Does North Carolina Have a Franchise Tax for LLCs?

No. North Carolina does not impose a franchise tax on LLCs or any other business entity. LLC income passes through to members and is taxed only at the individual level at a flat rate of 3.99% (for tax years beginning after 2025) under N.C.G.S. Chapter 105, Article 4. While LLCs must file annual reports and comply with sales tax obligations, no separate franchise tax applies.

What Taxes Do North Carolina LLCs Pay?

Pass-Through Income Tax

North Carolina taxes LLC income at the owner level. Members report their distributive share of profits on individual tax returns and pay state income tax at 3.99%. The LLC itself files an informational return but pays no state income tax.

Sales Tax

LLCs selling taxable goods or services must register for and collect North Carolina's 4.75% state sales tax, plus applicable local rates. Register at https://www.ncdor.gov/taxes-forms/register-business.

Self-Employment and Estimated Taxes

Members owe federal self-employment tax on their distributive share. Estimated state tax payments are due April 15, June 15, September 15, and January 15 if you expect to owe $500 or more annually.

Annual Report Requirement

Every North Carolina LLC must file an Annual Report by April 15 each year (N.C.G.S. § 57D-2-24). The filing fee is $203.00. Failure to file within 60 days of the due date results in administrative dissolution. Reinstatement requires a $100.00 fee.

Key Takeaway

North Carolina's lack of a franchise tax makes it tax-efficient for LLC formation. However, members remain responsible for individual income tax on pass-through earnings and must maintain annual compliance filings.

For tax guidance, contact the North Carolina Department of Revenue at https://www.ncdor.gov/.

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This is general information, not legal advice.