Does my North Carolina LLC pay franchise tax?

It depends on how the LLC is taxed. LLCs taxed as partnerships or disregarded entities do not pay NC franchise tax. LLCs that elected S or C corporation status do, at least $200, on Form CD-401S or CD-405.

How much franchise tax does an NC S corporation pay?

An NC S corporation pays $200 on the first $1 million of NC-apportioned net worth and $1.50 per $1,000 above that, with a $200 minimum. Most small S corporations with less than $1 million of net worth pay $200.

How is NC franchise tax calculated for C corporations after 2025?

For tax years beginning on or after January 1, 2025, a C corporation pays $1.50 per $1,000 on the first $1 million of net worth, capped at $500, plus $1.50 per $1,000 above $1 million, with a $200 minimum. The base is net worth only; the property bases were removed for tax years beginning in 2023.

Do I owe NC franchise tax if my corporation lost money?

Yes. The tax is based on net worth, not profit, so a corporation that exists or does business in North Carolina owes at least $200 each year until it formally dissolves.

Do NC lawyers, doctors and CPAs still pay the $50 privilege license?

No. The state privilege license tax under G.S. 105-41 was repealed by S.L. 2023-134 effective July 1, 2024. City and county general privilege license taxes ended July 1, 2015.

NC Franchise Tax: Who Pays & How It Is Calculated

The short answer

North Carolina franchise tax is paid by C corporations, S corporations and LLCs taxed as corporations that do business in or are chartered in North Carolina. It is based on net worth apportioned to North Carolina, with a $200 minimum. For C corporations, starting with tax years beginning in 2025, the rate is $1.50 per $1,000 with a $500 cap on the first $1 million of base, plus $1.50 per $1,000 above that; S corporations pay a flat $200 on the first $1 million and $1.50 per $1,000 above. C corporations report on Form CD-405 and S corporations on CD-401S, due April 15 for calendar-year filers. LLCs taxed as partnerships or disregarded entities do not pay it. Separately, the $50 state privilege license tax on professionals was repealed effective July 1, 2024, and city and county privilege license taxes ended July 1, 2015.

Who this applies to

North Carolina S corporation owners. Restaurants, salons and trading companies often elect S status and pay at least $200 each year on Form CD-401S.

C corporations and startups. Once net worth passes about $133,000, the tax exceeds the minimum, and it grows past $1 million.

LLCs that elected S status. Once taxed as a corporation, North Carolina treats the LLC as a corporation for franchise tax.

Licensed professionals. The $50 state privilege license you used to renew each July is no longer required.

Dormant corporations. A North Carolina corporation with no activity or assets still owes $200 each year until it formally dissolves.

Who pays and who does not

Corporations doing business in North Carolina, corporations chartered or domesticated here even if inactive, and LLCs taxed as corporations pay; LLCs taxed as partnerships or disregarded entities do not.

Pay: NC C and S corporations, foreign corporations doing business in North Carolina, and LLCs or PLLCs that elected to be taxed as C or S corporations.

Do not pay: Single-member LLCs disregarded by default, multi-member LLCs taxed as partnerships, and sole proprietors.

One wrinkle: A corporation owning more than 50% of the capital interests in an LLC includes a share of the LLC's net assets in its own franchise tax base.

P.L. 86-272 does not cover franchise tax: A corporation protected from NC income tax under that federal law still owes franchise tax if it does business here.

After dissolution: Because franchise tax is paid in advance, it generally stops after the income year in which articles of dissolution or withdrawal are filed.

How it is calculated since 2023

The base is now apportioned net worth only, with separate rates for C and S corporations.

The base: The tax used to be the highest of net worth, 55% of the appraised value of NC property, or investment in NC tangible property. S.L. 2021-180 removed the two property bases for tax years beginning on or after January 1, 2023 (the 2022 and later returns). Net worth is computed on Schedule C of CD-405 or CD-401S and multiplied by the same apportionment factor used for income tax.

