Starting a New Business in North Carolina
Starting a new business in North Carolina involves several steps, depending on the structure of your business.3 min read
Starting a new business in North Carolina involves several steps, depending on the structure of your business. If you're forming a sole proprietorship, for example, you only need to start doing business, as there is no registration required. Forming a corporation, on the other hand, requires filing the correct formation documents and paying a fee.
Create a Business Plan
Writing a business plan is the initial step to start a business in North Carolina. In your plan, you should describe what goals you hope to accomplish with your business and why your business will be a success. If you're not familiar with what a business plan should look like, read a few examples so that you understand the format.
The purpose of your business plan is to flesh out the ideas that you have for your company and to serve as a guide to getting your business up and running. A strong business plan will put you on the road to success and may also help you acquire a loan for your company.
Structuring Your North Carolina Business
After you've written your business plan, your next step should be choosing a structure for your business. Before choosing a structure, you should consider how each type can impact your taxes and management options.
There are four different structures available for businesses in North Carolina:
- Limited liability companies (LLCs)
- Sole proprietorships
If you want to go into business for yourself, establishing a sole proprietorship is a good idea. Of all the available business structures, sole proprietorships are the most affordable and simplest to form. Be aware, however, that with a sole proprietorship, you will hold unlimited liability for the debts of your business. If your sole proprietorship is ever sued, your personal assets can be seized if you lose the case.
Taxes for a sole proprietorship are often higher than for other business types, and you will also need to pay self-employment tax on your profits. However, you do not need to file any documents to start your sole proprietorship.
If you want to start a business with another person, you should structure it as a general partnership. General partnerships do not need to be formally registered with the state. Partners in a general partnership are fully liable for business debts, and their personal assets will be at risk if the partnership gets sued. Business income of general partnerships is not taxed directly. With this structure, losses and profits get reported and taxed on the partners' personal returns. The self-employment tax applies to the income of each partner.
If you decide to structure your North Carolina business as a corporation, it means that you and your business will be legally separate entities. Forming a corporation is more time-consuming and expensive than choosing another business structure, but doing so provides several benefits. In particular, your personal assets are not subject to seizure if your corporation loses a lawsuit. Having the ability to choose how your business will get taxed is another benefit of forming a corporation. Additionally, owners of a corporation will not need to pay the self-employment tax, as their earnings usually come in the form of dividends or salaries.
If you want to form a North Carolina corporation, you need to file Articles of Incorporation with the Secretary of State. Submitting your Articles of Incorporation requires payment of a $125 filing fee.
Establishing an LLC is a popular choice for entrepreneurs interested in starting a new business in North Carolina. An LLC combines the best characteristics of sole proprietorships and corporations, without any of the drawbacks. For example, your LLC won't need to observe corporate formalities such as holding shareholders meetings to maintain its good standing. LLCs also provide the most beneficial taxation options of any business structure.
LLCs can choose to be taxed as a:
- Pass-through entity
- Sole proprietorship
You can form your LLC by filing Articles of Organization with the state, which carries a $125 filing fee.
Business Name Registration
North Carolina requires that you complete a Doing Business As (DBA) registration if you want to run a general partnership or sole proprietorship using a fictitious name, meaning any name other than your legal name. You can register your DBA with the Register of Deeds in your county.
You should file a DBA registration in every county in which you have a business location. The filing fee will be $30 or less.
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