How to Start an S-Corp in North Carolina


Steve Bennett
Steve Bennett
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Start an S-corporation in North Carolina

North Carolina, popularly known as The Tar Heel State, offers a bunch of benefits for business owners, especially the state capital Raleigh has a lot to offer to the rising entrepreneurs in the state. If you want to start a business in North Carolina, you must choose an appropriate corporate structure. You can have a corporation or a sole proprietorship or set up an LLC in North Carolina. There are a few guidelines that you should be aware of when it comes to starting an S-Corporation. In North Carolina, S-Corporation is businesses’ most common corporate structure, especially start-ups. It was developed in order to give companies limited liability protection while preserving the advantages of being a distinct legal organization.

In this article, you will learn about how to start an s-corporation in North Carolina. You will also learn whether an s-corporate business structure suits your business. Please read all the points carefully before starting your business in North Carolina.

What is an S-Corp in North Carolina?

An S corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for both corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

If you want an S corp status for your business, you can always form an LLC to protect your personal assets from business debts. It takes some basic steps to have a successful s-corporation in North Carolina. S-Corps do pay corporate income taxes, but they are still treated as disregarded companies for federal tax purposes.

S-corps pay corporate taxes that LLCs do not have to pay. If you want to have an S-corp status, then we would recommend you have an LLC instead. This will protect your personal assets from your business liabilities and you don’t have to pay any corporate taxes.

–LLCBuddy Editorial Team

Limitation and Requirements of S-Corp in North Carolina

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

If you are qualified for the limitations and requirements, you can apply for an S-Corp in North Carolina.

How to Start an S-Corporation in North Carolina?

To create S-Corp in North Carolina, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Articles of Organization, creating an operating agreement in North Carolina, requesting an EIN, filing a form 2553.

Step 1: Register a Business Name in North Carolina

After you have decided on the idea to start an S-Corp in North Carolina, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up 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 S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in North Carolina.
  • Limit of restricted words that need a license in North Carolina, for example, doctors, attorneys, etc.
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hiring the North Carolina Registered Agent

The next step in starting an S-corp in North Carolina is hiring a North Carolina Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence in North Carolina. Forming an LLC and an S-corp will be easier if you have Registered Agent in North Carolina.

Step 3: File Your North Carolina Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). North Carolina Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. In order for the “Articles of Organization” to be filed, you need to pay a filing fee to the state. In North Carolina, the filing fee is $125.

In California, along with the Articles of Organization, you must send the Statement of Information to file your company. The statement of information is a mandatory document in California, but other states do not have this document.

Step 4: Creating an Operating Agreement in North Carolina

After you have filed your Articles of Organization in North Carolina, the next step is to create an LLC operating agreement in North Carolina. The North Carolina LLC operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following-

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure. For more details about how an operating agreement works, please check Operating Agreement.

Step 5: Request for EIN in North Carolina

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. 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- You can apply for EIN online, the most desirable and fastest method for users.
  • Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
  • Apply by Mail- The EIN application Form 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.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, we can get your EIN for you. Our EIN service is quick and hassle-free. For more details about EIN for your business, check why you need EIN.

Step 6: File Form 2553 for Your S-Corp Business in North Carolina

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In North Carolina, you can send your form 2553 to the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

Advantages of Starting an S-Corporation in North Carolina

Filing an S-Corp in North Carolina has numerous benefits and advantages.

  • Writing Off Losses: With S-corp, owners can deduct business losses from their individual income statements. If the company loses money in the first few years, it may balance its other sources of revenue. Even so, understand the shareholder loss limitations set by the IRS.
  • Pass-Through Taxation: Starting an S-Corp is the widely known advantage in forming this kind of business structure since an s-corp uses a pass-through taxation structure. The company does not pay twice the tax in this kind of taxation. Because of this structure, most start-ups and entrepreneurs in North Carolina apply for an S-Corp LLC.
  • Qualified Business Income Deduction: A qualified business income, or QBI, is the total of all qualified items of income, gain, deduction, and loss from any qualified trade or business, including S-Corp. With this, S corp owners may deduct up to 20% of their eligible earnings under the Tax Cuts and Jobs Act.

