North Carolina LLC tax requirements turn almost entirely on one question: how the IRS classifies your LLC. A default LLC — taxed as a partnership or disregarded entity — pays no entity-level income or franchise tax to North Carolina. An LLC that elected C corporation or S corporation treatment does. On top of that, every member pays individual income tax at a flat 3.99% for 2026, the LLC may owe sales tax if it sells taxable goods or services, employers owe payroll taxes, and every NC LLC files a $200 annual report with the Secretary of State by April 15.
Why Federal Classification Decides Everything
North Carolina defines “corporation” for franchise tax purposes to include LLCs that elected corporate treatment under the Internal Revenue Code, and it explicitly excludes LLCs and partnerships that didn’t make that election.1North Carolina General Assembly. North Carolina Code GS 105-114 That single line in the statute decides whether your LLC ever sees an entity-level tax bill from the state.
A single-member LLC defaults to disregarded-entity status; the owner reports the business on a personal return. A multi-member LLC defaults to partnership treatment. Either can elect S corp or C corp treatment by filing with the IRS. Most NC LLCs stay on the default classification and never owe franchise tax.
Income Tax Under the Default Pass-Through Rules
Under pass-through treatment, the LLC pays no North Carolina income tax. Each member reports a share of profit or loss on their own return. Individuals file Form D-400, and the rate is a flat 3.99% for tax years beginning in 2026.2North Carolina Department of Revenue. Tax Rate Schedules The rate has been dropping under a scheduled series of reductions.
A multi-member LLC classified as a partnership must also file Form D-403, the North Carolina Partnership Income Tax Return. It’s an informational return; no tax accompanies it. The form reports total income, deductions, and each member’s share so the Department of Revenue can match individual returns. D-403 is due March 15 for calendar-year filers — the 15th day of the third month after the fiscal year ends.
A single-member LLC files nothing separate. The owner includes the business’s income and expenses directly on Form D-400.
If a C corporation or S corporation holds a membership interest, that corporate owner reports its share on Form CD-405 or Form CD-401S, respectively.
The Optional Pass-Through Entity Tax
North Carolina lets partnerships and S corporations elect to pay state income tax at the entity level. This Taxed Pass-Through Entity election exists mainly as a workaround for the federal $10,000 SALT deduction cap: paying tax at the entity level can allow members to deduct the full amount federally. The PTE rate matches the individual rate — 3.99% for 2026. Eligibility requires that all partners be individuals, estates, or qualifying trusts; publicly traded partnerships and partnerships with corporate partners don’t qualify.3North Carolina Department of Revenue. 2025 Personal Taxes Bulletin
The election isn’t automatic and the math only helps members who are hitting the federal SALT cap. If nobody itemizes, it accomplishes nothing. Talk to a tax advisor before electing, because it changes reporting mechanics for every member.
Franchise and Corporate Income Tax If You Elected Corporate Status
An LLC that elected C corp or S corp treatment with the IRS is a corporation for North Carolina franchise tax purposes.1North Carolina General Assembly. North Carolina Code GS 105-114 Franchise tax is based on the LLC’s capital base, not its profits, so you owe it even in years you lose money.
The rate structure differs by election:
- S corporation election: a flat $200 on the first $1,000,000 of tax base, then $1.50 per $1,000 on everything above $1,000,000.
- C corporation election: $1.50 per $1,000 of tax base, capped at $500 on the first $1,000,000, then $1.50 per $1,000 above that with no cap.
Both carry a $200 minimum. Even if the formula produces a smaller number, you owe at least $200.4North Carolina Department of Revenue. Corporate Income and Franchise Tax Rates
The tax base is generally the greater of the LLC’s net worth or the appraised value of its North Carolina property, depending on the calculation method. LLCs operating in multiple states apportion the base by comparing North Carolina sales to total sales.
An LLC taxed as a C corp files Form CD-405 and reports both franchise tax and corporate income tax on the same return. An LLC taxed as an S corp files Form CD-401S. The deadline is April 15 for calendar-year filers — the 15th day of the fourth month after the fiscal year ends — with an automatic six-month extension available. Estimated payments are still due by the original deadline even if you extend.
Corporate Income Tax Is Phasing to Zero
An LLC taxed as a C corp also owes North Carolina corporate income tax on its NC-sourced income. The 2026 rate is 2.00%.4North Carolina Department of Revenue. Corporate Income and Franchise Tax Rates Under current law, the rate continues to decline and reaches zero in 2030. An LLC taxed as an S corp doesn’t owe this tax at the entity level unless it elected the PTE tax; income passes through to members.
