Are you looking to form a professional limited liability company (PLLC) in North Carolina, but you’re not sure how the formation process works? There are several important steps when it comes to creating a North Carolina PLLC that is compliant and able to do business in the state.
What is a North Carolina Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In North Carolina, a PLLC is an LLC formed to provide any type of personal or professional service to the public that requires a license, such as services rendered by, among others, architects, attorneys-at-law, public accountants, physicians, dentists, nurses, veterinarians, marriage and family therapists, engineers, and social workers.
The North Carolina PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in North Carolina have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in North Carolina (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
Legalities
North Carolina requires that the name of a professional limited liability company contain the word “Professional” or the abbreviation “P.L.L.C.” or “PLLC.” The name cannot contain any language that states or implies that the PLLC is organized for any purpose other than the purpose set forth in its Articles of Organization.
Explanatory Naming
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
Name Availability
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can check if a name is available by conducting a search on the North Carolina Secretary of State’s website. If the name is available, you can reserve the name for $30 for a non-renewable period of 120 days by submitting an Application to Reserve a Business Entity Name to the Secretary of State either by mail, in person, or online through the PDF Upload Portal.
Get Your Business Domain
To fully embrace the business name, register your URL. With GoDaddy you’ll be able to quickly build a company website so that nobody else can use or take it.
Step Two) Designate a Registered Agent
Every PLLC in North Carolina is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
Your PLLC’s registered agent can be either an individual or another business corporation, nonprofit or limited liability company. An individual appointed as a registered agent must have a physical office in North Carolina. A business appointed as a registered agent must be active in the records of the North Carolina Secretary of State.
Without a registered agent, you could lose your good standing with the state of North Carolina, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
Our Recommendation
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your North Carolina professional limited liability company, you will fill out the Articles of Organization (Form PLLC-02).
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of the PLLC
- Name(s) and address(es) of individuals executing the Articles of Organization
- Street address and mailing address of the initial registered office
- Name of the initial registered agent
- Purpose of the PLLC
- Any other provisions agreed to by the members of the PLLC
- Date of effectiveness, if other than the filing date
- Name and signature of the organizer(s)
[The Articles of Organization can be filed with the Secretary of State’s Business Registration Division by mail, in person, or online through the PDF Upload Portal. Note that you will also need to file a Licensing Board Certificate from the licensing board overseeing your profession confirming that you meet their requirements. You can learn more about the requirements of the various licensing boards on the Secretary of State’s website.
Cost to Form a PLLC
The filing fee for Articles of Organization is $125.
Processing Time
The North Carolina Secretary of State generally takes 5-7 business days to process filings.
Step Four) Create an Operating Agreement
After you register a PLLC in North Carolina, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
Federal Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
State Requirements
North Carolina has a number of state-level business taxes, such as corporate income and franchise tax, partnership tax, withholding tax, and sales and use tax. Which taxes apply to your PLLC will depend on its specific business activities and how your PLLC elects to be treated for tax purposes.
Generally, however, PLLCs are not taxed on their income, and instead the members are taxed on the income of the PLLC. A list of business taxes in North Carolina and related forms are available on the North Carolina Department of Revenue’s website. Information regarding how to file and pay various taxes is also available on the Department of Taxation’s website.
Local Requirements
Depending on where in North Carolina your business is located, you may also need to pay some local taxes. You should be sure to contact your PLLC’s city and county to confirm whether your PLLC will have any local tax obligations. Resources for businesses in the four largest cities in North Carolina are available online: Charlotte, Raleigh, Greensboro, and Durham.
Step Six) Obtain Business Licenses and Permits
North Carolina does not require a generic state business license, but there are over 700 regulatory, state-issued, and occupational licenses and permits. You may also need to obtain local permits or licenses for your PLLC. If you need assistance determining which licenses and permits you may need for your business, you can contact Business Link North Carolina, an economic development partnership with the North Carolina Department of Commerce that provides free service to anyone seeking to start a small business in the state.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in North Carolina
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Business insurance
If you plan to hire any employees, keep in mind that North Carolina generally requires all businesses with three or more employees to either obtain workers’ compensation insurance or qualify as self-insured. You can learn more about workers’ compensation in North Carolina by visiting the North Carolina Industrial Commission’s website. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
Income in North Carolina is reported on income tax forms. Which form you use depends on how your PLLC is classified for tax purposes. You can learn more about North Carolina income tax and find the related forms on the Department of Revenue’s website.
Understand annual reporting
While corporations and LLCs generally must file annual reports with the North Carolina Secretary of State, professional entities, including PLLCs, are not required to file an annual report.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.