FAQs

What is an S-Corporation?
An S-Corporation is a form of business entity defined under state and federal tax law, which is recognized as a separate legal entity from its owners. An S-Corporation is a pass-through entity, meaning that all profits and losses are reported on the owners’ personal tax returns and not on the company’s tax returns.
What are the benefits of forming an S-Corp in North Carolina?
Forming an S-Corp in North Carolina offers a number of benefits, including protection from personal liability, tax deductions on business expenses, and the ability to transfer ownership easily. Additionally, North Carolina does not impose a franchise tax on S-Corps, making it a cost-effective choice for business owners.
What is the process for forming an S-Corp in North Carolina?
The process for forming an S-Corp in North Carolina starts with selecting a business name, filing Articles of Incorporation with the North Carolina Secretary of State, and obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Additional steps include establishing the corporate bylaws and obtaining the necessary licenses and permits.
How much does it cost to form an S-Corp in North Carolina?
The cost to form an S-Corp in North Carolina is dependent on a variety of factors, including the type of business and the number of shares to be issued. Generally, the filing fee for Articles of Incorporation is $125, with additional fees for certified copies.
Is an S-Corp in North Carolina required to hold annual meetings?
Yes, an S-Corp in North Carolina is required to hold annual meetings of shareholders and directors. The purpose of these meetings is to review the year’s financial performance, elect directors, and set corporate policy.
What is the taxation rate of an S-Corp in North Carolina?
The taxation rate of an S-Corp in North Carolina is determined by the corporate income tax rate set by the state. Currently, the corporate income tax rate in North Carolina is 3%.
What are the requirements for maintaining an S-Corp in North Carolina?
The requirements for maintaining an S-Corp in North Carolina include filing annual reports and paying estimated taxes on a quarterly basis. Additionally, S-Corps must abide by all state and federal regulations, keep accurate financial records, and hold annual meetings of shareholders and directors.
What is an S-Corp in North Carolina?
An S-Corp in North Carolina is a type of business entity that is recognized by the state and the Internal Revenue Service (IRS). It is a “pass-through” entity, meaning the business’ profits and losses are passed through the corporation to the individual owners, who are then taxed on their personal tax returns.
What are the requirements to form an S-Corp in North Carolina?
To form an S-Corp in North Carolina, you must file a Certificate of Incorporation, also known as Articles of Incorporation, with the North Carolina Secretary of State. The Certificate of Incorporation must include the corporate name, address, purpose, registered agent name and address, and the names and addresses of the incorporators. Additionally, all S-Corp shareholders must sign an agreement stating that they will comply with the requirements of an S-Corp.
What is the filing fee for an S-Corp in North Carolina?
The filing fee in North Carolina to form an S-Corp is $125.
When must an S-Corp file taxes in North Carolina?
An S-Corp in North Carolina must file taxes annually by April 15th.
What documents must an S-Corp in North Carolina file with the IRS?
An S-Corp in North Carolina must file Form 1120S, U.S. Income Tax Return for an S-Corp, with the IRS. Additionally, S-Corp shareholders must file Form 1040, U.S. Individual Income Tax Return, with the IRS.
How long does it take to form an S-Corp in North Carolina?
It typically takes 5-7 business days to form an S-Corp in North Carolina.
Does an S-Corp in North Carolina need to hold an annual meeting?
Yes, an S-Corp in North Carolina must hold an annual meeting of shareholders.
Does an S-Corp in North Carolina need to have bylaws?
Yes, an S-Corp in North Carolina must have bylaws that outline the responsibilities of the members and the rules for conducting business.
Does an S-Corp in North Carolina need to register with the state?
Yes, an S-Corp in North Carolina must register with the North Carolina Secretary of State in order to be recognized as a valid business entity.
Does an S-Corp in North Carolina need to obtain an Employer Identification Number (EIN)?
Yes, an S-Corp in North Carolina must obtain an Employer Identification Number (EIN) in order to open a business bank account and pay taxes.
Does an S-Corp in North Carolina need to file an annual report?
Yes, an S-Corp in North Carolina must file an annual report with the North Carolina Secretary of State by April 15th of each year.
Does an S-Corp in North Carolina need to pay franchise taxes?
No, an S-Corp in North Carolina is not required to pay franchise taxes.
Does an S-Corp in North Carolina need to have a board of directors?
Yes, an S-Corp in North Carolina must have a board of directors comprised of at least three members.
Does an S-Corp in North Carolina need to issue stock?
Yes, an S-Corp in North Carolina must issue stock to its shareholders.
What is the minimum capital required to form an S-Corp in North Carolina?
There is no minimum capital required to form an S-Corp in North Carolina.
Does North Carolina have any special regulations for S-Corps?
Yes, North Carolina requires S-Corps to hold an annual shareholders meeting, have a board of directors, file a Certificate of Incorporation, and register with the Secretary of State.
How much does it cost to maintain an S-Corp in North Carolina?
The cost to maintain an S-Corp in North Carolina depends on the amount of stock issued and the number of annual meetings and reports filed.
What is the tax rate for an S-Corp in North Carolina?
The tax rate for an S-Corp in North Carolina is the same as the individual income tax rate.
Is an S-Corp in North Carolina required to have insurance?
An S-Corp in North Carolina is not required to have insurance, but it is recommended.
Does an S-Corp in North Carolina need to have a registered office?
Yes, an S-Corp in North Carolina must have a registered office in the state.
What types of businesses can form an S-Corp in North Carolina?
Any type of business can form an S-Corp in North Carolina, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.
What is the difference between an S-Corp and an LLC in North Carolina?
The main difference between an S-Corp and an LLC in North Carolina is the way they are taxed. An S-Corp is a pass-through entity, meaning the business’ profits and losses are passed through the corporation to the individual owners, who are then taxed on their personal tax returns. An LLC is a separate entity, meaning the profits and losses are taxed as the LLC itself.
Are there any restrictions on who can be a shareholder in an S-Corp in North Carolina?
Yes, there are restrictions on who can be a shareholder in an S-Corp in North Carolina. Shareholders must be US citizens or permanent residents and must be at least 18 years old.
Can an S-Corp in North Carolina have more than one class of stock?
Yes, an S-Corp in North Carolina can have more than one class of stock.
Are there any restrictions on the number of shareholders in an S-Corp in North Carolina?
Yes, there are restrictions on the number of shareholders in an S-Corp in North Carolina. An S-Corp can have no more than 100 shareholders.
How is an S-Corp in North Carolina dissolved?
An S-Corp in North Carolina is dissolved by filing a Certificate of Dissolution with the North Carolina Secretary of State.

