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The state of North Carolina boasts a wide array of business opportunities—from the farming and mining communities of the Appalachian Mountains to the energetic urban centers of Raleigh-Durham and Charlotte. It’s an exciting place to start a business, but also a complex one, with lots of variables to consider for any entrepreneur. This step-by-step guide walks you through what it takes to establish a lasting business in the state.
1. Choose a business idea
If you are serious about starting a business in North Carolina, the first step is coming up with a business idea. Deciding how you’re going to make money—will you sell a product, a service, or both?—is only part of the equation. There are a number of other considerations when devising an idea for your North Carolina business. Some key questions to ask yourself:
- Who is my customer? Viable business ideas are about knowing your target customer. To make this identification, you might conduct a competitive market analysis of other businesses, analyze marketplaces where similar products or services are sold (like Amazon or Wayfair), survey prospective customers, or research industry trends.
- What is my projected profitability? Profitability is key to business survival. There’s an array of considerations when it comes to determining potential profitability of your business idea. These include figuring out the best pricing, deciding how products or services will be offered (will they be bundled?), considering whether the business will be direct-to-consumer or business-to-business, weighing the most effective business model, and assessing customer demand for the products or services being sold. Equally important to know: What is the break-even point? How much money needs to be made, at minimum, to cover costs?
2. Name your business
Once you’ve settled on an idea for your North Carolina business, it’s time to pick a name. A good name must effectively communicate your business’s purpose and mission. When naming your business, considerations include:
Is the name unique to North Carolina? In the state, the business’s name must be original. The North Carolina Secretary of State offers a helpful
search tool that can assist with this. It’s also necessary to abide by certain naming rules in place for sole proprietorships, partnerships, and limited liability companies, or LLCs.
- Is the domain name available? Uniqueness of your business name is also key when building your website. Check whether a domain name is available that adequately aligns with your business name and brand identity. Ideally, it would be [YourBusinessName].com, but abbreviations or other domains (like .net) might work. If nothing that clearly communicates your business brand is available, consider another name.
- Are the required business identifiers attached? A limited liability company in North Carolina must contain the words “limited liability company” or its abbreviation—LLC or L.L.C.—in the name. Corporations in North Carolina must contain the word “corporation,” “company,” “incorporated,” “limited,” or an abbreviated form on these words.
No business in North Carolina may contain words that can potentially confuse it with a legitimate government agency, like the Federal Bureau of Investigations (FBI) or Internal Revenue Service (IRS). Special approval may be needed to insert certain words into your company name, such as “bank,” “pharmacy,” or “certified public accountant (CPA).”
Using a DBA in North Carolina
To set up a DBA—or “doing business as,”—in North Carolina requires filing your assumed name with the Register of Deeds in the county where your business is based. On the business checklist: ensuring your DBA is unique from any other business name in North Carolina—just like the original name of your business.
In North Carolina, sole proprietorships are required to operate under the surname of the owner. If you want to operate your sole proprietorship under an alternative name, then file for a DBA. Partnerships, likewise, must contain the partners’ surnames in the company name, but can apply DBAs like sole proprietorships.
You can search the names of existing businesses through the North Carolina Secretary of State’s office.
3. Create a business plan
A good plan is a vital part of successfully starting a business anywhere, including North Carolina. An effective business plan includes, at a minimum, these features:
- Executive summary
- Detailed company description
- Thorough market analysis
- Outline of the business entity’s organizational and managerial structure
- List of products and/or services
- Customer segmentation report
- Marketing, logistics and operations, and financial plan
A free business plan template is a great place to start, though you may wish to customize it to fit the unique needs of your new business venture.
4. Choose a business structure and get started
Before you formally register your business in North Carolina, you’ll want to decide the business structure for your company. Options include sole proprietorships, partnerships, corporations, and LLCs.
- Sole proprietorships are owned and run by a single individual. They are taxed as “pass-through” entities, meaning profits generated by the sole proprietorship are taxed one time at the owner-proprietor’s personal-income level.
- Partnerships can be limited or general, and are formed by two or more owners. Like sole proprietorships, partnerships are taxed one time at the owners’ personal income tax levels. There is generally no legal distinction between the owners and the company itself.
- Corporations, also called C corporations, are entities that are entirely separate, legally, from the ownership. This protects the owners’ personal assets if the company fails or faces a lawsuit.
- LLCs blend the benefits of partnerships and corporations. While similar to partnerships in structure (being made up of one or more owners, or “members”), LLCs enjoy the liability protection typically applied to corporations.
