How to Start a Business in North Carolina

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.

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.

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.

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.

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.

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.

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?

1. Get an Employer Identification Number (EIN).
2. Fill out the Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Other Taxes and Service Charge form.
3. File for unemployment tax.
4. Choose a payroll service.
5. Have your employees or independent contractors complete on-boarding paperwork, such as direct deposit and I-9 forms.
6. Fill out the NC-5 Withholding Return form or NC-5Q Withholding Tax Return form.
7. 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.

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.

Liability Insurance

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.

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.

Federal Taxes

• 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.

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.

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.

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.

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.