Start a business in North Carolina

Most southern states hand you a licence to buy from a city, a county, or both. North Carolina hands you nothing. Cities and counties lost the power to levy a business privilege licence tax for tax years beginning on or after 1 July 2015, and the state privilege licence that accountants, physicians, attorneys, engineers and real-estate brokers used to renew every year was repealed outright on 1 July 2024. Neither came back.

So the recurring cost of being a North Carolina business is the $203 annual report ($200 on paper) each 15 April, and after that whatever your own industry regulator charges. Five years of state fees comes to $937. Formation is $125 and takes three to seven business days — the LLC hub has the mechanics.

Here is the thing that catches trades moving in from almost anywhere else. In most states, sales tax lands on the goods you sell and stops there; the labour to install or repair them is a service and services are outside the tax. North Carolina taxes repair, maintenance and installation services in their own right, whether performed on real property or on goods.

A plumber replacing a valve charges tax on the callout and the hours, not only on the valve. An HVAC firm servicing a unit charges tax on the service. An appliance repair shop charges tax on the diagnosis. A flooring contractor charges tax on the fitting. And installation charges remain taxable even when the invoice states them separately — which is precisely the move most trades assume will keep labour out of it.

So the tax on a day's work runs 6.75% to 8.25% depending on the county — and some jurisdictions add a local prepared-meals tax on top of these figures, which matters if food is part of what you sell. If you quote jobs at a flat price, this comes straight out of the price you thought you were charging. Decide whether your quotes are tax-inclusive before the first one goes out, not after the first return is due.

These are worth naming precisely, because a lot of advice online still predates them.

Session Law 2014-3 ended local business privilege licence taxes from tax years beginning on or after 1 July 2015. Before that, North Carolina cities charged a licence tax much like the ones South Carolina and Virginia still run — a per-jurisdiction charge, often on gross receipts. It is gone. The only survivor is the local beer and wine licence, which is exactly as narrow as it sounds. A new business in North Carolina buys no general local licence at all, which is an unusual position for a southern state.

Session Law 2023-134 repealed the state privilege tax on professionals with effect from 1 July 2024. Accountants, physicians, attorneys, engineers and real-estate brokers no longer renew an annual state privilege licence. Occupational boards still license individual practitioners — that is a different thing, and it has not changed — but the general state privilege licence is finished.

What replaced neither of them is a local income tax: no North Carolina city or county levies one. The state's individual rate is a flat 3.99% for 2026, down from 4.25% in 2025, and that is the whole of the income tax your pass-through profit meets.

Workers' compensation is required at three or more employees, whatever the entity type. Two details decide whether you are over the line, and they pull in opposite directions.

Sole proprietors and LLC members are not automatically counted toward the three. Corporate officers are counted — even where they have elected out of coverage for themselves. So a corporation with two officers who have both opted out and one employee is at three and needs a policy, while an LLC with two members and one employee may not be. The entity you chose changes the arithmetic, which is not true in most states.

Two exceptions sit outside the headcount entirely: any business with even one employee working around radiation needs cover regardless, and farms are exempt below ten full-time non-seasonal workers.

Unemployment insurance arrives on a different trigger and usually earlier. Liability attaches once you have paid $1,500 of wages in any calendar quarter — which a single full-time employee reaches inside about six weeks — or employed anyone in 20 different weeks of the year, and the registration goes to the Division of Employment Security. So it is quite possible to owe unemployment insurance with one employee and no workers' comp obligation at all. The 2026 rates were not confirmed in this pass; DES publishes them.