How to start a business in North Carolina in 8 steps
Want to know a little-known fact about North Carolina? It’s home to the second-largest banking center in the United States, making The Tar Heel State a fantastic region to start your own business. Why, you ask? Because businesses—particularly small businesses—need capital to survive, launching them in an area that’s cash-flush can be particularly beneficial to their growth and success.
If you’re in the business of starting a business in North Carolina, the following 8 steps will provide you with the necessary roadmap to help take your business idea from a hopeful dream to a fully realized reality.
1) Think about the type of business you want to start
Starting a successful business is no easy task. It requires a fantastic business idea, a deep understanding of how that business idea will make you money, and the fortitude to draft and implement a business plan that can take the business idea and transform it into something tangible. This is why taking the time to think about why you’re pursuing your business idea is of extreme importance.
Having a thorough understanding of why you want to start a business will allow you to align your purpose with your motivation. Simply “wanting to make money” is not enough of a reason to start building a business from the ground up. There are much easier ways to make money that do not involve the all-encompassing, time-consuming process of being an entrepreneur.
With your “why” in place, you’ll be tuned in to the driving force behind your thoughts, actions and intentions, and will thus be more motivated and better equipped to meet the day-to-day needs and challenges of whatever specific enterprise you’re embarking upon.
2) Set up your legal structure
At this point, you have your business idea selected, an understanding of why you’re starting the business, and a vision for where you want to grow the business and how you’ll get there—aka business plan. In most cases, the next step is setting up your business structure—or legal structure—which will determine how your business is taxed. In North Carolina, there are four main ways in which you can establish your business structure:
- Sole Proprietorship: Being a sole proprietor is a great way to set up your business structure if you’re the only person involved in the business and are not expecting to generate a ton of revenue. You’ll get the benefit of keeping all the business profit to yourself but will also incur any loss. Additionally, suppose your business becomes entangled in any legal battles. In that case, your personal assets might be exposed in a lawsuit, since being a sole proprietor offers no legal protections to small business owners.
- General Partnership: Essentially, a general partnership is two or more sole proprietors working together under one banner. As with a sole proprietorship, the business owners receive all profits or incur all losses and are also financially and legally responsible for any lawsuits against them. Both sole proprietorships and general partnerships are classified as pass-through entities. The profit or loss is associated with the Social Security Number(s) of the business owner(s).
- Corporation: Contrary to general partnerships or being a sole proprietor, filing as a corporation will offer small business owners legal protection in case of a lawsuit. This is because corporations are classified as their own business entities, separate from the individual(s) running it, and are typically filed as C corporations or S corporations, corresponding to 2 different ways corporations pay business taxes.
- Limited Liability Company (LLC): For small business owners who want the ease of operating as a sole proprietor and the legal protections of a corporation, establishing as a Limited Liability Company—or LLC—might be the best move. LLCs are easy to set up and provide flexibility to owners whose operations might not fall squarely into the sole proprietorship or corporation lanes.
Whichever business structure you choose, be sure it’s in line with your competitors. Research what’s publicly available on your competitors and other businesses in your field, and you’ll be able to get a sense—based on how those companies are set up—if you’re headed in the right direction.
3) Name and register your business
The first thing you should do when choosing a name for your business in the state of North Carolina is to check the prospective name of your company with the North Carolina Secretary of State. While it’s an added step, checking if your business name is already in use will save you time and money. You won’t have to refile all of the same initial paperwork if, indeed, your desired business name is already taken.
Once you’ve verified through the North Carolina Secretary of State that your desired business name is available, you’ll then need to fill out business registration forms, which differ depending on how you set up your business structure.
If you’ve established your business as a sole proprietorship or general partnership, you’ll need to fill out the Certificate of Assumed Name—also known as the Doing Business As or DBA form—and file the form with the County Register of Deeds. There is a $26 filing fee associated with this submission.
Alternatively, if you’ve established your business as a C corporation, S corporation, or LLC, take the extra step and visit the North Carolina Secretary of State’s Trademark Registration website to ensure that any party with your proposed business name is not already trademarked in the state of North Carolina. You can also check with The U.S. Trademark and Patent Office if you think you’ll conduct business outside of North Carolina. Provided you’re in the clear, you’ll then need to fill out Articles of Incorporation if you’re filing as a corporation or Articles of Organization if you’re filing as an LLC. You can file and register your business online via the North Carolina Secretary of State’s business registration website in both scenarios.
It’s important to note that you only need to register your new business with your county if you’re filing as a sole proprietorship or general partnership in North Carolina. For this, you only need to use your Social Security Number and the Social Security Number of your partners, if any. For all other types of business entities, you’ll need to register your new business with the North Carolina Secretary of State and apply for a Federal Employer Identification Number, which is available for download on the IRS website.
4) Apply for business licenses and permits
With your business name selected and registered, the next step in starting your own business is to lock in any business licenses and/or permits. However, securing business licenses and permits in North Carolina is slightly more involved than in other states. North Carolina does not issue a universal business license. Instead, the onus is on the business owner to determine whether or not their industry requires operating licenses or permits, which vary at the county, city, state, and federal level depending upon the nature of each specific type of enterprise. For help understanding which permits and state licenses might apply to your business, contact the Small Business Administration (SBA) or the North Carolina Business and Occupational Database listed on the North Carolina Department of Commerce website, which will provide a directory of all the required occupational licenses and the contact information needed to secure each.
