Starting a Business in North Carolina

If you’re thinking of starting a business, there are good reasons why you should consider opening it in North Carolina. In a Fit Small Business study, researchers found that the Tar Heel State is the best state in the country to start a business because of its low corporate taxes, high corporate and individual income levels, high-quality facilities, educated population and other factors. Similar to other states, North Carolina requires aspiring business owners to follow certain regulations and procedures before they can operate legally. Here’s what you need to do to start a business in the state.

Create a Business Plan

Creating a good business plan is an essential part of starting a business because it provides the roadmap for achieving success. The way you write your business plan can have a significant impact on your ability to reach your goals, so you have to know exactly what you should include in it. A comprehensive business plan should have the following sections:

  • Company analysis – In this section, you should describe the products or services you will be offering or developing now and in the future.
  • Industry analysis – Describe your industry, including its nature, size, trends and potential.
  • Competitive analysis – Describe your competition landscape, including the strengths and weaknesses of your competitors and the areas in which you have a competitive advantage or disadvantage.
  • Customer analysis – Identify your target consumers and their needs, demographics and psychographic profiles.
  • Marketing plan – Explain how you plan to reach out to your target consumers, including the marketing channels and promotional tactics you will use, your brand positioning and your pricing strategy.
  • Financial plan – This section should include financial information such as the amount of external funding required to build your business, the areas in which the funds will be used, the assets you plan to acquire and your projected revenues, expenses and profits after one to five years.
  • Management team – List the members of your current management team and the key hires you plan to make.
  • Operations plan – Describe how you will operate and build your business, as well as the milestones you need to accomplish in order to reach your goals at the end of one year or five years.

You can create a new business plan every year or once in a few years, depending on how often you wish to refresh your goals. Besides helping you stay focused on your goals, a well-written business plan can also make it easier for you to get a business loan.

Choose a Business Structure

After writing a business plan, you should select the right business structure for your company. This is one of the most important decisions you must make when you are starting a business because it has an impact on the taxes you’ll pay, the paperwork you’ll need, the personal liability you’ll face and the money you can raise. Here’s a look at the most common types of business entities.

Sole Proprietorship

This is the most common type of business organization. It’s the easiest to form and gives you complete managerial control. Nonetheless, you will be personally liable for all the business’s financial obligations.

Partnership

A partnership has two or more owners who agree to share the profits and losses of the business. One of the main advantages of this business structure is that taxes on profits and benefits from losses are passed through to the owners’ personal tax returns. However, each partner will be personally responsible for the financial obligations of the partnership.

Corporation

A corporation is an entity that is separate from its founders and handles the responsibilities of the business on its own. Similar to a person, it can be taxed and held liable for its actions, as well as make a profit. This business structure enables you to avoid personal liability, but it is costly to form, involves extensive record-keeping and exposes you to double taxation.

Limited Liability Company

A limited liability company is a business structure that combines the benefits of a partnership and a corporation. It allows profits and losses to be passed through to its owners for tax purposes, while it also shields them from personal liability.

When you are choosing a business structure, you need to take a number of things into consideration, including legal liability, tax implications, formation costs, ongoing administrative costs and flexibility. It is also important that you look at the future needs of your business. If you are expecting your business to grow fast, you should select a business structure that can accommodate the growth.

Name Your Business

After deciding which business structure you will adopt, you must select a name for your business. It is essential that you choose a name that suits your business because it can have a significant impact on how consumers, vendors and the general public perceive your business. The name of your company should be easy to remember and reflect the nature of your business and your brand identity. Also, it must comply with the naming rules that apply to the business structure you chose.

Naming a Sole Proprietorship or Partnership

If you are planning to start a sole proprietorship or partnership, the simplest way to name your business is to use your own name. You can do this without consulting anyone, but you must include your full name. Here are some examples:

  • John Smith Plumbing, not John’s Plumbing
  • Jane Doe Landscaping, not Landscaping by Jane
  • Joe Mason and Mike James Pest Control, not Joe and Mike: The Pest Control Experts

A business name like “John’s Plumbing” or one that does not include your full name is regarded as an assumed name. If you want to use an assumed name, you must search your county’s Register of Deeds to see if someone else is already conducting business under that name.

Naming a Limited Partnership, Limited Liability Company or Corporation

The Secretary of State’s Office in North Carolina will review your chosen name. The office may reject the name if it contains prohibited words or is too similar to that of another registered business. Follow these steps to name your business:

  1. Choose a name.
  2. Find out whether the name is already being used or is available.
  3. Register for a federal or state trademark (optional).

