What Taxes Does an LLC Pay in North Carolina?

North Carolina LLCs do not pay entity-level income tax. Instead, LLC members report business income on their personal tax returns at the state's 3.99% flat individual income-tax rate (N.C.G.S. Chapter 105, Article 4). Members also owe federal self-employment tax on their share of profits. If the LLC sells taxable goods or services, it must collect and remit North Carolina's 4.75% state sales tax, plus applicable local rates. No franchise tax or gross receipts tax applies.

Pass-Through Income Tax

North Carolina treats LLCs as pass-through entities under N.C.G.S. Chapter 105, Article 4. The LLC itself pays no state income tax. Single-member LLCs are disregarded for federal purposes (Schedule C), while multi-member LLCs default to partnership taxation (Form 1065). Either way, members report their distributive share of LLC income on personal tax returns and pay the individual rate of 3.99% for tax years beginning after 2025.

Members must make quarterly estimated tax payments on April 15, June 15, September 15, and January 15 if they expect to owe $500 or more in state income tax for the year.

Self-Employment Tax

Self-employment tax applies to all LLC members on their net business income. This is a federal obligation under Internal Revenue Code § 1401, not a state tax, but it affects your overall tax burden. Members pay 15.3% combined Social Security and Medicare tax on their LLC income.

Sales Tax

If your LLC sells tangible goods or taxable services, you must register for a North Carolina sales-tax permit at https://www.ncdor.gov/taxes-forms/register-business. The state rate is 4.75%; many counties add local or transit taxes, raising the combined rate. You collect tax from customers and remit it to the North Carolina Department of Revenue monthly or quarterly, depending on your sales volume.

Optional Tax Elections

Your LLC can elect to be taxed as an S corporation or C corporation (N.C.G.S. § 57D). An S corp election may reduce self-employment tax if you take a reasonable salary and distribute remaining profits as dividends. Consult a tax professional to determine whether an election benefits your situation.

Next Step: Register for sales tax and file your first annual report by April 15 of the year after formation ($203 filing fee, N.C.G.S. § 57D-2-24). Contact the North Carolina Department of Revenue at https://www.ncdor.gov/ with specific tax questions.

This is general information, not legal advice.