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WNC Business

How to start a small business in NC

Apr 26, 2023 07:36AM ● By Randee Brown

Nick Hawks, founder of 1-2 Teach You and teacher with the North Carolina Community College Small Business Centers, is a long time small business owner who shared some information and insight into the significance of small businesses in the state as well as the necessary steps to take in order to create your own small business.

North Carolina is one of the best, easiest, and most popular states to start a business in, according to Hawks, because it has the fourth lowest business startup cost and the third lowest tax rate in the country.

Hawks shared results from a study stating the top motivations for starting one’s own business, included 49% of people said they wanted to be independent, and 43% said they wanted to have freedom and flexibility. Other reasons included: people wanted extra income, to share their creative passion, work from home, or found an opportunity to fill a niche in a specific market.

Small businesses make up 99.6% of all businesses in the state. This represents a total of 964,280 businesses and 1.7 million employees or (45.1% of all NC employees). As of 2021, the top five industries represented by these small businesses are:

  • Other Services (excluding Public Administration) - 125,511
  • Professional, Scientific, and Technical services - 120,826
  • Construction - 116,863
  • Administrative, Support, and Waste Management - 101,586
  • Real Estate and Rental Leasing - 94,968

Small business ownership varies by demographic group as well. Of all small businesses in NC, ownership demographics are represented by:

  • Women - 44.2%
  • African American - 13.6%
  • Veterans - 8.4%
  • Hispanics - 6.2%
  • Asian - 3.8%

*Above data from the U.S. Small Business Administration Office of Advocacy

According to the Small Business Administration, the definition of a small business varies according to industry. Some ‘small businesses’, like those described by the North American Industry Classification System as Automobile and Light Duty Motor Vehicle Manufacturing, can maintain that classification with up to 1,500 employees. Other industries, such as Fruit and Vegetable Merchant Wholesalers, can maintain that classification with up to 100 employees.

Within the 22 westernmost counties of North Carolina, for 2020, there were 172,783 businesses with 9 or fewer employees. The majority of these businesses are categorized as follows:

  • S-corporations - 86,224
  • C-corporations - 36,208
  • Individual Proprietorships - 19,280
  • Partnerships - 16,560
  • Nonprofit - 13,662
  • Government - 346
  • Other non corporate legal forms of organization - 503

*Above data from the U.S. Census Bureau

Survival rates of small businesses tend to be around 80% for the first year, and the number of surviving businesses declines after more years in business. After five years, 55% of small businesses are still in operation, and after 15 years, only 25% of businesses are still in operation, according to Hawks.

“The majority of small businesses fail because there is no market for what they are offering,” Hawks said. “They could also be outcompeted, face pricing or cost issues, have no business model, or use poor marketing strategies.”

Hawks said that it is important to research market needs before spending time and money with business startup costs. He said that it’s imperative to know the businesses values, mission, and target market. In addition, startups will need a business plan, name, structure, and an understanding of the products the business will handle, if applicable.

“There are always classes on how to make a business plan,” Hawks said. “Plan ahead, make sure you have the resources, do your market research, and account for startup costs.”

Examples of startup costs can include: research, opening a facility, advertising, travel costs for securing distributors or suppliers, consulting fees, fees to organize a partnership or corporation, wages to train employees, and costs to create a product inventory, according to Hawks. He also said that liability insurance, rent, and utility bills should also be considered for brick-and-mortar locations.

When starting up a new small business, considerations also have to be made for the type of business structure that makes sense for the company. Different organization structures include: 

  • Sole Proprietorship - Owner is responsible for profits and losses and legally liable for the business.
  • C- or S-corporation - Owned by shareholders and managed by Board of Directors.
  • General Partnership - Two or more owners that are both legally liable and contribute money, labor, and skills as well as share profits and losses.
  • Nonprofit Corporation - Owned by members and managed by Board of Directors with no tax on income.
  • Limited Liability Corporation - Member ownership legally separated from individuals.

Another important consideration when creating a business, according to Hawks, is deciding on its name. When considering options, Hawks said it may help to say it out loud and share the idea with others. He said to check the NC Secretary of State business database at to see if the business name already exists, and to make sure that the new business name is not too similar to an established business.

Once a name has been decided, the next step is to file an Assumed Business Name with the Economic Development Partnership of North Carolina at Hawks said the website has information on corporate and employer forms that may need to be filed.

Hawks said it is also helpful to go ahead and register a domain name for your website, and there are a variety of platforms with which to do so. A business can also register a trademark for any intellectual property, start social media accounts to claim handles, and obtain an Employee Identification Number for tax purposes. 

It will also be necessary for businesses to register at to pay state income taxes as well as file annual reports with the Secretary of State.

Other NC small business startup requirements can include permits or licenses for specific occupations or zoning locations. Federal, state, and local agencies may have different requirements, so it is important to check with them all.