7 Steps to Starting a Business in North Carolina
- Write a business plan that addresses your business’s purpose and financial goals.
- Determine your business entity type, business name, and register your business.
- Figure out your tax, licensing, and employer requirements.
- Obtain business insurance.
- Set up separate business finances.
- Secure funding for your business.
- Develop your marketing strategy.
Starting a business in NC requires more than an entrepreneurial streak—as is the case with starting a business in any state, there’s a bit of elbow grease to put in and fine print to read before you can legally launch your small business.
If you’re thinking about starting a business in NC, you’ll be in good company: According to a survey conducted by the SBA in 2018, 99.6% of all North Carolina-based businesses are small businesses, and those enterprises employ 44.3% of the state’s private workforce.
In this guide, we’ll break down the process of how to start a business in NC, as well as provide you with a few state-specific resources that can help you even further as you navigate each step. Let’s get to it.
A Step-by-Step Guide to Starting a Business in NC
Step 1: Write a Business Plan
Starting a business without a business plan is a bit like going for a hike without following the trail: in both scenarios, you’re setting yourself up to get lost—and that’s totally unnecessary! With a solid business plan in hand, as you start your business you’ll be better able to see the clearing in the forest when things inevitably veer from your expected course.
Your particular business plan can be as broad or detailed as you want, but at the very least, it should address some major points about your business’s purpose, organization, financial goals and requirements, target market, location (whether that’s a physical location or an online store), and marketing strategy.
For a bit more guidance, here are just a few questions you should address in your business plan:
- How will I set my product or service apart from my competitors?
- Who are my target customers, where are they located, and how can I market to them most effectively?
- How much money will I need to launch my business?
- What is my source of startup funding?
- How long will it take to break even?
- How long will it take to make a profit?
Keep in mind that if you plan on applying for a business loan, then you’ll ultimately need to write a more detailed business plan for funding. But at the very beginning stages of your startup, just aim to be as thorough as possible in your plan, knowing that you can always flesh out your plan as you develop more experience and your resources, goals, and audience behavior become clearer.
Step 2: Name and Register Your Business
Once you’ve nailed down your business plan, you can get into the nuts and bolts of starting a business in NC—and that begins with naming your business and registering with the state. Here’s how to do it:
1. Choose a Business Structure
Your business entity will determine how your business is taxed, who owns your business, and your business’s degree of protection in the event that a customer or stakeholder files a legal claim against your business—so choosing that entity is a pretty important decision! And while it is possible to relatively easily change your business’s legal structure down the line, you still want to start your business out on the right foot.
Sole proprietorships or general partnerships are the simplest business entity types, both tax- and registration-wise; but as these structures don’t differentiate between the business and the owners, they won’t protect the owner’s assets from potential legal action taken against the business. Instead, you may want to consider registering your business as an LLC. LLCs are simple to register and operate, you can choose how you’d like the IRS to tax you, and they provide owners the legal protections that sole props and GPs don’t.
But you have options beyond the business structures we’ve mentioned, too. Take a look at our comprehensive guide to the types of business entities to best determine which legal structure would work best for you.
2. Choose a Business Name
The process required for naming your business depends on which business structure you’ve chosen. If you’re a sole proprietorship or general partnership doing business under your legal name, then you can move onto registering your business with the state. But if you’re a sole prop or GP and you’d like to name your business something other than your legal name, then you’ll need to consult your county’s Register of Deeds to make sure your chosen name is available.
The process for naming a corporation, limited partnership, or LLC requires a few more steps. After you’ve come up with a business name, you’ll need to see whether that name is available for use. To do this, the state recommends that you consult some or all of the following resources to be absolutely certain that your business name is copacetic:
- Your Secretary of State’s office, which will tell you whether your proposed name is available for use
- The state’s guide to registering a trademark or service mark for wording restrictions
- Your county’s Register of Deeds office, chamber of commerce lists, and online directories to make sure there aren’t any businesses in your county operating under a name similar to yours
- The North Carolina Secretary of State’s Trademark Registration search tool, which will help you determine whether the words included in your desired business name have already been trademarked in the state
If it’s available to you, you also have the option of hiring an attorney to guide you through the process of naming and registering your business entity.
