North Carolina LLC Operating AgreementChapter 57D, the $200 annual report, and a corporate tax phase-out heading to zero
The North Carolina LLC Act in Brief
Chapter 57D took effect 1 January 2014, replacing the older Chapter 57C that had governed North Carolina LLCs since 1993. The new Act is closer to the Revised Uniform LLC Act framework adopted by 21 other states. It modernised default rules, clarified fiduciary duty standards, and gave the operating agreement broad authority under N.C. Gen. Stat. § 57D-2-30.
Under § 57D-2-30, the operating agreement governs the relations among members and managers, the activities of the LLC, and the means of amending the agreement. The agreement may be written, oral, or implied, but written form is universal practice. The agreement is not filed with the Secretary of State; it is held in the LLC's books and records.
North Carolina's corporate income tax has been declining since 2013. The rate for 2026 is 2.25%, on a schedule to reach 0% by 2030. Pass-through LLC income is taxed to individual members at the individual income tax rate (currently 4.25%, also declining). For LLCs choosing taxation type, the corporate election becomes progressively more attractive as the corporate rate falls.
Default Rules Under Chapter 57D
| Topic | Default Rule | Statute |
|---|---|---|
| Profit allocation | Per-capita (equal among members) | N.C. Gen. Stat. § 57D-4-04 |
| Voting | Per-capita unless agreement provides otherwise | N.C. Gen. Stat. § 57D-3-21 |
| Management | Member-managed unless Articles state manager-managed | N.C. Gen. Stat. § 57D-3-20 |
| Member admission | Unanimous consent of existing members | N.C. Gen. Stat. § 57D-3-04 |
| Distributions | Equal among members; on company decision | N.C. Gen. Stat. § 57D-4-05 |
| Member dissociation | Permitted in narrow circumstances | N.C. Gen. Stat. § 57D-3-02 |
| Dissolution | Majority of members in interest unless agreement requires more | N.C. Gen. Stat. § 57D-6-01 |
The per-capita default for both profit allocation and voting follows the standard RULLCA pattern. With unequal capital contributions, capital-weighted treatment must be expressly written into the operating agreement.
The $200 Annual Report
North Carolina charges $200 for the annual LLC report, one of the highest fees in the United States. Compare this with $50 in Georgia, $75 in Illinois, $138.75 in Florida, $300 in Delaware (which is annual franchise tax, not a report). The $200 fee makes North Carolina more expensive to maintain than most neighbouring states despite a moderate $125 formation fee.
The annual report is due by 15 April each year. It updates the LLC's registered agent, principal office, and member-or-manager structure. Filing is online via the Secretary of State Business Registration Division. Late filing triggers a $20 penalty plus monthly interest, and continued non-filing leads to administrative dissolution. The Secretary sends reminders to the registered agent address; if the agent address is stale, the reminders are missed.
Sample North Carolina-Specific Clauses
Forming a North Carolina LLC: The Five Steps
- Choose and check a name. Search the Secretary of State business name database. Names must include "Limited Liability Company", "LLC", "Ltd. Liability Co.", or similar.
- Appoint a registered agent. Required under N.C. Gen. Stat. § 57D-2-40. Must have a North Carolina physical street address.
- File Articles of Organization. $125 fee. Filed online with the Secretary of State Business Registration.
- Adopt the operating agreement. Not legally required but standard practice.
- Obtain EIN and calendar 15 April annual report. EIN free from IRS. First annual report due 15 April of the year following formation.
Five North Carolina-Specific Mistakes
Many founders compare formation fees but miss recurring report fees. The $200 North Carolina annual report fee is one of the highest in the US.
North Carolina does not authorise series LLCs. Series structures must be formed elsewhere then foreign-qualified into NC.
Late filing triggers $20 penalty plus monthly interest. Calendar 1 April as the personal deadline.
Chapter 57D defaults to equal allocation regardless of capital. Capital-weighted treatment must be written in expressly.
NC corporate income tax is heading to 0% by 2030. The optimal LLC tax election may change over the life of the LLC. Review annually.
Statutory Sources
- North Carolina Limited Liability Company Act, Chapter 57D, official text
- North Carolina Secretary of State Business Registration, LLC formation and annual reports
- North Carolina Department of Revenue, corporate and individual income tax