Business LoansSmall Business Loans

How to Start a Business in North Carolina

north carolina debt relief

Once you have a feasible idea on your hands, it’s time to begin the process of officially opening a business. Each state has its own regulations and requirements for new companies – below, we’ll dive into starting a business in North Carolina.

More than 890,000 small businesses operate in North Carolina, comprising nearly all businesses in the state, according to research from the U.S. Small Business Administration. Just over 44% of all North Carolina employees work for a small business.

If you’re ready to get the process started, here’s a rundown on how to start a business in North Carolina.

How to establish a business entity in North Carolina

No matter where you open a business, it must be set up as a certain entity, or structure, such as a sole proprietorship or limited liability company. The structure you choose will determine your personal liability for the business, the taxes you owe and overall ownership.

The state of North Carolina cannot advise new business owners, but you could consult an attorney or an accountant to help with your decision. The following entities are available to choose from in North Carolina:

  • Sole proprietorship: Single business owner; Full personal liability
  • General partnership: Two or more owners; Full personal liability
  • Limited partnership: Two or more owners; Protection from personal liability
  • Corporation: Multiple owners; Separate legal entity with protection from personal liability
  • Limited liability company: One or more owners; Separate legal entity with protection from personal liability

Naming your business

The entity you select would determine the steps you’d need to follow to name your business. If you’re operating as a sole proprietorship or a general partnership, you’re free to choose any business name. However, you would need to obtain a “doing business as,” or DBA, if your business name differs from your personal name.

LLCs, corporations and limited partnerships need name approval from the North Carolina Secretary of State Office. The office could reject your proposed business name if it’s too similar to the name of an existing business. You would also need to check the state trademark database, Register of Deeds office in your county and any online business directory to make sure the business name isn’t already in use. Some words that make up your business name could be trademarked as well.

When you’ve settled on a business name, you could register a trademark with the North Carolina Secretary of State office to protect its usage. You’d need to pay a $75 nonrefundable filing fee.

Registering your business

In North Carolina, sole proprietorships and general partnerships using a DBA need to be registered at the county level. If you’re using a DBA, you would need to file a Certificate of Assumed Name with your County Register of Deeds. You can find your county official here.

Corporations, LLCs and limited partnerships must be registered with the NC Secretary of State, which comes with a cost:

  • LLCs and corporations must pay $125 to file articles of organization and articles of incorporation, respectively. These documents disclose information about the business, including the address, number of corporate shares and type of stock available. Going forward, corporations must submit an annual report, costing $25, to keep business information current. LLCs must also submit an annual report, but the filing fee is $200.
  • Limited partnerships must provide business information as well, including the address and names of all partners. The filing fee for limited partnerships is $50.

Less common businesses entities, such as limited liability partnerships, limited liability limited partnerships, nonprofit corporations, professional LLCs and professional corporations, must also register with the North Carolina Secretary of State.

Which businesses need a license – and where to find one

Businesses in North Carolina are not required to obtain a general business license to operate. However, you could face licensing and permitting requirements at the local level.

To figure out what your business needs, you could set up a one-on-one consultation through Business Link North Carolina, which is a North Carolina Department of Commerce program providing free services and guidance to new business owners.

The type of business you operate and your location would generally determine which licenses you need. States typically regulate business activities such as construction, food service, retail, dry cleaning, farming and plumbing, among others. Some licenses and permits require regular renewal, so it’s important to keep an eye on expiration dates to avoid putting your business at risk.

Common local licenses and permits include:

  • Zoning and land use permits
  • Building permits
  • Health department permits
  • Fire department permits

To find the required licenses for your business, you would need to search for the North Carolina occupation board associated with your industry. The governor’s office provides a directory with contact information for each board and commission.

Many types of businesses are also regulated at the federal level. For instance, businesses involved in agriculture, alcohol or transportation would likely need a license or permit from a federal agency to operate.

Costs of starting a business in North Carolina

The type of business you operate would determine many of your initial costs. As discussed earlier, certain business entities come with higher registration fees than others. And if you choose to trademark your business name, that would be an additional expense. Costs associated with permits and licenses would also depend on your specific business.

State taxes

Businesses in North Carolina are subject to state taxes, in addition to federal taxes. The North Carolina Secretary of State would issue a state identification number for your business, also called a SOSID. Sole proprietorships and general partnerships do not receive an SOSID, but all other business entities need an SOSID to complete forms for the North Carolina Department of Revenue, excluding tax returns.

Depending on the details of your business, you could be required to pay the following business taxes in North Carolina:

  • Sales and use tax
  • Employee withholding
  • Machinery and equipment tax
  • State income tax
  • County property tax
  • Corporate income and franchise tax
  • Alcoholic beverages tax
  • Partnership tax
  • Tobacco products tax
  • Privilege license tax
  • Unemployment insurance tax

North Carolina has one of the lowest corporate tax rates in the country at 2.5%. Of course, other types of businesses pay taxes through their personal income taxes. For the 2019 tax year, North Carolina’s individual income tax rate is 5.25%. When factoring in both of these plus property taxes and unemployment insurance taxes, North Carolina earned an overall rank of 12 out of 50 states plus Washington, D.C. on the Tax Foundation’s annual State Business Tax Climate Index.

To pay federal taxes as a business owner, you would also need to obtain an Employer Identification Number, or EIN, from the IRS. You would need this number, in addition to your state tax number, to make sure you file all applicable business taxes.

Before opening your business: Regulations to check

After registering your business entity and obtaining the right permits, you may need to handle a few more details.

Employer requirements

If you plan to hire employees, you would need to follow additional state guidelines. You would need to report all new hires to the North Carolina Directory of New Hires within the North Carolina Department of Health and Human Services.

Additionally, you would need to meet statewide workplace safety requirements under the Occupational Safety and Health Act of North Carolina. There are also a number of posters that explain workplace laws that you would need to hang throughout your business.

As an employer, you would need to withhold state income taxes from employee wages, as well as child support payments when necessary. And if you have more than 50 full-time employees, you would need to provide health insurance as directed by the Affordable Care Act.

You would also be responsible for unemployment insurance and workers compensation insurance, which we’ll discuss next.

Insurance

All employers in North Carolina are required to pay unemployment insurance tax, which funds unemployment programs in the state. If you have at least three employees, you must also provide workers’ compensation coverage. If you fail to purchase a workers’ compensation policy from an insurance provider, you could face financial penalties, misdemeanor or felony charges, or imprisonment.

Though not required, you may want to consider purchasing other small business insurance policies to protect your assets, including general liability insurance, commercial property insurance and business income insurance, which helps cover a loss of income after an emergency or other interruption in your business. Consider the potential dangers to your business to determine what type of policies you need.

The bottom line

Although entrepreneurs typically follow the same steps to start a business in any state, North Carolina has a few specific requirements.

Most of the process of starting a business in North Carolina depends on the type of company you plan to operate. Required licenses and permits would be based on your industry and business activity, while your business entity would determine how you should name and register the business.

If you need assistance along the way, organizations like the Small Business and Technology Development Center and Council for Entrepreneurial Development help small business owners across North Carolina establish and grow successful ventures. If you’re moving your business to North Carolina, the Economic Development Partnership of North Carolina may be able to help with finding a location.

The information in this article is accurate as of the date of publishing. 

 

Compare Business Loan Offers