In North Carolina, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in North Carolina, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in North Carolina.
Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.
On this page, you’ll learn about the following:
- What is a Corporation in North Carolina?
- How to Start a Corporation in North Carolina
- Step 1: Choosing a Corporate Name
- Step 2: Hire a Registered Agent
- Step 3: Appointing Directors
- Step 4: Preparing and Filing Articles of Incorporation
- Step 5: Creating Corporate Bylaws
- Step 6: Holding the Initial Board of Directors Meeting
- Step 7: Issuing Stock
- Step 8: Obtaining Required Licenses and Permits
- Step 10: Registering with State Tax Agencies
- Step 11: Annual Reporting and Ongoing Compliance
- Paying Your Taxes in North Carolina
- Cost of Forming a Corporation in North Carolina
What is a Corporation in North Carolina?
A corporation in North Carolina is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in North Carolina are required to have at least One directors. One of the main advantages of a corporation in North Carolina is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.
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Common Types of Corporations
Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.
C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.
S-Corporation in North Carolina is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.
Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.
It is recommended to Start a Corporation in North Carolina if you would like to provide limited liability protection to your shareholders rather than North Carolina LLC. However, you may want to consult to LegalZoom’s Business Attorney before starting a business.– WEBINARCARE EDITORIAL TEAM
How to Start a Corporation in North Carolina
To start a corporation in North Carolina, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Articles of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.
Step 1: Choosing a Corporate Name
The first step in starting a corporation is choosing an available name that complies with North Carolina naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.
Here are some guidelines you must follow while naming your corporation in North Carolina-
- Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
- Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”
To check the availability of your desired corporate name, you can search the North Carolina Secretary of State‘s business name database and Business Name Search in North Carolina. If the name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of $30 and mail name reservation fee of $30. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.
The DBA filing can be done by two methods, by mail and in person., which costs around $26. In addition, the DBA’s validity in North Carolina is Indefinite, which you can file in North Carolina Secretary of State.
You can check out How to File a DBA in North Carolina for clearer understanding.
Step 2: Hire a Registered Agent
Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are North Carolina Registered Agent Services to check in forming North Carolina Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.
Step 3: Appointing Directors
Corporations in North Carolina are required to have at least One directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In North Carolina, directors must be at least 18 years old and do not need to be state residents.
When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.
Step 4: Preparing and Filing Articles of Incorporation
After you appoint the initial board of directors in your North Carolina corporation, the next step is to write and file a Articles of Incorporation. In writing, the North Carolina Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.
To officially form your North Carolina corporation, you must prepare and file Articles of Incorporation with the North Carolina Secretary of State. The Articles of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.
The specific requirements for Articles of Incorporation vary by state, but generally, the document must include the following:
- The corporate name
- The purpose of the corporation
- The name and address of the registered agent
- The names and addresses of the initial directors
- The number of authorized shares and their par value
- The name and address of the incorporator(s)
Once the Articles of Incorporation are complete, please submit them to the North Carolina Secretary of State’s office, along with the required filing fee. Fees vary by state, but in North Carolina, the Articles of Incorporation filing fee costs around $125 for filing online, or by mail.. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.
- Online Filing: Create a wizard on the SOS site, fill out the online form and submit online. Or download the PDF form, fill it up offline and upload it back to the SOS site.
- Offline filing: Send the form by mail or drop it off in person at The Secretary of State, Business Registration Division, P.O. Box 29622, Raleigh, NC 27626.
Step 5: Creating Corporate Bylaws
Now you are done filing Articles of Incorporation in North Carolina, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing North Carolina corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.
Key provisions to include in your corporate bylaws may include:
- The corporation’s purpose and principal place of business
- The roles and responsibilities of directors, officers, and shareholders
- The process for appointing and removing directors and officers
- The procedures for holding annual and special meetings
- The methods for amending the bylaws and Articles of Incorporation
- The procedures for issuing stock and maintaining shareholder records
Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.
Step 6: Holding the Initial Board of Directors Meeting
The initial board of directors meeting is a crucial milestone for your North Carolina corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.
The agenda for the initial board meeting may include the following:
- Adopting the corporate bylaws
- Ratifying any pre-incorporation actions taken by the incorporator(s)
- Electing corporate officers (e.g., president, vice president, secretary, treasurer)
- Designating a corporate bank account
- Authorizing the issuance of stock
- Approving necessary licenses, permits, and tax registrations
It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.
Step 7: Issuing Stock
Corporations in North Carolina are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Articles of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.
The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.
Step 8: Obtaining Required Licenses and Permits
Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:
- A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
- State sales and use tax registration, if your corporation sells taxable goods or services
- Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
- North Carolina Business Licenses, zoning permits, and health department approvals
Researching and obtaining all required North Carolina licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.
