LLC to continue
• If the LLC no longer has any members
• Judicial decree ordering dissolution, or the filing of a certificate of dissolution by the state Secretary of State

Unless otherwise specified in the articles of organization or the operating agreement, the approval of all members is required to sell all the LLC's assets, or to voluntarily dissolve the LLC.

Taxes

An LLC by its nature does offer some tax advantages over a corporation structure, including access to more deductions, since the LLC is not required to be a separate tax entity like a corporation. Instead, it is considered a "pass-through entity" for tax purposes, meaning LLC owners report business profits and losses on their individual tax returns.

Unless you decide that your LLC should be taxed in the same way as a corporation, the IRS looks at single-member LLCs as sole proprietorships. This means that the LLC itself does not pay taxes as such and does not have to file a tax return. The IRS treats multi-owned LLCs as partnerships for tax purposes. Therefore, LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, not the LLC itself.

The tax rate for North Carolina LLCs varies, based on the amount of North Carolina taxable net income per reporting period.

Articles of Incorporation

In accordance with the North Carolina Business Corporation Act (Chapter 55 of the North Carolina General Statutes), corporations must file articles of incorporation with the state Secretary of State's office before conducting business. The articles must be delivered by at least one of the incorporators, accompanied by the filing fee of $125.

Normal processing time by the state is five business from the date the state filing office receives your articles. Filing within 24 hours is $100 extra; same-day filing costs an additional $200.

The following information must be included in the articles of incorporation:

• The names and addresses of the incorporators.
• The street address and county of the corporation's initial registered office
• The name of the new corporation's initial registered agent at that office
• The mailing address of the corporation's initial principal office (if it's different from the registered office)
• The number of shares the corporation is authorized to issue

North Carolina law allows a corporation to be formed for any lawful business activity. There is no requirement for a specific corporate purpose to be stated in the articles of incorporation. North Carolina law also allows (but does not require) optional items to be included in the articles of incorporation for those corporations who wish to formally specify additional information, such as:

• The names and addresses of the initial directors of the corporation.
• The corporate purpose.
• The powers and constraints of the corporation, its board of directors, and shareholders.
• The par value of authorized shares or classes of shares.
• Provisions for or limitations on shareholder and/or director personal liability for corporate debts in certain situations.

In North Carolina, it's not required to state a par value for your new corporation's shares. The filing fee is not based on how many shares are authorized, so you can authorize as desired. Most incorporators authorize one class of common shares with equal voting, dividend, and liquidation rights, with no special restrictions.

Registered Agent and Office

Every North Carolina corporation must have a registered agent in the state-someone designated to receive official state correspondence, including notice if the corporation is "served" with a lawsuit. The registered agent must be either a North Carolina resident whose business office is the same as the registered office, or a corporation with a business office identical with the registered office.

Bylaws

Bylaws describe the corporation's basic managerial and legal operating principles. A North Carolina corporation must keep a copy of its bylaws at its main executive office, but is not required to file them with the state. The bylaws may contain any provision for managing the business and regulating the affairs of the corporation that's not in conflict with law or the articles of incorporation.

The board of directors of a corporation may adopt, amend, or repeal bylaws, unless the articles reserve this right to the shareholders. At its initial meeting, the board of directors should adopt corporate bylaws, and then keep them updated as time goes on. Bylaws normally address:

• Shareholders and directors meetings
• The authority, number, and tenure of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Directors and Officers

Officers may be listed in the bylaws or elected by the board in compliance with the corporation's bylaws. These officers may also appoint other officers, in compliance with the bylaws. One officer (usually the secretary or assistant secretary) has the responsibility of preparing minutes of director and shareholder meetings, and for maintaining and authenticating corporate records

A director of the corporation must be a "natural person" (as opposed to a business entity) who is at least 18 years of age, and there must be at least one. The articles of incorporation or the corporation's bylaws may specify additional qualifications for directors.

An officer may hold more than one corporate office unless prohibited by the corporation's bylaws. However, no individual is allowed to act in more than one capactity where the action of two or more officers is required.

Required Reports

An annual report must be filed (in either paper or electronic format) with the North Carolina Secretary of State each year by the 15th day of the third month after the end of the corporation's fiscal year. This report must include:

• The corporation's official name and its state or country of incorporation.
• The county, street address, and mailing address (if different) of its registered office, the registered agent at that office, and a statement of change regarding any change of the registered agent and/or registered office.
• The address and telephone number of the corporation's main office.
• The names, titles, and business addresses of its principal officers.
• A brief description of the nature of the business.

Additionally, state law requires that the corporation mail an annual financial statement to all shareholders within 120 days of the end of the corporate fiscal year. These statements must include a year-end balance sheet, an income statement for that year, and a statement of the year's cash flows, unless that information appears elsewhere in the financial statements

Taxes

North Carolina corporations are subject to a state corporate income tax. They must also pay an annual franchise tax, the minimum amount of which is $35.