How to Start a North Carolina Corporation (original) (raw)

Start a North Carolina Corporation

When you plan to start a business in North Carolina, you must decide on the appropriate structure. Starting a corporation may be more complicated than creating an LLC in North Carolina or a sole proprietorship. However, it is not that difficult as well. There are a few guidelines that you should be aware of when it comes to creating North Carolina corporation. Starting a corporation involves a legal process, that is, the process of incorporation.

In this article, I will share a step-by-step guide to start a corporation in North Carolina. I will also enlighten you on the advantages and disadvantages of having a corporation. Some people consider starting a corporation in North Carolina more than other business structures since it has many advantages over other forms.

What is a Corporation in North Carolina

In definition, a corporation is a formal organization established by stockholders, shareholders, or other people to make a profit. Like individuals, corporations can undertake contracts, own assets, sue and be sued, pay taxes, limit state and federal taxes, and loan funds from banking institutions.

Common Types of Corporations

Before you start with the process of forming 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: 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: An S-Corporation is set up similarly to a C-corporation but has different tax implications and owner limits. S-corps have no more than 100 stockholders and are not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.
Non-profit Corporation: Nonprofit businesses are frequently used by religious, educational, and charity institutions 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. Read how to start a nonprofit corp in North Carolina to learn about nonprofit corporations.

If you have a small business, it is recommended that you form an LLC instead of a corporation in North Carolina. LLCs have more tax benefits than other structures. Besides, LLCs protect your personal assets. However, it is wise to consult a legal expert before you start setting up your business in North Carolina.

– LLCBuddy 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 forming a corporation name, appointing a board of directors, filing for Articles of Incorporation, drafting corporate bylaws, meeting with the board of directors, issuing stocks, creating a shareholders agreement, requesting for an EIN, and getting a license and permit. 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: Choose a Corporation Name in North Carolina

Naming your business is one of the most crucial activities during the startup phase. Your corporation name serves as the foundation for your brand. Legal procedures should be taken into account when choosing your corporation name. Choose a corporation name that will enable you to develop a strong brand identity without being hampered by irrelevant factors.

If you are forming an LLC, there is a complete guide on North Carolina LLC name guidelines for a proper LLC name. 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.”

Step 2: Board of Directors Initial Appointment

To form a corporation in North Carolina, you must appoint an initial board of directors before making them permanent once the corporation is formed. In North Carolina, you may appoint at least One board of directors. The initial board of directors is in charge of guiding the overall strategy of your business. The structure, responsibilities, and powers given to a board of directors are determined by the bylaws of a company or organization. So, appointing your corporation’s initial board of directors in North Carolina is a big step in forming a corporation.

Step 3: Filing the Articles of Incorporation in North Carolina

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, North Carolina Registered Agent contact information, and the names and addresses of incorporators and/or initial board members, should be written.

Filing a Articles of Incorporation in North Carolina may be done with three methods that are online, by mail and in-person. The Articles of Incorporation fee may vary from different states. However, in North Carolina, it costs $125 for filing online, or by mail..

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 4: Draft Corporate Bylaws

Now you are done filing a Articles of Incorporation in North Carolina, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made-

The responsibilities are given to each officer.
How will judgments in business be made?
Where and when are the annual shareholder meetings?
The minimum number of shareholders required for decision-making.
Location and timing of dividend payments.

Step 5: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 6: Issuing Stock in a Corporation

After starting your North Carolina corporation, one of the first official corporate actions is issuing stock to the shareholders. Keep track of the number of shares issued to each shareholder and the purchase price. A corporation in North Carolina is managed by its shareholders, who contribute to the business in exchange for ownership shares.

Step 7: Draft and Finalize a Shareholders Agreement

Even though drafting and finalizing a shareholders agreement is unnecessary, I suggest you still comply since it will benefit your corporation and its shareholders. A small business’s shareholders enter into a shareholder agreement contract. It establishes how ownership will be handled in unexpected situations, like a shareholder passes away, retires, becomes disabled, or quits the corporation. Early on in the life of your North Carolina corporation, signing a shareholders’ agreement can help maintain corporate continuity and prevent future disputes.

Step 8: Request an EIN in North Carolina

After everything is in place, you should get or request an Employer Identification Number (EIN). 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 EIN online 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 For m SS-4 can be filed via mail. The processing time frame to receive the mail is 4 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.

After you have your EIN number, you can benefit in a number of ways. It will give your corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 9: Get Licenses and Permits for your Corporation in North Carolina

Before your corporation operates in North Carolina, you must have a business license. A business license is a document issued by a government agency that permits you to operate your business in the geographic region that that agency governs. To legally operate your corporation, you’ll need a business license. Numerous corporate licenses need to be filed and renewed regularly. Check out how to get business licenses and permits in North Carolina to know more.

You must also register a DBA name if you intend to conduct business using a name other than your corporation’s legal name. The DBA name is sometimes known as “doing business as” or a “fictitious business name.” Depending on your location, you may need to register the DBA with your state, city, and county. You can skip this step if your business solely uses your legal company name.

