North Carolina Business Taxes for LLCs
What taxes does a North Carolina LLC pay? This guide covers pass-through income tax, sales tax, franchise tax, payroll tax, and annual report requirements for NC LLCs.
Bizee Editorial Staff
Editorial Team
North Carolina LLC tax snapshot
Filing fee: $125 (Articles of Organization)
Processing time: [PROCESSING_TIME]
State agency: North Carolina Secretary of State
Annual report due: April 15 each year
State tax rate: Individual flat rate: 4.75% (2023); Corporate flat rate: 2.5% (2023, scheduled to decrease to 0% by 2030)
How North Carolina taxes your LLC
Most North Carolina LLCs don't pay income tax at the business level. Instead, profits pass through to each member's personal tax return, where they're taxed at North Carolina's flat individual income tax rate. Depending on how your LLC is structured and what it sells, you may also owe sales tax, franchise tax, or payroll tax.
The taxes that apply to your LLC depend on 3 factors: how the IRS classifies your LLC for federal tax purposes, whether you sell taxable goods or services, and whether you have employees. North Carolina follows federal tax classification, so your state tax treatment mirrors your federal one.
- Pass-through income tax: members report LLC profits on their personal NC returns
- Sales and use tax: required if your LLC sells taxable goods or certain services
- Franchise tax: applies only to LLCs taxed as C corporations
- Corporate income tax: applies only to LLCs taxed as C corporations
- Payroll and withholding taxes: required if your LLC has employees
- Annual report: due April 15 each year with the NC Secretary of State
North Carolina individual income tax for LLC members
By default, a North Carolina LLC is a pass-through entity — the LLC itself doesn't pay state income tax. Members report their share of the LLC's profits or losses on their personal North Carolina income tax return (Form D-400) and pay tax at the state's flat individual rate.
North Carolina's flat individual income tax rate was 4.75% for 2023. That rate applies to your entire taxable income, including your share of LLC profits, after allowable deductions. There's no graduated bracket system at the state level — everyone pays the same rate.
Single-member LLCs are treated as disregarded entities by default. The member reports all LLC income and expenses directly on their personal return — the LLC doesn't file a separate North Carolina income tax return. Multi-member LLCs are treated as partnerships by default. Each member reports their distributive share on their personal return, and the LLC may need to file a partnership information return with the state.
Most LLC members also owe federal self-employment tax — 15.3% on net self-employment income up to the Social Security wage base — on top of state income tax. A tax professional can help you figure out whether an S Corporation election makes sense for your situation.
North Carolina sales and use tax
If your LLC sells taxable goods, certain digital products, or taxable services in North Carolina, you're required to collect and remit sales tax to the North Carolina Department of Revenue (NCDOR). Not every LLC owes sales tax — it depends on what you sell.
North Carolina's base state sales tax rate is 4.75%. Counties add their own rates on top of that, and some areas include a local transit rate. Combined rates across the state generally range from 4.75% to about 7.5%, depending on the county where the sale takes place.
Before you collect a single dollar of sales tax, you need to register for a sales and use tax account ID with NCDOR. You can do that through the NCDOR business registration process. Once registered, you'll file sales and use tax returns on a schedule NCDOR assigns based on your sales volume.
Franchise tax for LLCs taxed as corporations
North Carolina's franchise tax applies to corporations doing business in the state — including LLCs that have elected to be taxed as C corporations. If your LLC is taxed as a pass-through entity (the default for most LLCs), franchise tax doesn't apply to you.
For LLCs taxed as C corporations, the franchise tax rate is $1.50 per $1,000 of the company's tax base. The tax base is generally the corporation's net worth, but North Carolina uses the largest of 3 measures: net worth, actual investment in tangible property in NC, or 55% of the appraised property tax value of all tangible property in NC. The minimum franchise tax is $200 per year regardless of the calculated amount.
Corporate income tax for LLCs taxed as C corporations
An LLC that elects C corporation tax treatment pays North Carolina corporate income tax on its apportioned net taxable income. For tax year 2023, that rate is a flat 2.5%. The LLC files Form CD-405 with NCDOR.