Checking the Availability of Your Chosen Name

There are several things you can do to determine if the business name you choose is available.

  • Check with the office of the Secretary of State to determine the availability of your proposed name as a corporate name.
  • Read the appropriate guide to understand the restrictions that apply to words such as bank, co-op, mutual, trust, insurance, architect and engineering.
  • Check with your county’s and nearby counties’ Register of Deeds offices to determine whether there are assumed names or partnership names that are similar to your chosen business name.
  • Conduct searches on online chamber of commerce lists, business directories and city directories for businesses in your area with similar names.
  • Check the Secretary of State’s Trademark Registration to find out whether the words used in your chosen name are a registered trademark under North Carolina law. If you want to conduct a federal trademark search, you can do so at the website of the U.S. Patent and Trademark Office (USPTO).

Appoint a Registered Agent

In North Carolina, you are required to appoint a registered agent if you want to start a limited liability company, limited partnership or corporation. A registered agent refers to an individual or business that has agreed to submit and receive legal documents on behalf of your company. Such documents may include state filings and service of process of legal action. The registered agent you elect must be a North Carolina resident or a company that is authorized to conduct business in North Carolina. You can choose someone from your company, including yourself.

Register Your Business

The process of business registration varies depending on which type of business structure you adopt.

Sole Proprietorship or Partnership

If you are planning to start a sole proprietorship or partnership, you must register with your county’s Register of Deeds office. If you are using an assumed name, you must complete and submit a Certificate of Assumed Name. Also, you may be required to pay a fee.

Corporation, Limited Liability Company and Limited Partnership

In order to register a corporation, limited liability company or limited partnership, you must file with the Secretary of State’s Office. Depending on which entity you are applying for, you are required to provide certain types of information and pay a registration fee.

Corporation

  • Corporation name
  • Maximum number of shares the company can issue, with the minimum being one
  • Classes of stock
  • Initial registered agent’s name and street address
  • North Carolina street address and county of the initial registered agent’s office
  • Mailing address, if not the same as the street address
  • Principal office’s street address
  • Incorporators’ names and street addresses
  • Registration fee of $125

Limited Liability Company

  • Company name
  • Name and street address of the filer of the articles of organization
  • Initial registered agent’s name and street address
  • Mailing address, if not the same as the street address
  • Principal office’s street address, mailing address and telephone number, if the company has more than one office
  • Business email address
  • Fee of $125 for the articles of organization

Limited Partnership

  • Company name
  • Initial registered agent’s name and street address
  • North Carolina street address and county of the initial registered agent’s office
  • Mailing address, if not the same as the street address
  • Business email address
  • Each general partner’s name and street address
  • Registration fee of $50

Obtain Tax Identification Numbers

The IRS and the state government of North Carolina issue tax identification numbers in order to administer tax laws. Depending on the business structure you chose and other factors, you may have to apply for the following tax identification numbers.

  • Social Security number – A sole proprietor can use his or her Social Security number for business tax purposes.
  • Employer Identification Number (EIN) – This number is used for identifying businesses, trusts and estates.
  • North Carolina Secretary of State Identification (SOS ID) number – This is an identification number that the Secretary of State issues to businesses and corporations operating in North Carolina.
  • North Carolina Department of Revenue identification numbers – The state’s Department of Revenue may assign identification numbers to a company, such as sales and use tax number, income tax withholding number, privilege license tax number and machinery and equipment tax number. You can find out about the various taxes you must pay at the department’s website.
  • County property tax number – You are required to submit a list of your business personal property to the County Tax Assessor’s Office, which will issue this number. In addition, you must provide information about any improvements on real property, such as the addition of new structures.

Obtain the Necessary Licenses and Permits

In order to operate your business legally in North Carolina, you must comply with local, state and federal laws and regulations. Depending on your industry, you may have to apply for certain licenses and permits. For example, a restaurant is required to obtain a health permit, building permit, signage permit and other permits.

You can find out about federal business licenses and permits at the website of the U.S. Small Business Administration. For state business licenses and permits, you can do research on the North Carolina Business Development website. To determine which local licenses and permits you need, check with your local Chamber of Commerce.

Depending on which legal structure you choose, the process of starting a business can range from easy to complicated. There are many other things you may have to do to get your new business up and running, including getting a business loan, buying insurance, renting a store or facility and purchasing equipment and supplies. Building a profitable business is not an easy task, but you will have a greater chance of success if you take off on the right foot.

Want to dig deeper?