How to Start and Run a Business in North Carolina

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  • North Carolina has a low unemployment rate and competitive labor market.
  • The cost of living and doing business is relatively low in North Carolina compared to the wider region.
  • To be successful, tap into the right resources to get the help you need and make sure you’re in compliance with state laws.

How to Start and Run a Business in North Carolina

North Carolina has a vibrant entrepreneurial community that includes more than 900,000 small businesses. These companies employ 1.7 million people across the state, representing 44.1% of the private sector workforce. These businesses operate in a modest post-recovery economy where the gross domestic product (GDP) grew at a rate of 1.8% last year, which is significantly lower than the national growth rate of 3.4%.

North Carolina’s unemployment rate stands at 4.1%, slightly higher than the national rate of 3.6%, which means that the labor market is somewhat less competitive than in other states throughout the U.S. It remains difficult to find and retain top talent in certain industries, however, so employers have to get creative when it comes to compensation and opportunities for career development.

Despite some of the challenges associated with doing business in North Carolina, entrepreneurs in the state remain optimistic. Many cite business-friendly regulations, a manageable tax code and low costs as their reasons for operating within the state. Here’s a closer look at the challenges and opportunities in the Tar Heel State, as well as resources that can help you start and grow your small business and answers to frequently asked questions amongst entrepreneurs in the state.

Competitive labor market

Across the country, states are contending with a competitive labor market, and the situation is no different in North Carolina. Declining unemployment rates have led to a clamor for skilled workers, meaning businesses are expected to provide better compensation, benefits and workplace perks. Attracting and retaining top talent in a competitive labor market can be difficult, especially for small businesses with limited resources that need to compete with larger companies.

In North Carolina, the unemployment rate was 4.1% as of September 2019, higher than the national average of 3.5%. That means North Carolina’s entrepreneurs should have a bit more room to operate than the average business in the U.S. However, 4.1% unemployment is still rather low, meaning top talent remains in high demand, especially in the state’s metropolitan areas.

“The labor market in the Charlotte area can be a challenge, because there are so many businesses competing for the same labor pool,” said Charlie Zylstra, owner of Window Genie of Lake Norman. “When looking for potential talent, my business puts a big focus on someone who understands what customer service means. We look for those who take pride in their work and want to exceed. One amazing tool that Window Genie utilizes as part of the Neighborly family of home service brands is CareerPlug. It casts a big net of potential employees, and then helps us filter out those who would be a good fit.”

Some small businesses, like Charlotte-based ComplianceLine, focus on career development and skill training in addition to compensation as a way to provide value to employees and boost retention. Co-CEO Giovanni Gallo said employee recruitment and retention has become just as important to focus on as client development (indeed, the former improves the latter).

“Not surprisingly, the labor market is noticeably tight in NC,” he said. “Business growth and demand seems to move faster than relocation or skills growth, so good talent is dear. Every growing company would be well advised to pay attention to not just the obvious things like pay and benefits, but also build intentional investment and processes around coaching, career development, cultural engagement and, critically, a culture focused on preventing the harassment, unfairness, and discrimination that wrecks culture and sends your best people to your competitors.”

Modest economic growth

North Carolina’s economic recovery from the 2008 financial crisis has been relatively modest for states in its region. Today, annual GDP growth rates stand at 1.8%, which is significantly lower than the national average of 3.4%. The tepid growth rate means entrepreneurs must work harder to secure a share of economic value within their industries, especially in highly competitive metropolitan areas such as Charlotte and Raleigh. Many entrepreneurs still see significant opportunity in North Carolina, though, citing the advantages of manageable costs and its location.

“North Carolina is … at an advantage geographically, as it is centrally located on the East Coast with interstate access to other major U.S. markets and population hubs,” said Morgan Crapps, a consultant with Columbia-based Parker Poe Consulting. “This is frequently an important factor in a company’s investment decision.”

Awamary Khan, executive vice president and CFO of the nonprofit community development financial institution Carolina Small Business Development Fund, told Business News Daily that rural areas and even certain urban regions missed out on much of the post-recession gain.

“While the overall indicators show an improvement, such as a decreasing unemployment rate, they mask considerable disparity between regions and communities,” she said. “There are geographic disparities as well; a majority of counties have not recovered from the recession and continue to struggle.”

Low cost of living and doing business

While the labor market can be a challenge in North Carolina, the relatively low cost of living and doing business is a plus. The tightening labor pool means costs have risen somewhat, but they remain manageable compared to some other states in the region.

“There is a lot that North Carolina offers from a quality-of-life standpoint, including a relatively low cost of living, which makes it an attractive place for people to move with their families,” Crapps said. “The cost of labor (and living) has increased in recent years as a result of the successes the state has had, but it still tends to be comparatively lower than many of the markets that it competes against.”

According to Sperling’s Best Places research on cost of living, North Carolina is more affordable than the average state in all of the major categories except healthcare. With a baseline of 100 to describe an “average” cost of living, North Carolina came in at 96.2 overall. The cost of groceries, housing, homes, utilities and transportation are all below average. However, its healthcare costs are a 109.6 on Sperling’s scale, meaning they are significantly higher than the national average. Employers should keep healthcare costs in mind when crafting benefits packages for employees, especially in a state where a competitive labor market makes benefits packages essential to attract and retain top talent.