5) Choose a location
Depending on where in North Carolina you’re looking to set up your business, you might be paying more or less in taxes. You also might be paying more or less in taxes simply for conducting business in North Carolina. Like with licensing and permitting, the fees associated with different occupations and industries vary greatly depending upon the nature of your business. While it’s best to contact your business manager or Certified Public Accountant, here are a few of the main types of North Carolina taxes that might impact your business depending on where you set it up:
- State and local tax forms: In North Carolina, you’re required to list any business personal property with the County Tax Assessor, which can potentially increase or decrease your taxes depending upon which county your property is located.
- Privilege License Tax: The Privilege License Tax, as the name suggests, is a tax for the privilege of conducting business in the state of North Carolina. The mere fact you’re choosing to set up your business in North Carolina could be taxable, so it’s important to verify if your industry requires a privilege license.
- Sales and Use Tax: If you’re in the business of selling, renting, or leasing personal property in the state of North Carolina, it’s required you obtain a Certificate of Registration unless you’ve been approved to be exempt. Once your certificate has been obtained, check with the North Carolina Department of Revenue on how best to report and remit your tax information.
- Franchise Tax: Similar to the Privilege License Tax, the annual Franchise Tax is required to be paid by corporations that remain incorporated in the state of North Carolina.
- Unemployment Insurance Tax: This is your contribution to the North Carolina unemployment insurance pool. Contact the Division of Employment Security Job Service Center to figure out how much money you’ll need to contribute.
- Workers’ compensation: Administered via the North Carolina Industrial Commission, if your business contains three or more employees, then this is a fee you’ll need to pay.
- Occupational Safety and Health Act (OSHA) of North Carolina: The Occupational Safety and Health Act of North Carolina helps protect employees against harmful working conditions. You’ll need to contact the North Carolina Department of Labor’s Occupational and Safety and Health Division to determine what fees—if any—you’ll need to pay.
Ultimately, it may be more cost-effective for you to forgo a physical location in favor of a digital storefront. Not having office space—particularly in North Carolina—could possibly reduce the amount in income taxes you pay each year and—depending on the nature of your business—could potentially reduce the amount in fees you’ll need to pay as operating costs.
6) Open a bank account and prepare for future taxes
In terms of operating costs, a great way to stay financially organized on a day-to-day basis—and for tax purposes—is to open a business bank account. Not only will this help you keep your personal and business expenses completely separate, but it will also streamline all of your transactions through a solitary account. This is much easier for tracking income and expenses and ensuring you’re meeting your tax requirements. Instead of trying to retroactively decipher if a charge is personal or for your business, setting up a business bank account or business credit card helps you ensure all the transactions are specifically related to your business.
Opening a business bank account in North Carolina is a pretty straightforward process. While taking out business loans or lines of credit are nice to have, the only account you need to set up initially is a business bank account. To get started, you’ll need to gather your Federal Employer Identification Number, Articles of Organization or Articles of Incorporation, and your personal driver’s license and provide some combination of these documents to your chosen financial institution to be approved.
Come tax season, it will be important to contact a business tax professional or another registered agent who can review your well-organized annual report and make sure you’re complying with all North Carolina and federal tax laws. They can also determine whether you are maximizing your business deductions or overpaying on your tax return.
7) Purchase business insurance
Regardless of the state in which you’re operating your business, business insurance remains one of the best ways to protect you and your business from lawsuits and other legal claims against your startup. Your business insurance needs will vary depending on the nature of your organization, what you’re selling, your number of employees, and your location.
Some other types of insurance that might be worthwhile for you to explore for your business include general liability insurance, professional liability insurance, product liability insurance, and key person insurance. Insurance is another area in which your accountant or tax professional can ultimately provide insight and direction about what best fits your specific enterprise.
8) Create a marketing plan, hire employees, and more
You’ve now successfully taken a business idea, drafted it into a business plan, chosen and registered a business name, registered the business with the state of North Carolina, secured all applicable licenses and permits, opened a business bank account, and purchased business insurance. The final piece to launching your startup is to market your services and position your business for growth.
If your marketing budget lacks funds or is nonexistent, do not panic. There are many online tools available to you that can help you execute your marketing strategy at little to no cost. Social media platforms like Facebook, Instagram, Snapchat, and LinkedIn all have features that can help you create targeted ads for your target market, boosting your brand’s awareness and sales. Google Ads can be another easy-to-use, cost-effective option to grow brand awareness and procure future clients. Ultimately, you have to choose the technology you feel most comfortable with, but why not use the empowering opportunity of running your own business to learn new tools and try something new? You might just discover you have a hidden talent for marketing, growth, and promotion.
As you continue to learn the ins and outs of running your own business in North Carolina, keep Huckleberry in mind as a helpful business resource for all things related to business insurance. In minutes, Huckleberry can generate a quote for you and get your business insurance policy in hand, helping keep your mind focused on growing your business and your business protected for the future.