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Starting a Business in North Carolina

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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 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

  • 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.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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4 Tips for Starting an Industrial Business

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The industrial sector is a broad category that covers businesses involved in the manufacturing, production, and distribution of goods. Small industrial companies are growing across the country and there are many opportunities for entrepreneurs to get involved in this sector.

As with any type of business, there are certain things you need to do to set yourself up for success. Here are four tips for starting an industrial business:

photo credit: Pixabay

1. Do Your Research

Market research means figuring out who your target customers are and what they want or need. There are a number of different ways to do this, but some of the most common include surveys, interviews, focus groups, and observation.

Surveys can give you a good overview of customer opinions while interviews or focus groups can help you to delve deeper into specific issues. Observing potential customers in their natural environment can also be helpful in understanding their behavior and needs.

2. Choose the Right Niche

When it comes to starting an industrial business, one of the most important decisions you’ll make is choosing the right niche. There are a number of factors to consider when making this choice, and it’s important to do your research before settling on a particular industry.

First, you’ll need to identify the needs of your potential customer base, such as the products or services they need. Once you have a good understanding of the market, you can then start to narrow down your options. Consider the competition in each niche and decide which one offers the best opportunity for success. When making your final decision, it’s essential to choose a niche that you’re passionate about.

3. Create a Business Plan

In today’s competitive marketplace, it’s more important than ever to choose the right niche for your industrial business. When you specialize in a specific industry or type of product, you can better meet the needs of your target market and stand out from the competition. How do you know what niche is right for your business? Here are a few things to consider:

First, think about your strengths. What does your company do better than anyone else? What unique skills or experience do you bring to the table? Use these strengths to narrow down your focus and choose a niche that you’re passionate about.

Next, consider your target market. Who are you trying to reach with your products or services? What needs do they have that you can address? When you choose a target market and understand their needs, you’ll be better able to choose a niche that meets their demands.

Finally, don’t be afraid to experiment. Trying new things is essential for any business, so don’t be afraid to test out different niches to see what works best for you. By keeping these tips in mind, you can be sure to choose the right niche for your industrial business.

Engineers work with industrial printer

4. Optimize Your Processes

Through industrial control engineering, you will be able to identify opportunities for improvement and design solutions that achieve the desired results. In many cases, these solutions involve the use of automation and other advanced technologies.

By optimizing industrial business processes, industrial control engineers can help to improve efficiency and increase productivity. In addition, they can also help to improve safety conditions by reducing the potential for accidents. As industries continue to grow and become more complex, the demand for qualified industrial control engineers is likely to increase.

Endnote

With an increased demand for industrial operations and manufacturing, there has never been a better time to start an industrial business. By following these four tips, you can be sure to set your business up for success.

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How to Find the Right Business Coach — and Avoid the Wrong One

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At its best, business coaching can connect you with a mentor and supporter who helps you generate ideas, make plans and execute on them.

But at its worst, a business coaching offer can cost you time, energy and money — without much to show for it.

Here’s what to expect from a business coach, how to find a coach that suits you and how to spot red flags.

What a business coach can do

Business coaches draw on their professional experience to help you set and achieve your own business goals.

“I’m here to help you, and I’m here to raise your level of knowledge in whatever way I can,” says Gary Robinson, who chairs the Memphis, Tennessee, chapter of SCORE. SCORE offers free business mentoring for entrepreneurs nationwide.

Some ways a business coach or mentor might do this include:

  • Offering feedback on your ideas and suggesting new ones.

  • Giving you templates and other tools that help you make plans.

  • Connecting you with resources in your region or your industry.

  • Giving you deadlines and holding you accountable to them.

Some business coaches may also offer coursework or group training sessions on particular topics, like sales.

Working with a coach should help you identify opportunities you hadn’t seen before or develop new strategies for pursuing those opportunities, says Sophia Sunwoo, who coaches women and nonbinary entrepreneurs through Ascent Strategy, her New York City-based firm.

“[Coaches] don’t necessarily have to have all the answers,” Sunwoo says. “But they are the people that know how to maneuver and create a bunch of different thinking paths for their clients.”

What a business coach can’t do

A business coach isn’t the same as a consultant, whom you would hire to perform a specific task. A coach or mentor could look over your business plan, for example, but they wouldn’t write it for you.

“If you were to hire me as a consultant, you would expect me to roll up my sleeves and pitch in and work with you to get things done, and you would pay me for that,” Robinson says. Coaches, on the other hand, “try to show you how to do things so that you can do them [yourself].”

Business coaches are also not therapists, Sunwoo says. Entrepreneurship can be emotionally and mentally taxing, but it’s important that coaches refer clients to mental health professionals when necessary.

Business coaching red flags

If a business coaching opportunity “promises guaranteed income, large returns, or a ‘proven system,’ it’s likely a scam,” the Federal Trade Commission warned in a December 2020 notice.

In 2018, the FTC took legal action against My Online Business Education and Digital Altitude, which purported to help entrepreneurs start online businesses. The FTC alleged these companies charged participants more and more money to work through their programs, with few customers earning the promised returns.

In both cases, these operations paid settlements, and the FTC issued refunds to tens of thousands of their customers in 2021 and 2022.

To avoid offers like these, the FTC recommends that you:

  • Be wary of anyone who tries to upsell you right away or pressures you to make a quick decision.

  • Search for reviews of the person or organization online.

