North Carolina is a fantastic place to do business. In fact, it boasts one of the best ratings in the nation for ease of doing business, thanks to its low-regulation environment, easy access to funding, low business costs, and low corporate income tax rates.
Are you ready to start your own North Carolina business? If so, this is the guide for you.
Below you will find detailed instructions on how to start a business in North Carolina, from the initial planning stages all the way through to running the successful business of your dreams!
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your North Carolina business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
Brainstorming to come up with a name for your new company is the next concrete step. It’s a very important step, as well, so take your time.
The name you choose will represent your business, so choose something that is memorable and unique, and relevant to your industry/business type. The name must also comply with the North Carolina business name rules.
One of the most important rules is that the name must be distinguishable/unique from all other companies registered in the state of North Carolina. In other words, if a name is already registered, you cannot use the same name (or a very similar name). To determine whether a name is available or not, you can conduct a North Carolina business name search online.
There are other rules to be aware of, as well, including:
- Names for LLCs need to contain “limited liability company”, or select approved abbreviations such as “LLC” or “L.L.C.”
- Names for corporations need to contain “corporation”, “incorporated”, or select approved abbreviations such as “corp” or “inc”
- Certain words or phrases are restricted, and either not allowed to be used or may require additional permission. See this resource for info.
- Other rules may apply. See the full legal rules here.
When you have decided on a name and confirmed its availability, you can move on. Or, if you need some time to think about it, you can reserve the name for 120 days by filing the Application to Reserve a Business Entity Name and paying the $30 filing fee. This prevents another business from registering the name for a period of 120 days.
North Carolina trade names
NC allows businesses already registered in the state to use “assumed names”, otherwise known as trade names or DBAs. These can be registered once your business is formed, and can then be used to do business with. This provides more flexibility for your business in regard to marketing and branding efforts. Learn more here.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans.
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers, and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited liability company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in North Carolina
Now it’s time to actually form the legal business entity of your new company. This could be a sole proprietorship, partnership, LLC, corporation, etc – the details of each are explained above.
The process for forming your business will differ slightly depending on the type of business entity, but in general, you’ll need to file paperwork with the NC Secretary of State.
If you want to save some time, you can also opt to use a paid business formation service. Companies like Northwest Registered Agent, ZenBusiness, and Incfile are all good options, which can help you complete every step needed to form your new business entity.
If you opt to do the work on your own, the basic steps include:
- Naming your company
- Choosing a registered agent (this individual or company is responsible for receiving legal documents on behalf of the business)
- Filing paperwork with the state
- Obtaining business licenses and permits if necessary
- Applying for an EIN from the IRS
More specific steps for each of the popular business entities are listed below.
Form a North Carolina sole proprietorship
Follow these steps:
- Decide if you will operate under your legal name, or use a trade name
- If you use a name other than your own, you may need to register a trade name/assumed name
- Apply for a business license and/or other necessary permits from local governments (city/county), as needed
- More information here
Form a North Carolina LLC
Follow these steps:
- Name your new LLC (see notes above)
- Choose a North Carolina Registered Agent (or use a service such as Northwest Registered Agent). This NC Registered agent will be tasked with receiving legal documents, notice of lawsuits, and more on behalf of your company
- File the LLC Articles of Organization online or by mail, and pay the $125 filing fee
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form a North Carolina corporation
Follow these steps:
- Decide on your desired corporate tax structure (S corp or C corp)
- Name your new corporation
- Choose a Registered Agent for your business (or use a service)
- Hold an organizational meeting and appoint directors
- File the NC Articles of Incorporation online or by mail, along with the $125 filing fee
- Apply for an EIN from the IRS
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: North Carolina may require additional permits and/or licenses in order to operate legally in the state. Check the License & Permits page on the NC Secretary of State website for details, or reference the North Carolina Economic Development Partnership’s Business Licenses & Permits page.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).
You’ll also need to stay on top of state-level requirements for employers. This includes reporting new hires when you hire them and registering for employer taxes including withholding tax and unemployment insurance tax. There will likely be additional reporting requirements as well; check with your accountant for details.
At this point, you also should look into setting up your payroll system – whether you handle it yourself, or use a payroll service.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
North Carolina business FAQs
Still have questions about running a business in North Carolina? Here are some answers to frequently asked questions.
What are some business resources in North Carolina?
There are tons of great resources available to NC entrepreneurs. The North Carolina Small Business Development Center (SBDC) is a great place to start. The SBDC provides free business consultation and coaching and dozens of other useful resources. SCORE NC is another great resource, as is the North Carolina district office of the Small Business Administration (SBA).
What is the minimum wage in North Carolina?
The North Carolina minimum wage is $7.25 per hour, the same as the federal minimum wage. There is an exception for employees who receive tips. Tipped employees can be paid as little as $2.13 per hour, so long as their total pay (wages + tips) equals the $7.25 per hour minimum wage.
Keep in mind that it is possible for individual cities or counties to impose their own minimum wage laws that may exceed North Carolina’s minimum wage. Check with local government officials in your area to ensure your business is compliant with all local rules.
What business taxes does North Carolina have?
NC firms must pay a variety of business taxes to the state. This includes sales & use tax, which is currently 4.75% on the state level, plus applicable local sales tax. For example, the total sales tax in Charlotte, NC is 7.25%.
Most firms will be subject to Corporate Income and Franchise Tax. Employers will need to pay withholding tax and unemployment insurance tax. Check with the NC Department of Revenue for details, or sign up for a virtual business tax seminar.
How do I dissolve an LLC or Corporation in North Carolina?
To shut down a North Carolina company, the owners must “dissolve” it. This involves filing the Articles of Dissolution for the appropriate business entity type that you are closing. More information can be found here.
Closing a business can be complex, so it’s wise to consult your tax attorney or CPA for help.
CHK_ YOUR NAME RIGHT NOW
Use our engine to quickly check your content right now!