North Carolina · LLC tax election
North Carolina LLC: S corp or C corp?
North Carolina is shrinking the tax that makes C corporations expensive, so the S versus C math is moving every year.
See North Carolina at a glanceShort answer
In North Carolina a C corporation pays a 2.00% corporate income tax for 2026, and that rate is scheduled to fall to 0% after 2029. An S corporation pays no corporate income tax but owes franchise tax of at least $200. Owners pay a flat 3.99% individual rate.
Last checked .North Carolina at a glance
| Question | North Carolina |
|---|---|
| S election recognized? | Yes, North Carolina follows the federal election1 |
| Separate state form and deadline | No separate state form2 |
| Tax the S corp itself pays | minimum $2003 |
| C corp rate and minimum | 2% flat, minimum $2004 |
| Entity tax on a default LLC | None for a default LLC5 |
| Personal income tax | Yes, on wages and pass-through income6 |
What is different about North Carolina?
North Carolina is in the middle of phasing out its corporate income tax. The rate was 2.25% for 2025 and is 2.00% for 2026, with the statute stepping down to 1% in 2028 and 0% after 2029. That makes North Carolina one of the few states where the C corporation penalty is shrinking on a schedule. The S corporation side is plain: the corporate income tax does not apply to an S corporation, and the profit is taxed to the owners at the state's individual rate, 3.99% for tax years after 2025. Both kinds of corporation pay franchise tax on their tax base, so even the S corporation has a $200 floor. A default LLC owes no corporate income tax.
Does North Carolina recognize a federal S corp election?
North Carolina recognizes S corporations: the corporate income tax on C corporations does not apply to them. The owners pay the individual income tax, a flat 3.99% for tax years after 2025, on their share of profit. The S corporation itself pays franchise tax: $200 on the first $1,000,000 of its tax base and $1.50 per $1,000 of base above that, with a $200 minimum. The base is net worth, not income, so a quiet year still costs $200.
Does my LLC need a separate North Carolina election or form?
North Carolina has no separate S election: the Department of Revenue's S corporation return instructions say there is no separate S election for North Carolina income tax purposes.2
What does North Carolina tax an S corp or LLC at the entity level?
- A North Carolina S corporation pays franchise tax of $200 on the first $1,000,000 of its tax base and $1.50 per $1,000 above that, with a $200 minimum.3
- A North Carolina LLC taxed as a partnership files Form D-403 and pays no entity-level income tax unless it elects to be a Taxed Partnership.5
- Under G.S. 105-130.3 the corporate income tax rate steps down from 2.25% in 2025 to 2% in 2026, 1% in 2028 and 0% after 2029.7
Is a North Carolina LLC taxed as a C corp ever better?
A North Carolina C corporation pays corporate income tax of 2.00% on state net income for 2026, down from 2.25% in 2025, with further cuts to 1% in 2028 and 0% after 2029 under G.S. 105-130.3. It also pays franchise tax of $1.50 per $1,000 of tax base, with a $200 minimum. Dividends are then taxed to the owners again at the individual rate, so double taxation still applies even as the corporate rate falls.
Run your North Carolina numbers
North Carolina's low and falling corporate rate narrows the gap between S and C. The S case still wins when most profit would otherwise be dividends taxed twice. Count the $200 franchise minimum and the added payroll cost against the self-employment tax you save.
Result
How much would a North Carolina LLC owner save as an S corp?
| Taxed as | At $80,000 profit | At $150,000 profit |
|---|---|---|
| Default LLC | $11,304self-employment tax $11,304 + North Carolina LLC tax $0 | $21,194self-employment tax $21,194 + North Carolina LLC tax $0 |
| S corp | $9,544payroll tax $7,344 + North Carolina S corp tax $200 + $2,000 payroll and prep | $15,970payroll tax $13,770 + North Carolina S corp tax $200 + $2,000 payroll and prep |
| C corp | $16,570payroll tax $7,344 + North Carolina tax $640 + federal $6,586 + $2,000 payroll and prep | $29,318payroll tax $13,770 + North Carolina tax $1,200 + federal $12,348 + $2,000 payroll and prep |
Assumes a 60% salary9 and a single filer. Income tax is left out. C corp dividends are taxed again.
When is the Form 2553 deadline for a North Carolina LLC, and what if I miss it?
Late relief: federal steps, deadline guide.
What to do next
How to start one, or have us form it from $123.75.
Registered agent $74.25/yr, annual report.
LLC vs S corp guide, election deadline, Form 2553 filed for $165.
More on North Carolina: How to start a North Carolina LLC · How to start a North Carolina corporation · North Carolina LLC cost · North Carolina annual report · Annual report late fees by state
File the S-Corp Election for your North Carolina LLC
We file Form 2553 for a flat $165.
Get the S-Corp ElectionCommon questions
What is the North Carolina corporate income tax rate for 2026?
It is 2.00% for tax year 2026, down from 2.25% in 2025, according to the Department of Revenue rate table. The statute reduces it to 1% in 2028 and to 0% after 2029, so the C corporation penalty keeps shrinking.
Does North Carolina tax S corporations?
Not through the corporate income tax: G.S. 105-130.3 says an S corporation is not subject to it. Owners pay individual income tax on their share, and the S corporation pays franchise tax of $200 on the first $1,000,000 of its tax base, then $1.50 per $1,000 above that.
What is North Carolina's individual income tax rate?
The rate is 3.99% for taxable years after 2025. NCDOR notes that further rate changes may apply to tax years beginning with 2027 under reduction triggers.
What is the minimum North Carolina franchise tax?
$200, for both S and C corporations. For a C corporation the rate is $1.50 per $1,000 of tax base, with a $500 maximum on the first $1,000,000. For an S corporation it is $200 on the first $1,000,000, then $1.50 per $1,000.
Sources 10 links, checked Nov 6, 2026
- North Carolina recognizes S corporations: its corporate income tax applies to C corporations, and an S corporation is not subject to it. ncleg.gov, checked Nov 6, 2026
- North Carolina has no separate S election: the Department of Revenue's S corporation return instructions say there is no separate S election for North Carolina income tax purposes. ncdor.gov, checked Nov 6, 2026
- A North Carolina S corporation pays franchise tax of $200 on the first $1,000,000 of its tax base and $1.50 per $1,000 above that, with a $200 minimum. ncdor.gov, checked Nov 6, 2026
- North Carolina's corporate income tax rate is 2.00% for 2026 (down from 2.25% in 2025), and the franchise tax on a C corporation is $1.50 per $1,000 of tax base, with a maximum of $500 for the first $1,000,000 and a $200 minimum. ncdor.gov, checked Nov 6, 2026
- A North Carolina LLC taxed as a partnership files Form D-403 and pays no entity-level income tax unless it elects to be a Taxed Partnership. ncdor.gov, checked Nov 6, 2026
- North Carolina taxes individuals at a flat 3.99% for tax years after 2025, which is the rate on S corporation and LLC owners' share of profit. ncdor.gov, checked Nov 6, 2026
- Under G.S. 105-130.3 the corporate income tax rate steps down from 2.25% in 2025 to 2% in 2026, 1% in 2028 and 0% after 2029. ncleg.gov, checked Nov 6, 2026
- IRS: Form 1120 instructions, C corp rate irs.gov, checked Nov 6, 2026
- IRS: S corp reasonable compensation irs.gov, checked Nov 6, 2026
- IRS: Form 2553 instructions irs.gov, checked Nov 6, 2026
Last verified Nov 6, 2026.
This page explains the rules; it is not tax advice. Run your numbers with a CPA or enrolled agent before you elect.
Last verified Nov 6, 2026.