One of the states that exempt S Corp businesses from paying corporate income tax at the state level is North Carolina. In other words, S corporations are not subject to income tax in North Carolina. The shareholders, who disclose the information on their individual tax returns, receive the corporation’s income, deductions, and credits instead.
Who is required to submit a corporate tax return for North Carolina?
While conventional corporations (C corporations) must file a corporate income tax return if they have income obtained from North Carolina sources or if they were incorporated in North Carolina, S corporations are not required to do so. S-Corps pay a franchise tax of $200 up to $1 million and $1.50 per $1,000 in excess of that.
In North Carolina, the corporate income tax rate is 2.5% for the first $50,000 of taxable income and 3% for the next $50,000.
What Documents Must a S Corp File?
S corporations must submit an annual report and income tax return. The corporation’s executives, directors, registered agent, and principal office address are all listed in this annual report. If your annual report is not submitted, the corporation risks having its ability to conduct business in North Carolina suspended or terminated.
The S Corp tax return is due by the 15th day of the fourth month after the end of the corporation’s year.
Does North Carolina Have a Franchise Tax?
There is a franchise tax in North Carolina, although not every corporation is subject to it. The tax only applies to businesses with a net worth greater than $1,000,000. The franchise tax is calculated for S corporations based on the net worth of the company, but the shareholders are responsible for paying the tax on their individual tax returns.
As a result of S corporations being exempt from corporate income tax, North Carolina is a good state for them. However, North Carolina’s normal firms must pay corporate income taxes, and some of them must also pay franchise taxes. In order to avoid fines and possible dissolution, corporations must stay current with their annual report and franchise tax responsibilities.
The price to form a S Corp in North Carolina will vary depending on a number of factors like filing fees, legal fees, and other costs. The overall price might be estimated to be between $500 and $2,000 total. For precise information and advice, it is advised to speak with a licensed attorney or tax expert.