Step 10: Registering with State Tax Agencies
In addition to obtaining licenses and permits, your North Carolina corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in North Carolina for payroll tax purposes, and filing state income tax and franchise tax returns.
An EIN will serve as the tax ID for your North Carolina corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.
The application of an EIN in North Carolina can be through the following:
- Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
- Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
- Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
- Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.
Each state has tax requirements, so consult a tax professional or North Carolina Department of Revenue for guidance on your specific obligations.
Step 11: Annual Reporting and Ongoing Compliance
Once your North Carolina corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the North Carolina Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.
In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.
Paying Your Taxes in North Carolina
Even if you have established your corporation in North Carolina, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in North Carolina has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in North Carolina are sales tax, franchise tax (not applicable to all the states), and other state taxes.
Cost of Forming a Corporation in North Carolina
In forming a corporation in North Carolina, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in North Carolina, it costs $125 for filing online, or by mail.. The corporation in North Carolina also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.
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How to Save Money While Forming Your North Carolina Corporation
Title: Maximizing Savings while Establishing Your North Carolina Corporation
Forming a corporation in North Carolina presents countless opportunities for entrepreneurs and aspiring business owners. However, it is no secret that the associated costs can leave a notable dent in the bank account. Sadly, financial constraints can often deter ambitious ventures before they’ve even begun. Yet, with careful planning and strategic decision-making, aspiring North Carolina business owners can ensure that their dreams become a reality while saving those hard-earned dollars. Here are some valuable tips to help save money when forming your corporation in the Tar Heel State.
Research and Planning:
One crucial aspect that can heavily influence both initial expenses and long-term financial goals is comprehensive research and effective planning. Thoroughly investigating the various legal requirements, tax implications, and administrative costs associated with setting up a corporation is an essential first step. By doing one’s due diligence and understanding the specific local regulations and permits, potential entrepreneurs can avoid unnecessary fees or legal complications on their journey to sustainability.
Choosing the Right Entity:
Another vital consideration while forming your North Carolina corporation is selecting the appropriate entity type. Consulting an experienced attorney or accounting professional can play a significant role in guiding this decision-making process. Different entity options, such as limited liability companies (LLCs) or S or C corporations, come with distinct tax structures and legal obligations. Picking the right entity that aligns with your business objectives can result in substantial cost savings both at the setup phase and during future tax filings.
Cost-Effective Legal Assistance:
Retaining the services of a proficient attorney is often essential while navigating the complex legal landscape surrounding business formation. However, there are various strategies to minimize legal expenses. Rather than engaging an attorney for every task, aspiring business owners can opt for an à-la-carte approach, seeking legal assistance on critical documents or specific topics relevant to their circumstances. Additionally, exploring free or low-cost legal resources often available through regional small business associations or entrepreneur support programs can provide invaluable aid without rendering a crippling blow to your finances.
DIY or Professional Filings:
When it comes to filing the necessary paperwork with the North Carolina Secretary of State’s Office, careful consideration must be given to whether you are able and willing to handle the task or if professional filing assistance is needed. DIY (do-it-yourself) filing methods can range from self-preparation and submission to utilizing cost-effective online platforms designed to simplify the process. These options often carry significantly lower price tags than hiring a professional service. However, the complexities involved, including ensuring accurate completion and adherence to strict deadlines, must be carefully weighed before embarking on a DIY approach.
Sensible Accounting and Taxation:
Efficient financial management is an integral part of both cost control and long-term success. Before initiating your North Carolina corporation, it is advisable to implement a streamlined accounting system that allows for cost-effective internal bookkeeping. Embracing cloud accounting software or engaging the services of a knowledgeable accountant can help maintain consistent financial records, simplify tax filings, and prevent potential penalties or audit concerns in the future.
While forming a corporation in North Carolina can undoubtedly incur certain costs, shrewd planning and informed decision-making can play an instrumental role in minimizing financial burdens. By conducting diligent research, leveraging professional expertise judiciously, and adopting cost-conscious strategies in legal filings and tax matters, aspiring business owners can successfully navigate the initial stages while conserving valuable resources.
Please note: The following conclusion is not the actual conclusion of the article as it is to be added along with the existing conclusion of the already-written article.
In conclusion, by adhering to the fecund recommendations outlined above, entrepreneurs embarking on the pursuit of their North Carolina corporation can successfully navigate the pitfalls associated with soaring financial expenses. Armed with careful planning, appropriate legal consultation, and vigilant financial management, individuals driven to establish a thriving North Carolina corporation can reap the benefits of cost control while paving their way toward lasting success.
Starting a corporation in North Carolina involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your North Carolina corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.