Learn about the annual report and tax filing obligations for North Carolina limited liability companies.
To establish and operate a North Carolina limited liability corporation (LLC), you must prepare and submit a number of paperwork with the state. This article discusses the most significant North Carolina LLC continuing reporting and state tax filing obligations.
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Report Annual
Your LLC must submit an annual report with the state of North Carolina. You may submit the report by mail or online at the Secretary of State’s website. Blank report forms are not available for download; instead, you may download a form from the SOS website that already has critical information for your LLC. The report requires just a few pieces of information, such as a short summary of the nature of your LLC’s business, the name of your LLC’s registered agent, the street location of your LLC’s registered office, and information about your LLC’s major office and company executives. If you file by mail, your report will be sent directly to the North Carolina Department of Revenue (DOR).
The annual report must be submitted by April 15 each year, with the exception of new LLCs, which do not need to file a report until the first year after they are formed. There is a $200 filing fee.
State Corporation Tax
Most LLCs are pass-through tax corporations when it comes to income taxes. In other words, the burden for paying federal income taxes is passed via the LLC to the individual LLC members. LLCs do not pay income taxes by default; only its members do. Some states charge LLCs a separate tax or fee for the privilege of conducting business in their jurisdiction. North Carolina, on the other hand, is not one of those states.
However, in certain situations, the owners of an LLC elect to have their firm taxed as if it were a corporation. This decision is made by submitting IRS Form 2553 to the IRS. (The form is available on the IRS website.) When an LLC elects to be taxed as a corporation rather than as a pass-through entity, the firm must submit a separate tax return. North Carolina, like practically every other state, levies a corporate income tax. The corporation tax in North Carolina is a flat 5% of taxable income. Furthermore, North Carolina levies a so-called company franchise tax. This tax may also apply to your LLC. Both taxes must be paid to the state Department of Revenue (DOR). To pay both taxes, use the state’s company income tax return (Form CD-405).
Employer Taxes in the State
Do you have workers in your LLC? If this is the case, you must pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not addressed in this section. (However, it is important to understand that federal employer tax duties begin with getting a federal employer identification number (EIN).) Employers in North Carolina, however, must additionally pay state taxes.
To begin, you must withhold and pay employee income taxes to the DOR. Begin by registering your company with the DOR, either online or in print form (Form NC-BR). Once registered, you must submit withholding taxes on a regular basis (usually monthly or quarterly) using Form NC-5. Each year, you’ll also need to utilize a form of Form NC-3 to reconcile your LLC’s tax withholding.
You’ll also need to register to pay state unemployment insurance (UI) taxes. North Carolina’s Division of Employment Security (DES), which is part of the state’s Department of Commerce, is in charge of these taxes. These taxes may be registered for online or by utilizing Form NCUI 604. Then, each quarter, utilize Form NCUI 101 to record your salary and pay your unemployment insurance taxes.
Taxes on Sales and Use
If your LLC sells items to clients in North Carolina, you must collect and remit sales tax. This implies you’ll have to register with the Department of Revenue for this reason and then make periodic sales tax payments for products sold. You may register either online or by mailing Form NC-BR. After registering, you will get a Certificate of Registration. Then, you must file sales tax returns with the DOR on a regular basis (typically monthly or quarterly). This may be done by mail or online.
Other States Registration
If you want to do business in states other than North Carolina, your LLC may need to be registered in any or all of those states. The exact states concerned will determine if you are needed to register: each state has its own regulations for what defines conducting business and whether registration is required. For registration reasons, having a physical presence (a business location) in a state, recruiting personnel in a state, or soliciting business in a state (through telephone, print advertisements, mail, or the Internet) are sometimes considered conducting business. Obtaining a certificate of authority or comparable document is normally required for registration.