Everything you need to know to start your business in North Carolina
There are plenty of great reasons to launch your startup in North Carolina, and we'll walk you through the process of launching any type of business in the Tar Heel State.
Before establishing a business in North Carolina, it's important to have a clear understanding of its startup ecosystem.
Here are some key startup stats for North Carolina:
Planning your business in North Carolina
In order to give your startup the highest chances of success, you need to first craft a business plan.
A business plan outlines the operations and growth strategies of your business. It helps keep you and your team focused on the core goals of the business and also gives your startup a sense of control which is very appealing to potential investors.
Thankfully, we've written an in-depth guide to crafting a winning business plan
The typical business plan is comprised of the following chapters:
Sales and marketing
If you're not sure what type of business to launch, here's a list of the top trending business ideas in North Carolina
Social media marketing agency
Child Care center
Your business idea doesn't have to be included in this list in order to be a success. Any business has the potential of prospering if its backed up with proper market research
Structuring and registering your business in North Carolina
There are 6 main business structures, and all are applicable to both brick and mortar businesses and e-commerce businesses:
Limited Liability Company (LLC)
Procedures for all business types
There are a few procedures you'll need to follow regardless of which business structure you choose:
Obtain an EIN
An EIN is your federal Employer Identification Number. This is a mandatory requirement if you'll be hiring employees. But even if you don't plan on hiring right away, it's a good idea to apply for your EIN anyway. You'll need it to apply for business banking accounts, and you'll need it for many of the forms you'll use to form your business.
Select a name for your business
Obtain licenses and zoning permits
Some businesses require a license to operate in North Carolina. Certain locations also restrict business activities.
You can find out more about business licenses and zoning permits online
Open business banking accounts
All business transactions should be kept separate from personal transactions. When opening a business banking account you'll need your EIN as well as your fictitious business name.
Obtain North Carolina Tax ID Numbers
Submit new hire reports
Whenever you hire a new employee, you'll need to inform both the IRS
and the state of North Carolina
Domestic or Foreign business in North Carolina?
Business owners based in North Carolina are classified as "Domestic" if they launch a business in North Carolina.
Business owners based outside of the state are classified as "Foreign" if they launch a business in North Carolina.
It's important to keep this classification in mind to ensure you access the right tax and registration forms for your business.
Tax details for all business types in North Carolina
The list below outlines some important tax obligations every business structure in North Carolina needs to be aware of:
Sales Tax, Use Tax and Employee withholding
You can register for these taxes online
State Income Taxes
Sole proprietors use their Social Security Number to file and pay their income tax.
Partnerships and Corporations use their Federal Identification Number to file and pay their income tax.
LLCs can choose to be taxed as either a corporation or a partnership.
You can find all the relevant tax forms for every business structure on the IRS website
County Property Tax
Other tax obligations
Now let's discuss the processes of establishing each individual business structure.
How to start a Sole Proprietorship in North Carolina
A Sole Proprietorship is the business structure of choice for most new business owners due to its simplistic and cost effective setup.
Sole Proprietors are categorised as an inseparable entity form their business, which means all of the business owner's personal assets are tethered to the business. As a result, it is highly recommended for Sole Proprietors to insure themselves
Register for North Carolina Tax ID numbers
If you follow the procedures outlined in table above you'll essentially have your Sole Proprietorship registered with the state.
One of the most important procedures you'll need to complete before trading as a Sole Proprietor is registering for both Sales Tax and Use Tax
. You can complete your registration online
How to form a Partnership in North Carolina
If you're launching a business with at least one other person, a partnership structure is the simplest business structure you can choose.
There are four different partnership types:
This is the standard type of partnership. Each general member shares the liability of the business, as well as running the business' day-to-day operations.
A Limited Partnership includes at least one Limited Partner and one General Partner. Limited Partners are shielded from personal asset liability, but also don't have a say in the day-to-day operations of the business.
Limited Liability Partnership
This structure is similar to a General Partnership, but limits the liability of the General Partners.
Limited Liability Limited Partnership
This is a new type of partnership that's only recognised in a few U.S. states. This business structure is similar to a Limited Partnership, but also protects the assets of General Partnerships.
Registering a Partnership in North Carolina
General partnerships do not require registration. All of the other forms of partnerships need to be registered online
To access the appropriate registration form, head to the North Carolina Secretary of State website and select "Business Registration" in the first dropdown menu, then select the type of Partnership you wish to register in the second drop down menu.
Create a Partnership Agreement
This isn't a state requirement, but it's an important step to ensure all members are in agreement with the direction of the business.
Some suggested chapters to include in your Partnership Agreement are:
Roles and expectations of each members
Distribution of profits
To save time you can also use a template
to create your Partnership Agreement.
How to form an LLC in North Carolina
If you plan on distributing official stock certificates to investors, an LLC is the simplest business structure you can choose.
LLCs also provide business owners with an advanced level of personal asset protection, since business owners are classified as separate entities to the business.
Naming your LLC in North Carolina
LLCs in North Carolina need to follow a specific naming convention. The name of an LLC needs to end with one of the following:
Limited Liability Company
Appoint a registered agent in North Carolina
In North Carolina, LLCs are required to appoint a registered agent to accept all mail on their behalf.
A registered agent ensures that all mail correspondence is forwarded to each business owner. This is especially a vital requirement for any legal documents.
The registered agent you appoint must meet all of the following criteria:
Be located in the State of North Carolina
Accept mail via a residential or business address (not via a PO BOX)
Guarantee availability during business hours
Guarantee the timely deliver of all accepted mail to business owners
Because as a business owner you can never guarantee your availability during business hours, it's not recommended for you to appoint yourself or a cofounder as a registered agent. It's much safer to appoint a professional registered agent to act on your behalf.