Important Information

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

A filing and annual fee must be paid to form a corporation in North Carolina. Without it, your corporation won’t operate. The initial filing fee for a corporation may vary depending on the state. However, in North Carolina, it costs 125forfilingonline,orbymail..ThecorporationinNorthCarolinaalsohastofileanannualreport(thoughitmightnotbemandatory,itisrecommendedtofileone).Ensureyoucomplywithallthenecessaryfeesandcostssoyourcorporationwillrunsuccessfullyandsmoothly.If,inthefuture,youmakeanychangestoyourcorporation,youmustfiletheNorthCarolinaAmendment.Itcosts125 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. If, in the future, you make any changes to your corporation, you must file the North Carolina Amendment. It costs 125forfilingonline,orbymail..ThecorporationinNorthCarolinaalsohastofileanannualreport(thoughitmightnotbemandatory,itisrecommendedtofileone).Ensureyoucomplywithallthenecessaryfeesandcostssoyourcorporationwillrunsuccessfullyandsmoothly.If,inthefuture,youmakeanychangestoyourcorporation,youmustfiletheNorthCarolinaAmendment.Itcosts50 to file an amendment in North Carolina.

Advantages of Starting a Corporation in North Carolina

Limited Liability: The biggest advantage of setting up a North Carolina corporation is that the shareholders are not personally responsible for the debts of the company. As a result, when you incorporate as a corporation, personal assets like homes, vehicles, and other possessions are prohibited. One of the main benefits of setting up a corporation over a general partnership or sole proprietorship business structure is that neither the business nor the owners are held legally responsible for the obligations of the business, even if it means giving up their personal assets.
Limitless Corporation: The fact that a corporation’s existence is independent of its owners is another significant benefit of incorporation. In other words, a corporation has an endless life and will continue operating normally even if the owner dies or decides to sell their ownership.
Advantages in Tax: The deduction of health insurance premium payments made on behalf of an owner-employee is one of the many financial benefits to which corporations are entitled. Corporations also save on self-employment taxes since their revenue is not subject to workers’ compensation, Social Security, or medical taxes. Tax rates on corporate profits are lower than those on individual income.

FAQs

What is required to start a corporation in North Carolina?

To start a corporation in North Carolina, you need to file a Certificate of Incorporation with the North Carolina Secretary of State.

How long does it take to form a corporation in North Carolina?

It usually takes about one to two weeks for the Articles of Incorporation to be approved by the Secretary of State.

How much does it cost to incorporate in North Carolina?

The filing fee for submitting the Articles of Incorporation to the North Carolina Secretary of State is $125.

What are the benefits of incorporating in North Carolina?

Incorporating in North Carolina has several benefits, such as limited liability protection, tax savings, and more credibility with investors and customers.

Does a North Carolina corporation have to have a board of directors?

Yes, all North Carolina corporations must have at least one board of directors.

What paperwork is required to form a corporation in North Carolina?

The paperwork required to form a corporation in North Carolina is the Certificate of Incorporation, the Articles of Incorporation, and the Articles of Organization for LLCs.

How do I file the paperwork for my North Carolina corporation?

You can file the paperwork for your North Carolina corporation with the North Carolina Secretary of State either in person or by mail.

What is the North Carolina Corporation Commission?

The North Carolina Corporation Commission is the state agency responsible for overseeing the formation and administration of corporations in North Carolina.

Are there any annual filing requirements for North Carolina corporations?

Yes, all North Carolina corporations must file an annual report with the North Carolina Secretary of State.

Does my North Carolina corporation need a registered agent?

Yes, all North Carolina corporations must have a registered agent to accept service of process and official correspondence from the state and other creditors.

What is the difference between an LLC and a corporation in North Carolina?

An LLC is a business entity designed to provide limited liability protection, while a corporation is a more formal business structure that allows shareholders to own and manage the company.

How do I maintain my North Carolina corporation?

To maintain your North Carolina corporation, you must keep accurate records of all financial transactions, file annual reports, and pay applicable taxes and fees.

Is there a North Carolina corporate tax?

Yes, all North Carolina corporations are subject to the state’s corporate income tax.

Are there any other taxes that my North Carolina corporation must pay?

Yes, your North Carolina corporation may also be subject to sales and use taxes, franchise taxes, and other local taxes and fees.

How do I select a name for my North Carolina corporation?

To select a name for your North Carolina corporation, you must first check the North Carolina Secretary of State’s database to make sure the name is available and not already in use.

How do I open a corporate bank account in North Carolina?

To open a corporate bank account in North Carolina, you must provide the bank with your Articles of Incorporation, a copy of your Certificate of Incorporation, your federal Employer Identification Number, and other required documents.

What are the requirements for holding a corporate meeting in North Carolina?

To hold a corporate meeting in North Carolina, you must give advance notice to all board members, create a detailed agenda, and keep accurate meeting minutes.