  • Research your coach’s background to see if they’ve accomplished as much as they say.

Sunwoo says to also be skeptical of one-size-fits-all solutions. A coach should customize their advice to your personality and skill set, not ask you to conform to theirs.

“The moment that a business coach pushes you to do something that is really not compatible with your personality or your beliefs or values,” Sunwoo says, “that’s a huge problem.”

How to find the right coach — maybe for free

Here’s how to find a coach that will be as helpful as possible.

Determine whether you need advice or to hire someone. A coach isn’t the right fit for every business owner. If you need hands-on help organizing your business finances, for instance, you may need a bookkeeping service or accountant. And take legal questions to an attorney.

Seek out the right expertise. A good coach should be aware of what they don’t know. If they’re not a good fit for your needs — whether that’s expertise in a particular industry or a specialized skill set, like marketing — they might be able to refer you to someone who’s a better fit.

Consider free options. There may be some in your city or region:

  • SCORE offers free in-person and virtual mentoring in all 50 states, plus Guam, Puerto Rico and other U.S. territories.

  • See if your city has a Small Business Development Center, Veterans Business Outreach Center or a Women’s Business Center. All are funded by the U.S. Small Business Administration and offer free training and advising for entrepreneurs.

  • Do an online search for city- or state-specific programs. Philadelphia, for example, offers a business coaching program designed for entrepreneurs who want to qualify for particular business loan programs. Business incubators often offer courses or coaching.

Make sure your coach is invested in you. They should take the time to learn about you, your business and its unique needs, then leverage their own experiences and creativity to help you.

“I’m on your team now,” Robinson says of his clients. “Let’s do this together and make this a success.”

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Are There SBA Loans for the Self-Employed?

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Many of the same SBA loans are available to both self-employed people and more formally structured businesses, such as limited liability companies and corporations. However, self-employed individuals, like sole proprietors and independent contractors, might face a higher barrier to entry for having limited credit history, inconsistent revenue or no collateral. If they can’t qualify for an SBA loan, other business financing options are available.

Who qualifies as self-employed?

Sole proprietors, independent contractors and partnerships all fall under the self-employed category. In these cases, there is no legal distinction between the business owner and the business itself. Sole proprietors, for example, are solely responsible for their business’s gains and losses, while LLCs and corporations are legally distinct from their owners. This distinction helps protect the owners’ personal assets if their business runs into legal or financial issues.

Are self-employed SBA loans hard to get?

While a sole proprietorship is much easier to set up than an LLC or corporation, lenders may be more hesitant to finance them for a few reasons:

  • Self-employed business owners are legally responsible, as individuals, for any debt and liabilities that their businesses take on. If someone sues their business, for instance, their personal assets — not just their business — could be at stake. This makes it riskier for lenders to finance them.

  • Sole proprietorships and independent contracting businesses may have lower revenue or less collateral to offer since they’re often a business of one. This could make it more difficult for them to prove that they can pay back the loan, plus interest. And it may require more paperwork.

  • Some banks set lending minimums that surpass what a self-employed business owner is looking for, either because the business owner doesn’t need that much funding or doesn’t qualify for it.

  • Since there is no legal distinction between the self-employed business owner and their business, they may lack business credit history. To establish business credit, you’ll want to register the business, obtain an employer identification number and open a separate business bank account and credit card to keep your business and personal finances separate.

SBA loans for the self-employed

SBA microloan: Best for small loans and more lenient requirements

Applying for an SBA microloan is a great option for self-employed business owners, especially if they’ve been turned down by traditional banks and don’t need more than $50,000 in funding. In fact, the average SBA microloan is around $13,000, according to the SBA. SBA microloans are administered by nonprofit, community-based organizations that can also help train applicants in business practices and management. And because the loans are small, the application process may be easier — applicants may have limited credit history and typically don’t need as high of a credit score as they do for an SBA 7(a) loan.

SBA 7(a) small loan: May not require collateral

Funds from the SBA’s most popular 7(a) lending program can be used for a variety of business-related purposes, such as working capital or purchasing equipment. While the maximum SBA 7(a) loan amount is $5 million, SBA 7(a) small loan amounts don’t exceed $350,000. And if the 7(a) small loan is for $25,000 or less, the SBA doesn’t require lenders to take collateral.

SBA Express loan: Best for quicker application process

SBA Express loans are a type of 7(a) loan for businesses that need quick financing and no more than $500,000. The SBA responds to these loan applications within 36 hours as opposed to the standard five to 10 days, which may speed up the process for borrowers working with non-SBA-delegated lenders. Additionally, borrowers might not have to fill out as much paperwork — the SBA only requires Form 1919. Beyond that, lenders use their own forms and procedures.

SBA loan alternatives

Online lenders

Self-employed business owners turned down for SBA or traditional bank loans may be able to qualify for financing with an online lender. These lenders offer options such as term loans and lines of credit, and they often process applications faster and have more lenient requirements. However, applicants should expect to pay significantly more in interest than they would with an SBA loan.

Business credit cards

Not only can business credit cards help build your business credit history and pay for everyday business purchases, but they can also help finance larger purchases (within your approved credit limit). And if you qualify for a credit card with a 0% introductory APR offer, you’ll have multiple months to pay off the balance interest-free. Just make sure you’re able to pay off your purchase before the intro offer ends and a variable APR sets in.

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