How to Start a Business in North Carolina
Are you curious about how to start a business in North Carolina? Well, if you’d rather not file paperwork with the state, then you can become a sole proprietor by simply selling something. But, if you want liability protection you’ll need to create a separate entity, such as an LLC or corporation. North Carolina continues to benefit business owners by having low corporate taxes and a competitive labor market. Now that you know a few of the perks, follow our guide to setting up your North Carolina business.
Ready to Start a Business in North Carolina?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get North Carolina Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File North Carolina Annual Report
Apply for Trademarks
1. Pick a Business Structure
The simplest way to form a business is to sell something. Suppose you design graphic t-shirts and sell them at local craft fairs. Then, you would be a sole proprietor. If you sell with a friend, then you would be a general partnership. Although neither business type requires filing formal paperwork, there are significant downsides. Legally, if you’re a sole proprietor or general partnership, you are the business—meaning if someone sues your business, your personal assets (such as your house and car) could be at risk.
If you want liability protection, you’ll need to start a business that’s separate from you, the business owner. The most common types of entities that offer liability protection are LLCs and corporations.
North Carolina Limited Liability Company (LLC)
LLCs are a popular entity to form because they offer a lot of flexibility. For example, you can run an LLC yourself as a single-member or have members or managers run your multi-member LLC. You can even choose whether to maintain your default tax status (as a pass-through entity) or to be taxed as a S or C corporation. Sounds good? Then, to start your North Carolina LLC , you’ll need to file paperwork with the North Carolina Secretary of State.
North Carolina corporation
Corporations are quite different from LLCs. Statutory law mandates a lot of what corporations must do, such as appointing a board of directors and holding an initial board meeting. However, corporations can offer stock, which helps attract investors who can then help fund your business. To form your North Carolina corporation, you’ll need to file paperwork with the North Carolina Secretary of State.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a North Carolina nonprofit?
In North Carolina, you can start a North Carolina nonprofit corporation if your business will exist to benefit the public or serve a group’s shared interests. With this business type, you can also enjoy certain tax deduction benefits. If you wish to start a North Caroline nonprofit, you’ll need to file Articles of Incorporation (Form N-01) with the Secretary of State.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Naming a business in North Carolina means making your business stand out from all others! However, there are several factors you’ll want to consider. For example, if you’re a sole proprietor, your business name will be your human name—unless you get a DBA.
LLCs and corporations will need to meet the following state regulations:
- LLCs must have an identifier like “LLC,” or “Ltd. Liability Company”
- Corporations must an identifier like “corporation” or “incorporated”
- Not use words or abbreviations that make your business sound like a different type of entity—meaning, an LLC shouldn’t include words like “corp” or “limited partnership.”
- Not include words like “bank,” “accounting,” or anything relating to government affairs unless you have approval from the appropriate boards
Find out if your desired name is available in North Carolina by searching the North Carolina Business Registration.
Can I reserve a business name in North Carolina?
Yes! You may reserve your business name by filing the Application To Reserve A Business Entity Name form. Once you submit this form, you may reserve your business name for up to 120 days. The clock starts as soon as you file the name reservation application, and it is not renewable.
It costs $30 to file an Application To Reserve A Business Entity Name with the state. If you file this form online, there is an additional $2 electronic transaction fee. The state will process your form within 3-5 business days. You can also mail your form in, but it will take a little longer for the state to process your application.
What is a DBA?
A DBA is any name your business uses other than its legal name, which is the name on your formation paperwork. But, in North Carolina, a DBA is known as an ABN—assumed business name.
There are several reasons why you may want to use a DBA. For one, a name other than your own can be beneficial if you’d prefer having more privacy as a sole proprietor or general partner. LLCs or corporations may want a DBA if you’re looking to expand your products or services.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
Sole proprietors and general partners don’t need to file formation documents because they aren’t separate entities from you. (You may, however, need to get a North Carolina business license.)
To form an LLC or corporation, you’ll need to file paperwork with the North Carolina Secretary of State.
- To form a North Carolina LLC, file North Carolina Articles of Organization.
- To start a North Carolina corporation, file North Carolina Articles of Incorporation.
Also, you’ll need to list a North Carolina registered agent (like us!) to handle your legal mail.
Note: The information you list on this form will become part of the public record. This means that the names and addresses you provide will be posted on the Secretary of State website for anyone to find.
How can I keep my information off the public record?
The best way to keep your private information off the public record is to keep it off public documents altogether. To do that, you’ll need a registered agent who will list their address on this form instead of your own. (Hint: we do that!)
What is a registered agent?
A registered agent is the person or entity who is responsible for receiving legal mail on your business’ behalf. Your North Carolina registered agent must have a physical address (PO Boxes are not allowed) in the state and be available during standard business hours. So, when you want to take that well-earned vacation, this could create problems. That’s why many business owners choose to hire a professional registered agent to serve as their company’s point of contact.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the North Carolina Secretary of State. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
North Carolina LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a North Carolina LLC Operating Agreement template that you can use as a solid foundation.
North Carolina Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in NC Gen. Stat. § 55-2-06.
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a North Carolina Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about North Carolina nonprofit bylaws.
5. Get North Carolina Business Licenses
There is not a specific state business license that all North Carolina business owners must have. However, North Carolina does have more than 700 different business licenses for specific professions, such as child care, marriage/family therapy, and real estate. So there is a good chance you’ll need to obtain some kind of business license. Moreover, you might need a permit or zoning license for your business depending on where you’re located.
North Carolina State Business License
North Carolina doesn’t have a general business license that will ensure you’re compliant in all jurisdictions. Whether or not you need to obtain a license, will boil down to the type of business you own, the products or services you provide, and where your business is located. For example, let’s say you lived in Raleigh and wanted to create a foster family home. Because your business is home-based, you’ll need to obtain a home business permit from your local Development Services Customer Service Center. In addition, you’ll need a state-issued Foster Home License.
