Opening a Company in North Carolina: LLC or Corporation

To open a company in North Carolina, it is necessary to appoint a Registered Agent and file the Articles of Incorporation with the North Carolina Business Registration Division.

The company name must include the term LLC or Corporation, Corp., Co., Incorporated, Inc., or Ltd.

Characteristics of the Registered Agent for North Carolina:

• Must have a street address in the State of North Carolina (no PO boxes or virtual offices)
• Must have regular business hours
• Must agree to receive legal mail (called service of process) on behalf of the company and forward it promptly.

Corporate Income Taxation in North Carolina

State corporate income tax in North Carolina is levied at a flat rate of 3%.

In addition to income tax, there is also a Franchise Tax, payable by LLCs in North Carolina. The franchise tax is $1.50 for every $1000 of taxable base. The taxable base for the franchise tax in North Carolina refers to:

• The company's net worth, or
• The historical cost of tangible assets located in NC, or
• 55% of the appraised value of tangible assets in NC.

The highest value among the three bases must be used. The minimum franchise tax is $200.

The Sales Tax rate in North Carolina is 4.75%. Unlike most states, cities and counties in North Carolina cannot add local surtaxes to the state sales tax.

The Articles of Incorporation for North Carolina must include the following information:

• Company Name
• Number of Authorized Shares. If intending to issue preferred shares, for each class of preferred shares, an attachment explaining the rights and limitations of each share class is required
• Appoint a Registered Agent in North Carolina
• Provide the address of the company's Principal Office
• Any Other Corporate Provisions to list additional provisions not otherwise specified in the standard Articles of Incorporation form
• Name and Address of the Incorporator
• Company Directors
• Corporate Email for notification of document filing [This address is not visible to the public]
• Effective Date of the company's opening: optional, used to indicate when the company will become effective.

Convening and Meeting of the Shareholders' Assembly and Board of Directors to Start the Company in North Carolina

Depending on the workload of the Business Registration Division of the State of North Carolina, the company opening in NC is typically approved in 5-10 days. Therefore, it is necessary to convene the shareholders' assembly and then hold the first meeting of the Board of Directors [board of director] to:

• Adopt the company's bylaws,
• Appoint the company Officers [President, Secretary, Treasurer, and possibly Vice President], and
• Make the other necessary decisions to start the company's activities in North Carolina [Decide the number of shares to issue, Decide the issue price, give the mandate to open the company's bank account, etc.]

The Shareholders' Assembly and the Board of Directors meetings must be documented through the preparation of so-called resolutions, which are then kept in the company's record book.

Finally, every year, companies in North Carolina must file an Annual Report with the Secretary of State to confirm or update the company's ownership and contact information.

A Brief Overview of North Carolina's Economy

North Carolina recorded a population of 10,856,322 in 2023, with an average annual growth of 0.9% over the last five years, ranking 18th among all 50 states in the USA for growth rate. North Carolina's gross domestic product (GDP) reached $559 billion in 2022, and the GDP is expected to reach $565 billion in 2023.

The number of employees in North Carolina is 4,976,583 people [Sept 2023], with an average annual growth over the last ten years of 1.7%. The three main sectors for employment are manufacturing, construction, professional services, and technical-scientific services.

The unemployment rate in North Carolina is 3.5% [data related to September 2023].

Criteria for Attributing Income to North Carolina for Corporate Income Taxation

For companies with sales in multiple states in America, North Carolina has adopted a market-based income apportionment criterion for corporate income tax. This means that revenues are considered to come from North Carolina if:

• For leases, licenses of tangible or real personal property, the sales market is in North Carolina;
• For goods and products, if the merchandise is in the State or is delivered to a location in the State;
• For the sale of a service, if the service is delivered at a location in North Carolina;
• To sell intangible goods, to the extent the property is used in the State.

North Carolina previously used the cost of performance to determine the source of revenue from the provision of services and intangible goods.