Are there any special requirements for a North Carolina corporation to issue stock?

Yes, a North Carolina corporation must create a Stockholder Agreement and file it with the North Carolina Secretary of State before it can issue stock.

Can a North Carolina corporation issue more than one class of stock?

Yes, a North Carolina corporation can issue more than one class of stock, but the Articles of Incorporation must specify the rights, privileges, and restrictions associated with each class of stock.

How do I close a corporation in North Carolina?

To close a corporation in North Carolina, you must file a Certificate of Dissolution with the North Carolina Secretary of State and pay any outstanding taxes and debts.

How do I transfer ownership of a North Carolina corporation?

To transfer ownership of a North Carolina corporation, you must file a Certificate of Amendment with the North Carolina Secretary of State and notify all shareholders of the transfer.

What is the North Carolina Limited Liability Company Act?

The North Carolina Limited Liability Company Act is a state law that outlines the requirements for forming and operating an LLC in North Carolina.

Does a North Carolina corporation have to have an Employer Identification Number?

Yes, all North Carolina corporations must obtain an Employer Identification Number from the Internal Revenue Service.

Does a North Carolina corporation need to file annual reports?

Yes, all North Carolina corporations must file an annual report with the North Carolina Secretary of State.

Is it possible to convert a North Carolina corporation to an LLC?

Yes, it is possible to convert a North Carolina corporation to an LLC by filing a Certificate of Conversion with the North Carolina Secretary of State.

What is the North Carolina Business Corporation Act?

The North Carolina Business Corporation Act is a state law that outlines the requirements for forming and operating a corporation in North Carolina.

Does a North Carolina corporation need to have an operating agreement?

Yes, all North Carolina corporations must have an operating agreement that outlines the rights and responsibilities of the shareholders, directors, officers, and other stakeholders in the corporation.

What is the North Carolina Secretary of State?

The North Carolina Secretary of State is the state agency responsible for registering and administering corporations in North Carolina.

What are the requirements to start a corporation in North Carolina?

To start a corporation in North Carolina, you must file the Articles of Incorporation with the North Carolina Secretary of State, provide a registered agent in the state, and provide a registered office in the state. You must also pay the applicable filing fee.

Is it expensive to incorporate in North Carolina?

The cost to incorporate in North Carolina depends on the type of corporation you are forming, but is typically between 60−60-60−200.

What is the process for registering a corporation in North Carolina?

The process for registering a corporation in North Carolina involves filing the necessary paperwork with the North Carolina Secretary of State, providing a registered agent and registered office in the state, and paying the applicable filing fee.

What are the different types of corporations in North Carolina?

The two main types of corporations in North Carolina are C Corporations and S Corporations.

What is the North Carolina corporate income tax rate?

The North Carolina corporate income tax rate is 3% for C Corporations and 2.5% for S Corporations.

Why North Carolina Corporation is So Important

One of the key reasons why North Carolina corporations are so important is the significant impact they have on the state’s economy. These companies contribute significantly to the GDP of North Carolina through job creation, tax revenues, and overall economic activity. With a strong presence of Fortune 500 companies such as Bank of America, Duke Energy, and Lowe’s, North Carolina has cemented its status as a major economic hub in the Southeast.

Furthermore, North Carolina corporations also play a vital role in fostering innovation and entrepreneurship. The state’s vibrant startup ecosystem has produced a number of successful companies in sectors such as biotechnology, venture capital, and clean energy. These companies not only contribute to the state’s economic growth but also showcase North Carolina as a preferred destination for emerging businesses and entrepreneurs.

In addition to the economic impact, North Carolina corporations also contribute significantly to the social fabric of the state. Many companies in North Carolina are actively involved in philanthropic efforts, supporting education, healthcare, and community development initiatives. Through their corporate social responsibility programs, these companies make a positive difference in the lives of North Carolinians and help improve the overall quality of life in the state.

Moreover, North Carolina corporations are also important drivers of job creation and workforce development. By providing employment opportunities and investing in employee training and development, these companies contribute to the growth and prosperity of individuals and families across the state. In a rapidly changing economic environment, the presence of strong, stable corporations in North Carolina is crucial to ensuring a skilled and competitive workforce.

Overall, North Carolina corporations are vital to the economic, social, and cultural vitality of the state. Their contributions to job creation, innovation, and community development demonstrate the significant role they play in shaping the future of North Carolina. As key stakeholders in the state’s economy, it is imperative that North Carolina corporations continue to thrive and grow, driving progress and prosperity for generations to come.

Conclusion

When determining which corporate form is best for you, be selective. You must know which business structure is bet-fitted for your product/service in North Carolina. Consult a legal professional before you take the first step while setting up your business. Finding the ideal ratio of corporate advantages and legal protection that meets your unique needs is very important. In forming a corporation in North Carolina, you need to ensure that every detail is well-formed so that your corporation will be successful. And if you have any questions, share them in the comment section below.