Also Read

Why North Carolina S Corporation is So Important

One of the key benefits of choosing to operate as an S Corporation in North Carolina is the limited liability protection it offers. When a business is registered as an S Corporation, its owners’ personal assets are typically shielded from any liabilities or debts incurred by the company. This means that if the business faces financial difficulties or legal issues, the personal financial security of the owners is not at risk. For small business owners who have invested significant time, money, and energy into building their business, this level of protection can provide much-needed peace of mind.

In addition to the liability protection offered by S Corporation status, small businesses in North Carolina can also benefit from significant tax advantages. Unlike traditional corporations, which are subject to double taxation, S Corporations pass their profits and losses through to their shareholders. This means that profits are only taxed once, at the individual shareholder level, rather than at both the corporate and shareholder level. For small business owners, this can result in substantial tax savings and help to free up additional capital for reinvestment in the business.

Another reason why North Carolina S Corporation status is so important is the increased credibility and access to capital it provides. Many investors and lenders prefer to work with S Corporations due to their more structured and transparent corporate governance, as well as the limited liability protection they offer. By choosing to operate as an S Corporation, small businesses can attract more investors and secure loans more easily, helping them to grow and expand their operations over time.

Additionally, North Carolina S Corporation status can provide small business owners with more flexibility in terms of ownership structure and profit distribution. Unlike traditional corporations, which must adhere to strict regulations regarding the number and type of shareholders they can have, S Corporations can have up to 100 shareholders of any type. This allows small business owners to bring on new partners or investors without sacrificing their S Corporation status, providing them with more options for growth and diversification.

Overall, North Carolina S Corporation status is incredibly important for small businesses looking to protect their assets, minimize their tax liability, attract investors, and grow their operations. By choosing to operate as an S Corporation, small business owners can enjoy the best of both worlds – the flexibility of a sole proprietorship or partnership and the legal protections and tax advantages of a corporation. For any small business looking to secure its future and build a strong foundation for growth, becoming an S Corporation in North Carolina is a crucial step in the right direction.

Conclusion

In conclusion, starting an S-corp in North Carolina is a strategic choice for entrepreneurs seeking the benefits of limited liability and favorable tax treatment. One can successfully establish an S-corp by following the outlined steps, including selecting a unique name, filing the Articles of Incorporation, obtaining necessary licenses, and adhering to state-specific regulations. Ultimately, this corporate structure offers a strong foundation for business growth and protection, making it a worthwhile consideration for those looking to launch a venture in North Carolina.

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