How to start a business in North Carolina
If you’re considering starting your own small business in North Carolina, you’re in good company. Believe it or not, over 99.5% of all businesses in the Tar Heel State are small businesses! If you want to become a business owner in North Carolina, this guide can help you determine how to begin your new startup best. Let’s look at a brief overview of the steps to starting a business in North Carolina.
So what do you need to launch your North Carolina business?
There are eight crucial steps to starting a successful business in North Carolina. First, choose a business idea and name. Then, you’ll need to decide on your business’ legal structure. Next, register your business and apply for the relevant North Carolina licenses and permits. To wrap things up, you’ll need to pick a business location and check on zoning laws. You’ll want to know how to file and pay your business taxes, obtain insurance and open a business bank account.
Let’s take a closer look at each of the steps.
Step 1: Choose a business idea and a business name
The first step to creating a business is choosing a business idea. When you choose an idea, consider your interests and passions. You’ll need to outline the goods or services you want to provide, perform market research to ensure your business is viable and then choose a business name. When thinking of your business name, you want to ensure that your desired name stands out from the rest of the competition.
However, you’ll also want to balance a unique name with a descriptive one. You should be sure that your business name gives customers a good idea of your business. Once you decide on a name, you’ll want to search the North Carolina Secretary of State’s website to ensure the name is available.
If you’d like to reserve a business entity name before starting your business, you may do so for up to 120 days. You must complete the Application to Reserve a Business Entity Name form and pay the $30 filing fee.
Step 2: Develop a business plan
The next step is to develop your business plan. A business plan helps detail your business' most important questions. A variety of people — from lenders and investors to partners and clients — reference business plans to determine potential success. A sound business plan is crucial if you want a Small Business Administration (SBA) or a bank loan. Here are the sections you’ll most often see in standard business plans:
Executive summary
The executive summary section introduces the company with its mission and vision statements. In this summary, you’ll describe your business, the goods or services you’ll sell, essential leadership and any relevant financial information.
Financial projections
The following section outlines your financial projections. You should include your methodology for these projections and illustrate how you’ll turn a profit.
Company description
Here, you’ll provide a more detailed description of your company and detail the problems in the market and the opportunities your business has to solve them. Include information about your customers and if you’ll sell to businesses (B2B) or consumers (B2C). You should also include your business’s strengths and how they will help your company succeed when you come up against competition.
Market analysis
This section contains information about the market in which your business will operate. From current market conditions to competitor analysis to primary and secondary markets, you’ll include detailed information about who your business will compete against. After detailing this information, you should also mention how your business will succeed based on the current and projected market conditions.
Business structure
In this section, you’ll detail your business and organizational structure. You should include why you decided on the type of business you’re running here.
Products or services
In this section, you’ll describe your product or service offerings, including pricing and the full life cycle of your offerings. Finally, make a note of any proprietary information or intellectual property that your business relies upon.
Funding
In this section, you’ll detail the types of funding you’d like to obtain (small business loans, grants, etc). In addition to your funding requirements, you should include a detailed description of how you’ll use any funding you secure.
Marketing and sales
Describe how you will market and sell your products or services. Detail the entire sales process through the payment-collection stage. You should include sales projections, as these numbers will be crucial for securing outside financing.
Appendix
Include all other relevant information in the appendix section. From business permits, licensing, founder resumes and industry-specific credentials, supporting documents can help paint a clear picture to business plan readers.
Step 3: Decide on a business structure
Electing a business structure is a critical step in the business-building process. The right legal structure can affect multiple aspects of your business – from tax responsibilities to liabilities to accessing funding. Here are the main business entities in North Carolina.
Sole proprietorship
A sole proprietorship is exactly what it sounds like — a sole person runs and owns the business. Many times, this sole proprietor uses their name as the business name. However, some people elect to use a different name, a “doing business as” (DBA) name. To operate your sole proprietorship with a different name, you must file an Assumed Business Name Certificate ($26 fee) with the county register of deeds. There are no other documents for sole proprietorships, and the business income from a sole proprietorship gets taxed by the government through the proprietor’s personal income tax return.
Limited partnership (LP)
A limited partnership exists when two or more people form a business. In this business structure, there’s at least one general partner and one limited partner. General partners are liable for debts and obligations of the partnership, but limited partners are limited in both their contributions and liability. You must file a Certificate of Limited Partnership with the North Carolina Secretary of State to form a limited partnership. Limited partnerships are pass-through entities for tax purposes, so each partner is liable for their share of income on their personal tax returns.
General partnership (GP)
In a general partnership, two or more partners go into business together to turn a profit. The personal liability for general partners is joint and individual. In North Carolina, a general partnership requires you to file a Certificate of Assumed Name with the register of deeds in the county the principal office is in. Without written agreements between the partners, the North Carolina Uniform Partnership Act (UPA) controls the partners’ rights and obligations. A general partnership is a pass-through entity for tax purposes, and business incomes will be reflected on each partner’s tax return.
Limited liability company (LLC)
An LLC combines a few advantages of different legal structures. It provides limited liability for its members while providing tax advantages similar to partnerships. To form a North Carolina LLC, you’ll need to file Articles of Organization and elect a registered agent. While you won’t need to file an operating agreement, you should have one for your records. You should also elect a registered agent.