3. Register Your Business
Once you’ve determined your legal structure and chosen a usable name, you can officially register your business with the state. If you’re a sole prop or GP then you’ll file with your county, and all other types of entities will need to file with the NC Secretary of State.
Step 3: Understand Your Tax, Licensing, and Employer Requirements
The logistics attendant to starting a business in NC don’t stop there: Next, you’ll need to understand which state, county, and federal taxes apply to your business, and obtain the proper licenses and permits in order to operate legally.
1. Determine Your Tax Requirements
The most efficient and foolproof way to determine your tax requirements is to consult a business attorney or an accountant. But know that your business will be responsible for some combination of the following taxes, depending on your business entity, what you sell, whether you have employees, and a few other factors:
- Sales and use taxes
- Employee withholding
- Machinery and equipment taxes
- State income taxes
- Federal taxes
You might also need to pay a tax specific to the item you’re selling, such as alcoholic beverages, tobacco, or motor fuels. Take a look at the North Carolina Department of Revenue website for a full list of state business taxes.
Depending on your business entity as well, you might need to obtain an EIN (other than sole proprietorships, which can use the owner’s SSN), an NC Secretary of State Identification Number (SOSID), and/or identifying numbers issued by the NC Department of Revenue, depending on which taxes you’re responsible for.
2. Obtain the Proper Licenses and Permits
North Carolina doesn’t issue one, universal business license. Rather, you’ll need to find out whether your particular business requires licenses and permits to operate legally, whether at the state, city, county, or federal level. You can call Business Link NC to learn more about your business’s licensing requirements, and if you need an occupational license, consult the directory of North Carolina occupational boards to find relevant contact information.
3. Understand Employer Requirements
If you plan to employ contractors or employees, you’ll need to go through a few extra processes. Depending on your business’ size and your employees’ individual needs, you’ll need to complete some combination of the following employer requirements:
- Register with the state to withhold state income taxes from employee wages
- Obtain unemployment, workers’ comp, and health insurance
- Withhold child support payments from employee wages and sending them to the proper agency
- Post a copy of the North Carolina Workplace Laws Poster where your employees can clearly see it
- Report newly hired employees to the NC Directory of New Hires
- Ensure that your place of work is OSHA (Occupational Safety and Health Act)-compliant
- Verify employment eligibility
To see exactly how and where to complete all the aforementioned steps (and to determine which of these steps your particular business is responsible for), take a look at the State of North Carolina’s webpage on employer requirements.
Step 4: Get Insured
Regardless of the state in which they’re based, we recommend that all new businesses obtain business insurance to protect themselves against potential legal claims.
The exact types of small business insurance you can or must take out depends on the type of product or service you’re selling, whether you have employees, whether your business operates in a physical location, and your industry, among other factors. On a state level, if you have employees then the state might require that you obtain unemployment insurance, workers’ compensation, and/or health insurance, depending on your business’s size and liability requirements.
Beyond that, we’d recommend looking into general liability insurance, which provides protection in case a client or vendor takes legal action against your business as a result of injury. Other types of business insurance you may want to consider include commercial property insurance, professional liability insurance, product liability insurance, employment practices liability insurance, and key person insurance. Consult our guide on small business insurance to better determine which types of insurance your business should have.
Step 5: Separate Your Business and Personal Finances
Next, you’ll need to take a few steps to separate your business and personal finances.
This separation is important for a few reasons. For one, it’ll protect your personal assets in case your business runs into legal trouble. And if you plan on applying for a business loan down the line, then potential lenders will have a much easier time coming to a credit decision with a separate tax return for your business, as without the numbers muddled with your personal finances they can truly understand your business’s financial solvency. Those separate tax returns will also make things much more efficient for you (or your accountant) when it’s time to file your taxes.
Luckily, maintaining that separation is pretty easy to do. To start, we recommend opening a business bank account ASAP, using that account solely for your business’s capital. As a startup, you’ll likely only need a business checking account to start, as they’re generally more accessible than business savings account—and you’ll need to access that capital as much as possible, especially in the early days. Check out our guide to the best banks in North Carolina for business.
If you plan on using a credit card for your business, which we also recommend, be sure to sign up for a dedicated business credit card rather than using your personal card.