North Carolina is phasing out its corporate income tax entirely. The rate drops to 2.25% for tax years beginning on or after January 1, 2025, then to 2% in 2026 and 2027, 1% in 2028, and 0% for tax years beginning after 2029. If your LLC is taxed as a C corporation, that schedule affects your planning.
Payroll and withholding taxes
If your LLC has employees, you're required to withhold North Carolina individual income tax from their wages and remit it to NCDOR. You need to register with NCDOR for state income tax withholding before you start paying employees.
North Carolina has no local income taxes on wages, so you only withhold at the flat state rate. You'll file periodic withholding returns using Form NC-5 or NC-5Q, with filing frequency based on your average monthly withholding amount. At year end, you file Form NC-3 to reconcile total tax withheld for the year.
On top of state withholding, you'll handle federal payroll obligations: withholding federal income tax, paying the employer's share of Social Security and Medicare (FICA), and filing quarterly Form 941 with the IRS. A payroll provider or accountant can help you stay on top of both sets of requirements.
Annual report requirement
Every North Carolina LLC must file an annual report with the North Carolina Secretary of State by April 15 each year. This isn't a tax return — it's a state filing that keeps your business information current in the Secretary of State's records.
You can file online through the Secretary of State's annual report system or submit a paper form. Missing the April 15 deadline can put your LLC's good standing at risk, so it's worth setting a calendar reminder well in advance.
Nonresident member filing requirements
If your LLC has members who live outside North Carolina, those members still owe North Carolina income tax on their share of the LLC's NC-source income. A nonresident member who receives pass-through income from a North Carolina LLC needs to file a North Carolina nonresident income tax return.
This catches some multi-member LLCs off guard — especially those with members spread across multiple states. If North Carolina income tax was withheld on a nonresident member's behalf, that member still needs to file a North Carolina return to get any refund of over-withheld tax. A tax professional can help you figure out the right approach for members in multiple states.
FAQ
Yes, but not always at the business level. Most North Carolina LLCs are pass-through entities, so the LLC itself doesn't pay state income tax. Instead, each member reports their share of the LLC's profits on their personal North Carolina income tax return and pays tax at the flat individual rate. LLCs taxed as C corporations do pay corporate income tax and franchise tax at the entity level.
Yes. North Carolina has a state sales tax rate of 4.75%, and counties add their own rates on top of that. Combined rates across the state generally range from 4.75% to about 7.5%. If your LLC sells taxable goods or certain services, you need to register with NCDOR for a sales and use tax account before you start collecting.
Yes. North Carolina taxes individual income at a flat rate — 4.75% for 2023. LLC members who receive pass-through income from a North Carolina LLC pay this rate on their share of the profits. There are no graduated brackets at the state level, so the same rate applies regardless of income amount.
Yes, but it only applies to LLCs taxed as C corporations. The franchise tax rate is $1.50 per $1,000 of the company's tax base, with a minimum of $200 per year. Pass-through LLCs — the default for most single-member and multi-member LLCs — are not subject to North Carolina's franchise tax.
Yes, in most cases. If you expect to owe tax at year end, you're generally required to make estimated tax payments to both the state and federal governments throughout the year. North Carolina follows a quarterly estimated payment schedule similar to the IRS. Getting behind on estimated payments can mean owing interest and penalties when you file. A tax professional can help you figure out the right payment amounts for your situation.
It depends on how your LLC is classified. Most North Carolina LLCs are pass-through entities by default — the LLC pays no income tax itself, and each member reports their share of profits on their personal state return at the flat individual rate. If your LLC sells taxable goods or services, you also collect and remit sales tax. If you have employees, you withhold state income tax from their wages. LLCs taxed as C corporations face a separate corporate income tax and franchise tax at the entity level.
Yes. Self-employment tax is a federal tax — not a North Carolina state tax — but it applies to most LLC members who receive pass-through income. The rate is 15.3% on net self-employment income up to the Social Security wage base, covering both the employee and employer portions of Social Security and Medicare. Members of pass-through LLCs pay this on top of their state and federal income tax.
April 15 each year. The annual report is filed with the North Carolina Secretary of State — not NCDOR — and it's a state filing requirement, not a tax return. You can file online through the Secretary of State's annual report system. Missing the deadline can affect your LLC's good standing with the state.