Corporation
A corporation separates the business from its owners. This structure provides liability protection to business owners, but the trade-off is usually increased corporate taxes. You’ll need to file for Articles of Incorporation with the North Carolina Secretary of State. You should also elect a registered agent, write corporation bylaws (although not filed with the Secretary of State), appoint directors and hold director meetings. Because establishing a corporation is a little more complex than the other business entities, it’s best to consult with a North Carolina attorney or CPA.
No matter which business structure you choose, you can get the full guidelines for business registration in North Carolina here.
Step 4: Register your North Carolina business entity and apply for licenses and permits
Unless you are classified as a nonprofit, your business will owe taxes at the federal, state and local level. But before you can those business taxes off, you’ll need to complete some paperwork to make your business legitimate in the eyes of the government.
First, you should apply to the Internal Revenue Service (IRS) for a federal employer identification number (EIN). You’ll use this number to identify your business for federal tax purposes. From income to payroll taxes to opening a business bank account and applying for licensing and permits, an EIN is something you’ll always use in your business. Sole proprietors can use their social security number instead of obtaining an EIN.
You’ll need to register your business appropriately with the state based on your business type. Follow the information above to register your business in North Carolina.
In North Carolina, there is no general business license. However, certain professions have unique requirements, so you’ll want to check with your professional association to learn more about your specific requirements. The North Carolina Department of Commerce can help you determine regulatory licenses and permits.
Step 5: Pick a business location and check zoning laws
Next, you must pick a business location and check local zoning regulations. You should begin to forecast how much the sites you’re looking at will cost you in rent and utilities. It’s essential to evaluate these costs against your business plan to determine if you will turn a profit or if you need to look for a different location.
You should also check local zoning laws to ensure your location is zoned for your business type. These zoning laws can prevent you from opening your business in specific locations, so ensuring correct zoning is crucial to your success.
Step 6: File and report taxes
All businesses have local, state and federal tax obligations. For federal taxes, you’ll utilize your EIN or social security number (for sole proprietors). As a new business, you’ll also need to register with the North Carolina Department of Revenue for sales, withholding and other state taxes.
To sell tangible personal property, you must register for the Sales and Use Tax with the North Carolina Department of Revenue. Some cities may require additional licensing or taxes, so checking your locality’s regulations is important. Talking to a local tax professional or attorney can help you get more specific information for your business.
Step 7: Obtain business insurance
General business insurance is not required in North Carolina, although some professions require insurance. Here are the most common types of business insurance you should consider:
- General liability insurance: This type of insurance covers losses your business causes to another company, client or vendor. Businesses of every size should consider general liability insurance.
- Worker’s compensation insurance (unemployment insurance): If you have more than one employee, you’ll need worker’s compensation insurance. This insurance covers claims from work-related accidents and injuries.
- Professional liability insurance: If you provide professional advice, consulting or accounting services, you’ll want to consider personal liability. This type of insurance covers financial losses due to your business’ negligence and malpractice.
Step 8: Obtain a business bank account (and credit card)
You’ll need a business bank account to help keep your business finances and personal assets separate. Business bank accounts also simplify bookkeeping and are necessary for running payroll and paying your company’s bills. Opening a business bank account is straightforward: you must visit a local bank branch or online institution to sign up. Many banks require businesses to have an EIN and state identification.
Consider opening a business credit card once you’ve opened your business bank account. This card can help you separate your business and personal spending as your business gets off the ground.
Frequently asked questions (FAQs)
What are the steps to starting a business in North Carolina?
To create a business in North Carolina, you’ll need to follow the steps outlined in this article — from developing a business idea to paying taxes and opening a business bank account.
Do I need a license to start a business in NC?
While no general business license exists for North Carolina businesses, some industries have specific licensing requirements. Check with the North Carolina Department of Commerce to view the requirements for your industry.
How much does a business license cost in North Carolina?
There are no general business licenses needed in North Carolina. However, fees for starting a business vary based on the business entity type.
Is it easy to start a business in North Carolina?
Starting a business in North Carolina is similar to starting a business in any state. This guide contains all the information you need to get started.
How much is it to start an LLC in North Carolina?
To start an LLC in North Carolina, you must pay to file Articles of Organization, which costs $125. Some other costs can be associated with creating an LLC (such as industry-specific licensing fees), but the Articles of Organization fee is the main one.
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North Carolina may not be a large state, but it’s always been home to big ideas — the invention of Pepsi — and bold dreamers — the Wright Brothers who flew the world’s first airplane. It’s no wonder it draws entrepreneurs and aspiring business owners looking to do things a little differently … but even the bravest among us need support and a solid strategy to build a company that stands the test of time.
If you’re looking for more free resources to fuel your business journey, we’ve got just the thing. The Start-Up Path for Entrepreneurs is full to the brim with eye-catching content about starting and growing a business from real entrepreneurs who have been in your shoes and found their slice of success.
If you’re ready to move on from business structure into the nitty gritty of technology, Heartland can help with that, too. To learn more about the payments, payroll and point of sale software solutions for every kind of business, visit our website or connect with a local sales professional to get started.
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Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us