Manageable taxes

Tax rates in North Carolina are relatively low, earning the state the No. 12 spot in the nation from the Tax Foundation for business taxes. The top corporate income tax rate is 2.5%, which is significantly lower than in many other states, especially North Carolina’s northern neighbors on the East Coast. It is a full 2.5% lower than South Carolina’s top corporate income tax rate, and 3.5% lower than neighboring Virginia’s.

The state’s low business tax rates are offset somewhat by a 4.75% sales tax, which is ranked 35th in the nation but remains lower than North Carolina’s northeastern neighbors. The state’s top individual income tax rates, which apply to pass-through entities like LLCs, stand in the middle of the road at 5.25%. That is lower than the rates in neighboring South Carolina and Virginia.

“I would say the taxation in North Carolina is favorable compared to most other states,” Zylstra said. “From where I moved from in Connecticut, I see the North Carolina tax policy as a huge boost to the state’s economy.”

“To me, [taxation and regulations] seem fairly relaxed, and the state overall seems to have an attitude of wanting to promote business and to make things as noncomplex as possible,” added Stan Kimer, president of Total Engagement Consulting.

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Again, though, North Carolina is a fairly large state with notable disparities depending on your location. Precise tax burden is dependent on local and county taxes as well as the state rates. Certain tax incentives might only be available to businesses in certain locations or industries.

“Incentives and taxes differ based on location within the state,” Crapps said. “North Carolina as a whole tends to stack up well. They also have some specific incentive programs, including one for recycling companies that can exempt eligible property from property tax, [which] makes them extremely competitive for certain types of projects.”

Frequently asked questions about doing business in North Carolina

Starting a business in North Carolina requires you to select a business structure and file the appropriate tax and employer identification documents.

Do you need to register your business in North Carolina?

Yes, you must register your business when operating in North Carolina. The first step in the registration process is to choose an available business name; you can see if your desired name is available by searching the state database. You must also select a business structure, such as an LLC or limited partnership, and incorporate accordingly. Once these steps are complete, you can register your business with the North Carolina Secretary of State or county, depending on the business structure you’ve selected. Once you have registered your business with the appropriate agencies, you will receive an email regarding the status of your newly formed entity.

How much does it cost to register a business in North Carolina?

The fee to secure Articles of Incorporation through the business registration process in North Carolina is $125. Depending on the type of entity you incorporate as, there could be additional fees, such as for an application to reserve a corporate name or for Articles of Amendment. You can review a full list of the business registration fees on the North Carolina Secretary of State’s website.

Do you need to register your business in North Carolina if you are a sole proprietor?

Yes, sole proprietors still need to register their business, although they must go through the county or counties in which they operate rather than the North Carolina Secretary of State’s office. Each county has its own fees and processes, so review the rules of your locales before beginning the process.

What kind of licensing do you need to do business in North Carolina?

North Carolina does not require a single type of general business license, but many businesses are required to apply for a certain type of license to operate within the state. These licenses depend on your business operations, including which goods and services you offer. For more information on North Carolina’s business licenses, permits and certifications, see the state website.

Does your business have to have a physical location in North Carolina?

Yes, a business must maintain a registered agent with a physical address in North Carolina. The registered agent is responsible for receiving all official communications from the state. If your company is headquartered in a state other than North Carolina, you must first register as a foreign entity. That requires a Certificate of Authority from the North Carolina Secretary of State. To obtain a Certificate of Authority, you must provide the name of your company as it appears in its home state’s records, the name you will use in North Carolina, the address of your principal office, the name of a North Carolina-based registered agent, the names of your current business officials and the equivalent document of authority from your home state.

How long does it take to form a new business in North Carolina?

Typically, the business registration process in North Carolina takes 5-7 business days. This period of time can vary if you register with a county (as LLCs and sole proprietorships are required to do). Generally, though, you can expect a response within one business week. The state recommends waiting to receive confirmation that your registration was accepted before purchasing any branded stationery or business cards.

How do you get a business tax ID in North Carolina?

To register your business, you need a tax identification code (known as an EIN) from both the U.S. Internal Revenue Service and the state of North Carolina. Your EIN will be used to cover sales taxes, use taxes, employee withholding taxes, and any machinery or equipment taxes that might apply to your business.

Does North Carolina require a DBA?

North Carolina only requires a “doing business as” name (DBA) if you plan to operate your business under a different brand name from the one that appears on your business registration filings. To register a DBA with the state, you must first make sure the preferred name is available with the state and no other business is already using it. You can designate your DBA for multiple counties through one filing. To search available DBAs and begin the process of registering a DBA for your business, visit the North Carolina Secretary of State’s website.

Resources for small businesses in North Carolina

If you’re a small business owner in North Carolina who is looking for resources to help you move forward, here are a few organizations you might want to learn more about.

North Carolina SCORE

SCORE’s volunteer business professionals and expert mentors give counsel and guidance to entrepreneurs looking to start or expand their businesses. The services are entirely free and volunteer-driven.

SCORE locations in North Carolina

U.S. Small Business Administration District Office

The SBA offers financing and grants as well as consultations and counseling services. There are also opportunities to apply for federal government contracts through the SBA and avenues for assistance in the wake of natural disasters.

U.S. SBA North Carolina District Office

North Carolina Small Business and Technology Development Centers

North Carolina hosts a number of development centers for small businesses. Each center is dedicated to supporting the development and retention of small businesses, helping entrepreneurs do everything from crafting business plans to navigating the state’s tax code. You can find your region’s small business development center at the link below.

North Carolina SBDTC

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