C corporation rate: For tax years beginning on or after January 1, 2025 (the 2024 and later returns), $1.50 per $1,000 on the first $1 million with a $500 maximum, then $1.50 per $1,000 above $1 million added to the $500. The minimum is $200. This change came from S.L. 2023-134.

S corporation rate: Since 2019, $200 on the first $1 million and $1.50 per $1,000 above it, with a $200 minimum.

Holding companies: Qualifying holding companies are capped at $150,000.

Paid in advance: Franchise tax is paid for the privilege of doing business in the next income year. Tax computed on the 2025 return covers the tax year beginning in 2026.

2026 legislation: As of our check, NCDOR's notices on the 2026 session laws (S.L. 2026-31 and 2026-41) describe income tax changes only and list no franchise tax change. The NC corporate income tax rate is 2% for 2026.

Filing, due dates and late payment

C corporations file CD-405 and S corporations file CD-401S, reporting franchise and income tax together, due the 15th day of the fourth month after year-end.

Due date: April 15 for calendar-year corporations.

Extension: File CD-419 for a seven-month extension, or fill in the Federal Extension circle if you have an automatic federal extension. An extension does not extend the time to pay.

Late filing: Penalties and interest apply. If returns or payments are 90 days overdue, NCDOR can have the Secretary of State suspend the company (G.S. 105-230); acts during suspension are invalid, and reinstatement requires all returns, payment and a $25 fee.

Privilege license tax: repealed at both levels

The $50 state privilege license on professionals ended July 1, 2024, and local general privilege license taxes ended July 1, 2015.

State level: Former G.S. 105-41 required attorneys, physicians, dentists, accountants, engineers, architects, real estate brokers and others to buy a $50 license from NCDOR each year. S.L. 2023-134 repealed it; the last license year was July 1, 2023 through June 30, 2024.

Local level: S.L. 2014-3 removed city and county authority to levy general privilege license taxes effective July 1, 2015. Local beer and wine privilege taxes remain.

Still required: Zoning, health and building permits are regulatory permits, not privilege license taxes, and local governments can still collect unpaid privilege taxes from earlier years.

A simple example

This is simplified and assumes 100% NC apportionment and a calendar year.

An NC S corporation restaurant with $600,000 of net worth pays $200.

An NC C corporation with $250,000 of net worth pays $250,000 ÷ $1,000 × $1.50 = $375.

The same C corporation at $800,000 would compute $1,200, but the first $1 million is capped at $500, so it pays $500.

A C corporation with $3,000,000 of net worth pays $500 + $2,000,000 ÷ $1,000 × $1.50 = $3,500; an S corporation with the same net worth pays $200 + $3,000 = $3,200.

These amounts are reported on the 2026 CD-405 or CD-401S due April 15, 2027.

Common mistakes

"We lost money, so no franchise tax." The tax is based on net worth, not profit, with a $200 minimum.

"LLCs never pay franchise tax." LLCs taxed as S or C corporations do.

"NC corporate income tax is going to zero, so franchise tax will disappear." They are separate taxes.

"Professionals still owe $50 every July." Not since July 1, 2024.

"An extension means I can pay later." It extends filing only; pay by the original due date.

What to do and when

By December 31, 2026: Review the balance sheet to estimate year-end net worth and the 2026 franchise tax.

March 2027: Prepare the Schedule C net worth and apportionment for CD-405 or CD-401S.

April 15, 2027: Calendar-year corporations file and pay franchise and income tax, or extend on CD-419 and pay.

October 15, 2027: Extended filing deadline.

Inactive corporations: Dissolve formally to stop the annual minimum.

How YCL can help

We prepare CD-405 and CD-401S for NC C corporations, S corporations and LLCs taxed as corporations, compute net worth and apportionment, and handle extensions and estimated payments. See our NC franchise and privilege tax service.

If you have received an NCDOR balance-due or suspension notice, we file the missing returns and help restore the company's status.

Retail clients can also read our North Carolina sales tax guide.

YCL Accounting & Consulting is a multi-state CPA firm serving clients across the U.S. in English and Chinese, led by co-founder Gloria (Chenchen) Liu, CPA. You can start with a free 15-minute consultation.