An LLC in North Carolina doesn’t need to file a corporate tax return—the state will handle taxes on any profits at your personal income level. Corporations will need to file a CD-405 to cover corporate income, which is taxed at 2.5%. And sole proprietorships and partnerships will need to pay self-employment taxes (15.3% in North Carolina). Depending on the type of business you operate, you may also be responsible for sales and use taxes, employee withholding taxes, and machinery and equipment taxes.
Obtaining an EIN
Once you’ve decided what kind of business you’d like to start in North Carolina, you can apply for an employer identification number, or EIN. You can start the process through the IRS website. The EIN is a nine-digit number assigned to businesses by the IRS for tax purposes. It’s the business version of a person's Social Security number. North Carolina state tax authorities will also identify your business by its EIN. Having an EIN not only makes it easier to file taxes both at the federal and state levels, but it also helps with securing lines of credit and opening business credit cards.
Incorporating in North Carolina
To formally launch your business in North Carolina, expect to make certain disclosures to state authorities. This is regardless of the structure of your business. After you choose a business name (abiding by any rules specific to the structure you’ve chosen), you’re ready to file the articles of organization, also known as articles of incorporation, with the Secretary of State’s office. Your articles must include basic information like:
- Business name with the correct business identifiers
- Name and street address of a registered agent for service of process
- The name and address of the person executing the articles of organization
You will have to pay a $125 filing fee with your submission. When incorporating, it can be beneficial to open a business bank account and you will likely want to address any tax obligations.
5. Obtain business licensing and permits
Your North Carolina business will need to acquire the business licenses required to run lawfully in the state. Which business licenses are necessary will depend on the industry in which you’re operating. The state’s directory of occupational boards can point you in the right direction.
6. Examine insurance options in North Carolina
In North Carolina, and anywhere else, unforeseen losses can take a serious toll on a new business. If the loss is severe enough, it could wipe a new business off the map. While some business structures, like corporations and LLCs, offer a degree of personal asset protection, you may still want to purchase additional insurance coverage for business assets, like vehicles and business products, that may not be covered by the LLC designation. Also, if planning to hire employees in North Carolina, you are required to purchase workers’ compensation insurance. The federal Small Business Administration maintains a list of forms of insurance your new North Carolina business may need, including:
- Workers’ compensation insurance. This coverage offers wage replacement and medical benefits for workers injured on the job, and consequently, unable to work for a period of time.
- General liability insurance. This provides coverage against financial losses that result from property damage, injury on the job, and defending or pursuing lawsuits, for example.
- Product liability insurance. With this insurance, coverage is provided against financial losses that result from legal proceedings relating to the sale of a defective product causing injury or harm to a customer.
- Professional liability insurance. This covers financial losses resulting from malpractice suits (generally for businesses in specialized fields like law, accounting, or medicine).
- Business owner’s insurance. An insurance package that bundles coverage options that are typical for small-business owners.
7. Understand financial considerations
In addition to purchasing insurance, you will likely also have to make other financial investments to get your North Carolina business off the ground. This could include rent toward leasing a brick-and-mortar retail space, as well costs associated with professional website design, ad placements, and the purchasing of business equipment and software. You may also want to hire lawyers, accountants, or other professionals to support business operations. These costs can add up. Tapping available resources can help entrepreneurs find startup funding to assist with marketing, inventory, and payroll expenses that may arise in the course of business.
8. Market your business
A solid marketing plan for your small business will include several key elements:
- Market research. Thorough market research is the key to better understanding your company’s target customer.
- Advertising and promotion. Get the word out about your product or service through paid advertising. You can do this yourself or hire an agency to do it on your behalf.
- Social media. Most successful businesses have a robust social media presence on multiple platforms—including Facebook, Instagram, and YouTube, to name a few. Consider publishing content consistently that aligns with your brand to build a loyal and engaged customer base.
- Public relations. Identify and cultivate relationships with media outlets, within North Carolina and nationally, that can help increase visibility.
- New business and customer retention. Build genuine relationships with customers that strengthens customer loyalty and turns them into repeat customers that can organically market your business through word-of-mouth communication, as well as through social media platforms.
The steps laid out in this guide provide a solid foundation for starting your business in North Carolina. But before setting up shop in the state, you’ll likely want to give careful consideration to whether your business goals align with the services and products you’re offering customers compared to competing businesses in the marketplace. By doing your homework and researching North Carolina’s demographics, business laws, infrastructure, and competitive environment, your business will be better poised to enter—and thrive—in this dynamic marketplace.