Here's a list of professional registered agents in North Carolina:
Submit North Carolina Articles of Organization
This document registers your LLC with the state of North Carolina. Detailed instructions on how to complete this document can be found on the first page of the Articles of Organization.
LLCs located in North Carolina can submit their Articles of Organization online
or by mail via the following address:
The Secretary of State
Business Registration Division
PO Box 29622
Raleigh, NC 27626
If your LLC headquarters are located outside of North Carolina and you want to do business in the state, you'll need to file a Certificate of Authority in order to register as a foreign entity. You can submit the application online
or by mail
Create an Operating Agreement
This is highly recommended, though it isn't a state requirement. Operating Agreements consist of rules and guidelines that keep the business running smoothly in all circumstances.
If you're unsure how to create an Operating Agreement, you can use a template
File your annual report
LLCs in North Carolina are required to file an annual report to the Secretary of State. The purpose of this report is to ensure the state of Carolina holds the most up-to-date record of your business.
You can submit the report online
. There's a $200 filing fee, and the report must be submitted by April 15 of each year.
How to form a Corporation in North Carolina
A Corporation structure offers its members the highest level of protection from company debts and lawsuits.
There are two different variations of Corporations: C-Corporations and S-Corporations.
C-Corporations greatly simplify the process of selling shares of stock. They can also have more shareholders than S-Corporations.
The main difference between these two types of Corporations is their taxation. C-Corporations are taxed twice at both the corporate level and personal tax income level. S-Corporations are classified as pass-through entities, because they're only taxed once at the personal income level of each member.
S-Corporation members can also receive tax-free dividends to the extent of their investment.
When a Corporation is formed, it's a C-Corporation by default. In order to choose an S-Corporation status, members need to file Form 2553
with the IRS.
Naming a Corporation in North Carolina
A Corporation name in North Carolina must end with any of the following:
Submit Articles of Incorporation
The Articles of Incorporation form formally registers your Corporation with the state of North Carolina.
This document can be submitted online
. To access this document, make sure you select "Business Registration" in the first dropdown menu and "Business Corporations" in the second:
Choose a Registered Agent
The process of appointing a registered agent for Corporations in North Carolina is the same as the process for LLCs.
Create a Corporate Records book
A Corporate Records book holds all of the important documents pertaining to a Corporation, including:
Duties of each Corporation member
List of all active directors
List of all major transaction and contracts
You can structure this records book however you like. Make sure it's stored in your primary office.
Host initial Corporate meeting
Some of the steps you'll take during your initial Corporate meeting are:
Appointing initial directors that are to serve during the first term
Creating bylaws, which are laws and procedures that will govern the corporation You can use an online template
to streamline the process
Issuing stock certificates to all members
Deciding on the structure of the Corporation (S or C).
Submit annual report
Corporations are required to keep their records updated with the state of North Carolina by submitting an annual report online
by the 15th of April of every year.
Foreign Corporations in North Carolina
How to form a nonprofit in North Carolina
Nonprofits in North Carolina enjoy the benefits of a tax exempt status with the IRS. Since nonprofits are a type of Corporation, the process of forming one is similar to Corporations.
Naming a nonprofit in North Carolina
The name of nonprofits in North Carolina may end in any of the following:
Submit Nonprofit Articles of Organization for North Carolina
This document needs to be filed in order to register your nonprofit with the state. At least one incorporator must be appointed to sign the Articles of Organization.
You can access the nonprofit Articles of Organization online
. Be sure to select "Business Registration" in the first drop down menu and "Nonprofit Corporations" in the second:
If you plan to also apply for Federal tax exemption, you'll need to include a purpose clause
and dissolution of assets
provision in your Articles of Incorporation. Be sure to use the specific IRS language outlined in the linked article.
Host a corporate meeting
This meeting is an opportunity for all members to create the bylaws that will govern the nonprofit, appoint directors and discuss any other preliminary topics prior to commencing business activities.
Register for fundraising activities in North Carolina
You can file your Charitable Solicitation License online
Appoint a Registered Agent
The process of appointing a registered agent for nonprofits in North Carolina is the same as the process for LLCs.
Tax exemption for nonprofits in North Carolina
To obtain a Federal level tax exempt status, you'll need to submit Form 1023
with the IRS. Smaller nonprofits may be eligible
to submit the much simpler registration Form 1023-EZ
Articles of Incorporation
All nonprofits in North Carolina are required to submit an annual report
in order to maintain transparent operational integrity.
Protecting your business in North Carolina
Some recommended insurance policies for your startup in North Carolina are:
Business owners policy (BOP)
This policy is a combination of business liability insurance and business property insurance.
This policy protects your business from events such as theft, fire, loss of income, etc.
Commercial property insurance
This policy protects all of your business inventory and other business belongings.
General liability insurance
This policy protects your business from property damage, copyright infringements, personal injuries and more.
Business income insurance
This insurance policy supplements any lost income while your business recovers from disruptive damage.
Workers compensation insurance
This policy offers compensation to any employees injured at work.
The Economic Development Partnership of North Carolina contains helpful resources for new businesses.
A resource for taxation documents, a database of registered business names and more.
North Carolina's portal for lodging tax returns
This is a great resource for small business news, tips and advice, market research and industry-specific links.
The US Small Business Administration offers advice, advocacy and instruction for small businesses across the country.
Our own guide to launching your startup will walk you through every step of starting a business, from concept to execution.