North Carolina boasts the country’s second-lowest business costs and third lowest corporate taxes. With many growing cities and a low cost of living, the state of North Carolina provides a fantastic customer base for those who want to start a new business there.
How to Start a Business in North Carolina:
1. Determine your business structure.
One of the most important decisions that you make will be choosing the legal structure for your company. Your choice will have an impact on taxes, paperwork, liability, and your ability to raise funds. You can choose from the following legal structures:
A sole proprietorship is the simplest structure and usually involves one individual who is solely responsible for the enterprise while a partnership is suitable for businesses with two or more owners. A corporation is a standalone entity with shareholders while a Limited Liability Company (LLC) is the most popular type because of minimal paperwork, flexibility, tax benefits, and simple implementation process. LLC business owners are not obligated to file a corporate tax return.
LLCs are regulated by North Carolina state laws and must be created by filing the Articles of Organization with the secretary of state for North Carolina. LLCs costs start from as little as $125.00 and can be registered online or by mail.
2. Write a business plan.
Your business plan is the foundation of your new business and will serve as an invaluable guide for how to structure, run and grow your company. The business plan must meet your needs and can fall into one of two common categories: traditional or lean startup.
The traditional plan is very detailed, takes more time to write and is quite comprehensive while the lean startup plan is high-level and fast to write.
A strong business plan can help you to get funding and make the process of opening a new business easier.
3. Sign up for business banking.
A small business bank account is a necessity when you are starting a business. Your business finances must be kept totally separate from your personal ones in order to maintain accurate records. With a business bank account, you can easily obtain statements and access products that would not be available to you as an individual.
Best Banks for Small Business in North Carolina:
4. Seek startup capital and/or loans.
Opening a new business involves many costs that you need to consider. If you are unable to fund your new business on your own, you will need to take out a loan. You can get funding for your business through three common ways: commercial loans, business lines of credit and small business loans.
5. Decide on a business name.
The business name should reflect your business brand and capture your spirit. Make a list of the names that you like and perform a Google search to find any conflicts with other North Carolina business names.
Once this is done, you will need to do a trademark search to ensure that the business name that you chose has not already been trademarked. You can perform the trademark search at the U.S. Patent and Trademark Office and the Trademark Electronic Search System. These databases have a comprehensive list of business names that are registered together with their classification.
After you have confirmed that your business name is not trademarked, you need to check the North Carolina Association of Registers of Deeds and North Carolina Secretary of State databases to ensure that your business name is not the same or similar to another corporation registered in North Carolina.
If you are satisfied that your business name is available, you can then register it on the U.S. Patent and Trademark Office website. You can check out our guide on How to Name a Business to assist you with naming your business.
Once you have found a suitable name, make sure to register the matching web domain and social media handles, should you wish to market your business online.
6. Request an Employer Identification Number (EIN).
Every business needs to have an Employer Identification Number (EIN). Registering for an EIN is very easy—all you need to do is go to the IRS website. You can complete the application online, and save your EIN confirmation notice once you receive a number from the IRS.
7. Acquire business licenses and permits.
The state of North Carolina does not have any single generic business license that ensures compliance with all requirements. Your business may, however, require a specific license or permit depending on the type of business that you open.
There are various costs associated with businesses obtaining filings and trademarks necessary for their business to operate legally in North Carolina. You can contact Business Link North Carolina for specific information regarding your business.
8. Hire employees.
If your business plan included the addition of new employees to your business, it is time to start the hiring process. Compliance with labor laws in North Carolina will ensure that your employees are treated appropriately at your business and their rights as employees are protected.
The North Carolina Employee Fair Classification Act states that employers must post a notice in the workplace stating that workers will be treated as employees unless they are independent contractors and that those who believe they have been misclassified have the right to report the alleged misclassification to the Employee Classification Section.
