If you own a business that was created in a state other than North Carolina, you will need to qualify or register that business in North Carolina if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-North Carolina) limited liability company (LLC) to do business in North Carolina.
For North Carolina purposes, if your LLC is formed in another state, then it is known as a foreign LLC in North Carolina. In other words, foreign doesn’t mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in Wisconsin is a foreign LLC in Minnesota.
According to North Carolina’s LLC Act, you are required to register your foreign company with the state of North Carolina if you are “transacting business” in North Carolina. What does this mean? Well, like most states, North Carolina’s LLC Act does not specifically define the phrase “transacting business” in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state’s residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules can get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo’s articles on Internet Sales Tax: A 50-State Guide to State Laws.
Like most states, North Carolina’s LLC Act specifies certain activities that do not constitute transacting business in the state. The items listed include:
Regarding making or investing in loans with or without security, the LLC Act contains important additional rules about exactly what activities are allowed, such as rules related to foreclosures. For the full legal description of each of the listed items, check Section 57D-7-01 of the North Carolina General Statutes.
If your LLC’s only activity in North Carolina is one or more of the listed items, you should not need to register with the state.
To register your business in North Carolina, you must file an Application for Certificate of Authority for Limited Liability Company with the North Carolina Secretary of State (SOS). You can download a copy of the application form from the SOS website.
To complete the form, you must provide more or less the same information that you need to create an LLC in your home state. However, since every state is a little different, there may be items that North Carolina asks for that you did not need to provide when you first organized your LLC. More specifically, for a North Carolina application for registration, you need to provide:
The certificate of existence of equivalent document that you attach must be less than six months old. A photocopy of the certificate is not acceptable. The application filing fee is $250.
If your LLC does business in North Carolina without having a certificate of authority, it cannot bring a lawsuit in the state. It also will be liable for fees and penalties. In addition, the LLC will be liable for fees, taxes, and penalties. Among other charges, this includes a potential civil penalty of up $10 per day for each day business is transacted without a certificate of authority, up to a maximum of $1,000 per year. However, not having a certificate of authority does not invalidate your LLC’s contracts or prevent your LLC from defending a lawsuit in the North Carolina.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in North Carolina are similar. You will, however, have to use a different application form, Form B-09,Application for Certificate of Authority. See the North Carolina Secretary of State website for forms and filing instructions.