Step 6: Secure Startup Funding
Once you’ve nailed down all the logistical necessities involved in starting a business in NC, you can begin to obtain funding to (finally!) launch your operation.
This can be the most difficult aspect of starting a business, as it’s notoriously difficult for brand-new businesses to prove to potential lenders that they’re financially solvent and savvy enough to be trusted with debt. And while bank loans’ affordability and generous terms are certainly desirable, banks are among the most risk-averse lenders you’re bound to find.
For that reason, your safest bet is not to put all your eggs in the brick-and-mortar basket—though if your heart is set on a traditional bank loan, we won’t discourage you from lobbing in an application with your local bank or credit union.
But you should also consider zero-debt financing methods, which is common for startups that don’t have the years’ worth of financial documents that banks need to make a credit decision. Crowdfunding, angel investors, and bootstrapping or self-financing are all popular startup funding methods that don’t require the creation of debt, and which, by extension, are a little easier for startups to secure.
Also, friends and family loans and personal loans for business are much more accessible to startups than business loans are, even they do involve the creation of debt. And don’t overlook the power of a business credit card, which is actually a type of loan. You should only use your business credit card for smaller, day-to-day expenses to make sure you’re staying below your credit limit and keeping your all-important credit score in check; but business credit cards typically have higher credit limits than consumer cards, you’ll have some more wiggle room there. Plus, if you’re using a cash back credit card then you’ll also rack up extra cash as you spend, which you can then invest right back into your business.
At the same time, look into NC-specific funding opportunities for new businesses. In particular, EDPNC has an excellent guide to funding resources for NC-based businesses, including private equity programs, financial assistance for rural businesses, microenterprise loan programs, SBA loans, and more.
Also remember that many startups (and established businesses, for that matter) use a combination of financing methods, so you’re hardly bound to choosing a single funding track. But the most important factor to take into account whenever you’re choosing a financing method is to be certain that you can pay your debt in full and on time. If you can’t, choose another method that won’t plunge you into a cycle of debt.
Step 7: Market Your Business
Ultimately, all the previous steps you’ve taken won’t amount to much if no one knows about your brand-new business. That’s why implementing a small business marketing strategy as soon as you start your business, or even right before your official launch, is absolutely crucial. (And if you’re a bit more right-brained, you’ll likely have more fun with this step than the previous steps!)
It’s likely that you’ve set aside only a small amount of your business budget toward marketing materials. But thanks to social media marketing, which is often low- or no-cost, plus other free marketing strategies, it’s easy to make an impact on that shoestring budget. (As you grow, you can begin to implement paid marketing strategies, like Google Ads.)
Start by creating a business website, which can be as simple or as complex as you want or need it to be. Depending on which ecommerce platform you choose, you can sell items on your website and/or social platforms; create and manage a standalone online store; or simply create an online landing page for your business that includes your store’s address and operating hours, or your service-based business’s contact information and appointment scheduling software.
Love it or hate it, the power of social media marketing is unavoidable—so be prepared to create a handful of social media profiles for your business, as well. A business Facebook page and business Instagram are key, but depending on which platforms your target audience engages with the most, you might also consider getting your business onto Twitter, Snapchat, or Pinterest. It’s a good idea to brush up on some basic SEO strategy, too. That way, all digital content you create for your business will have the best possible shot at ranking higher on search engines—which, in turn, increases the chances of a browser or shopper clicking on your link.
But don’t forget about old-school, in-person marketing tactics, too. Offering sales incentives, setting up a booth at your local crafts or farmers market, setting up a pop-up shop in a larger store in your area, offering workshops, tutorials, or tours of your facilities, and guerilla marketing tactics like posting flyers, are all effective and relatively low-cost strategies for getting the word out about your new business.
The Bottom Line on Starting a Business in NC
Ultimately, starting a business in NC is not so different from starting a business in any other state: Regardless of where they live and work, all entrepreneurs need a combination of grit, belief, and creativity, but successful entrepreneurs need the humility to follow the rules when necessary. And while we can’t really cultivate the first three traits in that list for you, we hope we’ve helped clarify the logistical processes involved in fulfilling the last.