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How to Run a Business in North Carolina

Adam Uzialko
Adam Uzialko
Editor
Business News Daily Staff
Updated Aug 03, 2022

Are you considering launching a business in North Carolina? Here's what you should know.


  • North Carolina has a low unemployment rate and competitive labor market.
  • The cost of living and doing business is 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 to comply with state laws.
  • This article is for entrepreneurs currently running or considering opening a business in North Carolina.

In 2021, North Carolina had more than 964,000 small businesses, accounting for over 99% of businesses, with more than 1.7 million small business employees in the state. As of March 2022, the state’s economists showed that North Carolina had fully recovered from the economic jolt of the pandemic.

North Carolina’s unemployment rate stands at 3.4%, slightly lower than the national rate of 3.6%, which means that the labor market is competitive. In addition to the generally tight labor market, it remains particularly difficult to find and retain top talent in certain industries, so employers have to get creative when it comes to compensation and opportunities for career development.

Entrepreneurs in the state are 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 among 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. As unemployment rates return to, and even fall below, pre-pandemic levels, businesses are clamoring for skilled workers and providing 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.

“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.”

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 that employee recruitment and retention have become just as important 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.”

A quick economic recovery

North Carolina’s economic recovery from the pandemic has been swift and robust. Throughout 2021, the state saw a 6.7% economic growth rate, creating new opportunities for entrepreneurs. This strong recovery, paired with manageable costs and other benefits of its location, makes North Carolina an entrepreneurial hotspot.

“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, founder and CEO of The Woman Boss, told us that rural areas and certain urban regions continue to miss out on the state’s economic gains.

“The overall indicators … 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.”

Key TakeawayKey takeaway: Though the state overall has recovered quickly from pandemic-related economic turmoil, some regions of North Carolina have been left out.

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 tight 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 the cost of living, North Carolina is more affordable than the average state in all of the major categories except healthcare. With 100 representing the average cost of living, North Carolina came in at 90.6 overall. The cost of groceries, housing and transportation are all below average. However, its healthcare costs come in at 107.5 on Sperling’s scale, which means they are 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 such packages essential to attract and retain top talent.

Manageable taxes

Tax rates in North Carolina are relatively low, earning the state the No. 11 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 6.98% sales tax, which is ranked 26th in the nation but remains lower than North Carolina’s northeastern neighbors. The state’s top individual income tax rate, which applies to pass-through entities like LLCs, is 4.99%, while its neighboring states have higher rates: South Carolina’s is 7% and Virginia’s is 5.75%.

“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, founder and president of Total Engagement Consulting and vice president of training at the National Diversity Council.

Again, though, North Carolina is a fairly large state with notable disparities, depending on your location. The precise tax burden is dependent on local and county taxes. Certain tax incentives might 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.”

Key TakeawayKey takeaway: North Carolina businesses face a relatively friendly environment with regard to small business taxes.

Industries to watch and to avoid

North Carolina’s Research Triangle continues to drive much of the state’s economic growth. Anchored by North Carolina State University, Duke University and the University of North Carolina at Chapel Hill, opportunities abound in the Research Triangle for tech startups as well as businesses that are related to the region’s highly educated, high-earning population. 

Though the economy overall has recovered, hospitality and leisure continue to struggle. Entrepreneurs should be cautious about starting new ventures in these sectors.

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 agency, 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 five to seven business days. This 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 will 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, payroll taxes, and any machinery or equipment taxes that might apply to your business.

Does North Carolina require a DBA?

North Carolina requires a “doing business as” (DBA) name only 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. Discover SCORE locations in North Carolina.

U.S. Small Business Administration (SBA) District Office

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

North Carolina Small Business and Technology Development Centers

North Carolina has several 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.

North Carolina is open for business

If you manage these challenges and take advantage of North Carolina’s opportunities, such as its low cost of doing business, the state can be a great place to start and run a business. Though the economic growth rate has been modest in recent years, many entrepreneurs have created flourishing businesses here.

Ross Mudrick contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

 

Image Credit:

Thinkstock Images / Getty Images

Adam Uzialko
Adam Uzialko
Business News Daily Staff
Adam Uzialko is a writer and editor at business.com and Business News Daily. He has 7 years of professional experience with a focus on small businesses and startups. He has covered topics including digital marketing, SEO, business communications, and public policy. He has also written about emerging technologies and their intersection with business, including artificial intelligence, the Internet of Things, and blockchain.