Professional Business Licenses
You’ll likely need a professional license to perform certain services under your business, such as acupuncture, midwifery, or optometry. For example, to run an adult care home that has at least seven beds, you must submit the 2022 Licensure Application for Home Care, Nursing Pool, And Hospice form to the North Carolina Department of Health and Human Services, Division of Health Service Regulation. To obtain a professional license for your business, you’ll need to apply with the licensing authority that oversees your specific industry.
Local Business Licenses
Certain cities and counties will require you to have some sort of license to operate your business. For example, Charlotte requires food trucks to have a food and beverage permit license, and Greensboro requires you to have a privilege license to sell alcohol or run a taxi business.
Learn more about How to Get a Business License.
How do I get a North Carolina business license?
You just need to fill out and submit the appropriate paperwork. Applications will vary, but you’ll likely need to include some basic information about your business, like it’s name, entity type, and primary address. Most applications can be submitted online or via mail.
How much does it cost to get a North Carolina state business license?
The costs for licenses depends on the license itself. For example, a professional license to perform chicken hatchery costs $25. A license to perform aerial pesticides as a contractor only costs $75. However, if you want to be a private investigator, your professional license will cost you $500.
How do I get a professional license in North Carolina?
You need to apply with the state board that regulates your license to get the professional license you want. For example, if you want to be an adult care administrator, you’ll apply to the North Carolina Division of Health Service Regulation.
How do I get a local business license?
Each county and city will have their own rules and application process for obtaining a local license. You’ll need to contact the appropriate authority of your county or city to get the right local license. Start by contacting the appropriate authority at North Carolina Business Licenses & Permits.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
Whether you hire employees or independent contractors, you’ll need to establish a payment system. In other words, you’ll need to set up payroll. How do you set this up?
- Get an Employer Identification Number (EIN).
- Fill out the Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Other Taxes and Service Charge form.
- File for unemployment tax.
- Choose a payroll service.
- Have your employees or independent contractors complete on-boarding paperwork, such as direct deposit and I-9 forms.
- Fill out the NC-5 Withholding Return form or NC-5Q Withholding Tax Return form.
- Process an annual payroll report for employees with a W-2 or independent contractors with a 1099.
Setting up payroll can seem complicated, but having a payroll service or software can help ease some of your burden. For example, many services will automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees through direct deposit or by check—whichever you prefer.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I get a North Carolina Employer Account Number?
An Employer Account Number (EAN) is a tax identification number for your business. You’ll need an EAN to set up your payroll as well. You can get an EAN by going to North Carolina Department of Commerce Employment Security. It can take up to six weeks before the state assigns you a unique EAN.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
Here’s a breakdown of the most commonly purchased business insurance:
Workers’ Compensation Insurance
Although some business owners won’t need to buy workers’ compensation insurance, you’ll need workers’ compensation insurance if you have at least three full-time employees, according to NC Gen Stat § 97-2 (2021). But not every worker is an “employee.” Independent contractors, some board members, LLC members, and seasonal workers (even if they’re full-time) are just a few workers who don’t count as employees.
Still, buying workers’ compensation insurance is a good idea. If a part-time or full-time employee gets injured, your insurance pays for their medical expenses.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect.
If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers' compensation insurance in North Carolina?
We’ve covered when employers need to buy insurance for their workers. But what if employers want insurance in case they get injured on the job? As a business owner, you may elect to be covered if you’re“actively engaged in the operation of the business” and tell your insurance company you want to be covered under your workers’ compensation policy.
However, business owners don’t need to get workers’ compensation insurance for themselves. It’s really a matter of preference.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
North Carolina has one of the lowest corporate tax rates—at just 2.5%. But your tax burden isn’t determined by the state alone. You’ll also have federal, state, and local taxes to consider.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. Good News: North Carolina has a 4.99% income tax rate, which is lower than many other states. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-corp instead.
- Corporations. Corporations are taxed as C-corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable North Carolina corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-corps, but LLCs can also apply for C-corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in North Carolina the corporate income tax rate for C-corporations is 2.5%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-corp tax election.
Local North Carolina Business Taxes
North Carolina has a state sales tax rate at 4.75%. But different counties and cities may charge you additional sales and use taxes. For example, Alamance county has a sales and use tax rate of 2.00%. Graham County has a sales and use tax rate of 2.25%. There may be other additional local taxes to consider as well.
9. Build Your Business Website
If you want the good people of North Carolina to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File a North Carolina Annual Report
Corporations and LLCs must file an annual report with the Secretary of State. Your annual report is due by April 15 of the year following when you started your business. (So if you formed your business in 2022, your first annual report is due in 2023).
This report keeps the state updated with general information about your business, such as your registered agent’s name and address, your business’s phone number, and your officials’ names and addresses. It costs $20 to file.
Read more about North Carolina Taxes.
What if I don’t file an annual report in North Carolina?
It’s definitely in your best interest to file your annual report on time. Otherwise, the state will dissolve or revoke your business. Then, you’ll have to pay $100 to get your business reinstated, $275 to re-qualify by filling out an Application for Certificate of Authority and annual report, and pay other fees.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of North Carolina or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in North Carolina is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in North Carolina.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in North Carolina?
First, find out if your trademark is available by checking the Trademark/Service Mark Database, Business Registration Division Database and the USPTO. Second, collect three different specimens showcasing your Trademark being used in the ordinary course of business, such as your Trademark being on a tag, label, or packaging. Third, complete the Application for Registration or Renewal of Trademark form. Bear in mind that your specimens must be taken within six months of your trademark application.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.