Self-Employment Tax on Members
North Carolina doesn’t impose its own self-employment tax, but the federal one is often the biggest single tax an LLC member pays. If the LLC is taxed as a partnership or disregarded entity, each actively participating member owes self-employment tax on their share of profits. The combined rate is 15.3% — 12.4% for Social Security and 2.9% for Medicare.5Internal Revenue Service. Employer’s Supplemental Tax Guide
The Social Security portion applies only up to $184,500 in earnings for 2026.6Internal Revenue Service. Household Employer’s Tax Guide Medicare has no cap. Members earning above $200,000 (or $250,000 if married filing jointly) owe an additional 0.9% Medicare surtax on the excess.
Members can deduct the employer-equivalent half (7.65%) as an adjustment to gross income on the federal return. They may also deduct health insurance premiums paid for themselves and their families, as long as the plan is established under the business and the member isn’t eligible for coverage through a spouse’s employer plan.7Internal Revenue Service. Instructions for Form 7206
An LLC that elects S corp treatment can reduce self-employment exposure by splitting a member’s compensation between a reasonable salary (subject to payroll taxes) and distributions (not subject to self-employment tax). This is one of the main reasons LLC owners make the S corp election.
Sales and Use Tax
An LLC selling tangible goods, certain digital products, or taxable services in North Carolina must collect and remit sales tax. The state rate is 4.75%, with counties adding local rates on top.8North Carolina Department of Revenue. Current Sales and Use Tax Rates Combined rates by county typically fall between 6.75% and 7.50%.
The collection obligation starts once your LLC establishes nexus. An office, warehouse, or employees in North Carolina creates nexus automatically. A remote seller without physical presence triggers economic nexus once gross sales into North Carolina exceed $100,000 in the current or previous calendar year.
Before making a taxable sale, you need a Certificate of Registration from the Department of Revenue. Registration is free and can be completed online.9North Carolina Department of Revenue. Who Should Register for Sales and Use Tax Without it, you can’t legally collect tax from customers.
Filing Frequency
How often you file depends on how much you collect:
- Monthly with prepayment when total liability consistently reaches $20,000 or more per month. Returns are due by the 20th of the following month, and you must prepay at least 65% of the next month’s expected liability with each filing.
- Monthly when liability is consistently between $100 and $20,000 per month. Returns are due by the 20th of the following month.
- Quarterly when liability is consistently below $100 per month. Returns are due by the last day of the month following the quarter.
All filings use Form E-500. You’ll report gross sales, exempt sales, and tax collected broken out by jurisdiction.10North Carolina Department of Revenue. Instructions for Form E-500, Sales and Use Tax Return Keep records that clearly separate taxable and exempt transactions.
Certain categories are exempt, including groceries (excluding prepared food), prescription medications, and some agricultural supplies. If you buy inventory for resale, you can provide suppliers with a resale certificate rather than paying tax at purchase. Using that certificate for items the business actually consumes creates a use tax liability and potential penalties.
Payroll Taxes If You Have Employees
An LLC that hires employees takes on obligations beyond its own income and sales taxes. It must withhold North Carolina income tax from wages and remit it to the Department of Revenue. It must also withhold and match the federal share of Social Security (6.2% each for employer and employee on wages up to $184,500 in 2026) and Medicare (1.45% each, no wage cap).6Internal Revenue Service. Household Employer’s Tax Guide
North Carolina also requires employers to pay state unemployment insurance tax. New employers get a standard rate that adjusts over time based on claims history. Register for a state unemployment account with the Division of Employment Security separately from the Department of Revenue registration.
Annual Report With the Secretary of State
Every North Carolina LLC files an annual report with the Secretary of State, regardless of tax classification or whether it earned any income. This isn’t a tax filing; it’s an administrative confirmation of the LLC’s registered agent, principal office, and managers or members. The fee is $200.
The deadline is April 15 every year, and it doesn’t shift with your fiscal year. Miss it and the Secretary of State can administratively dissolve the LLC. Dissolution strips the company of its legal standing, which is the whole reason members formed the LLC to begin with. Reinstatement is possible but costs more than staying current, and during the gap between dissolution and reinstatement, members may have personal exposure for business debts.