The North Carolina Wage and Hour Act (WHA) does not require mandatory meal breaks or rest breaks for employees 16 years of age or older, but does require meal breaks and rest breaks of at least 30 minutes after five hours for those workers under the age of 16 years old. The rule applies to businesses reporting gross receipts of under $500,000 and to non-profit organizations.
The Immigration Reform and Control Act of 1986 requires employers to verify employment eligibility by completing and retaining a one-page Employment Eligibility Form (Form I-9).
9. Check your business employer requirements.
Business employer requirements are specific to the type of business that you are starting and include various labor, safety and tax obligations that need to be met. You should consider engaging in the services of a tax or business attorney to ensure your business is fully compliant with the laws in North Carolina.
If you are starting a business in North Carolina, you will need to take note of the following important items:
The North Carolina Industrial Commission administers the Workers’ Compensation Act. It requires any employer with three or more employees to provide workers’ compensation coverage. Any sole proprietor or partner of a business whose employees are eligible for benefits may also be covered as an employee.
Health insurance isn’t a requirement for small businesses in North Carolina.
Business Link North Carolina
Business Link North Carolina is a free service offered to anyone seeking to start a small business in North Carolina and operates in partnership with the North Carolina Department of Commerce. They provide assistance and resources to business owners regarding business registration, business licenses, tax requirements, business plans and access to capital.
The North Carolina unemployment insurance program is designed to provide temporary economic benefits to eligible workers. To determine the extent of your obligation, contact your local Division of Employment Security Job Service Center.
Sales and Use Tax
Every retail or wholesale business that is selling, renting or leasing taxable tangible personal property in North Carolina is required to obtain a Certificate of Registration unless specifically exempt by statute.
Once registered, you will receive information from the Department of Revenue on sales and use tax reporting and remittance requirements.
You can apply online for your Sales and Use Tax number, complete the application for Sales and Use Tax (Form NC-BR) or contact the North Carolina Department of Revenue at (877) 252-3052.
Franchise and Income Tax
A franchise tax is imposed on corporations for the privilege of doing business in North Carolina. This tax is due annually as long as the corporation remains incorporated, domesticated or continues to do business in the state.
Starting a business in North Carolina FAQs:
How much does it cost to start a business in North Carolina?
The overall cost to incorporate a business in North Carolina depends on several factors. The North Carolina articles of incorporation cost $125 with the North Carolina Secretary of State.
North Carolina Formation and Registration Fees:
Articles of Organization.
Articles of Organization, LLC (Conversion of Business Entity).
Articles of Organization Including Articles of Conversion of a Charitable or Religious Corporation.
Application of Certificate of Authority.
Application to Reserve a Business Entity Name.
Articles of Merger.
How do I register when starting a business in NC?
How do I start a business in North Carolina with no money?
- Use services to generate cash flow and fund a product-based business.
- Get creative to discover funding sources.
- Grind it out and look for business, even if you don't get paid for it.
- Use your current resources in different ways to generate income.
- Get a credit line to help with the early stages of your business.
- Locate an accelerator if you are able to hit the market swiftly.
- Crowdfund and allow the public to invest a small percentage of money in return for a future buy-in.
- Use a business incubator to provide funding designed specifically to financially assist a startup company.
How can I protect the name and logo of my business in North Carolina?
The easiest way is to register your business name on the U.S. Patent and Trademark Office website. Prior to registration, remember to check on the Trademark Electronic Search System, the North Carolina Association of Registers of Deeds and North Carolina Secretary of State databases that your business name is not already registered by another company.
Do I need workers compensation when starting a business in NC?
Any employer with three or more employees is compelled to provide workers’ compensation coverage. Any sole proprietor or partner of a business whose employees are eligible for benefits may also be covered as an employee.
Does my business in North Carolina need to contribute towards health insurance?
Health insurance isn’t a requirement for small businesses in North Carolina.
Browse The SMB Guide for more helpful articles for small business owners, and be sure to download our How to Start a Small Business checklist.