How to Start a Sole Proprietorship in North Carolina

What is a sole proprietorship?

Before we get to the part on how to establish this type of business, let’s define what a sole proprietorship actually is. A sole proprietorship is an unincorporated business with a single owner who owns, operates, and makes all the decisions for the business.

In sole proprietorships, the owner and the business are considered the same legal entity, meaning that the owner is personally liable and responsible for all the debts incurred by the business. 

With that said, the owner is also entitled to all business profits and business assets. The owner also gets full control over the business and gets to decide every aspect when it comes to spending money and how to improve the business.

What qualifies your business as a sole proprietorship?

Businesses in various industries with a sole owner can qualify as a sole proprietorship. If you have a viable business idea or business plan that can be funded and operated by one person without the need to appoint shareholders or investors, it can qualify as a sole proprietorship.

With just one owner and a simple business structure, you don’t need to register your business with the State and the IRS. 

Who is it best for?

Sole proprietorships are ideal for startups, freelancers, and new entrepreneurs who are looking to start operating a business quickly without too many requirements and government regulations. 

If you desire complete control over a business and business activity and operations, a sole proprietorship is an ideal choice for freelancers, startups, consultants, and small businesses that could be run by a single individual.

How to set up a sole proprietorship in North Carolina

Setting up a sole proprietorship in North Carolina involves several steps to ensure that your business is legally recognized and operates smoothly. Although you don’t need to formally register your business to the state department that handles business affairs in North Carolina and can start doing business immediately, here is a guide with optional and required steps to help you through the process:

Name your business

Naming your business might not sound that important, but it is actually one of the most crucial steps when starting a business. By default, a sole proprietorship uses the owner’s legal name. But you have the option to operate under a different name by acquiring a DBA or “doing business as.” However, if you want to continue using your own name, that is also alright, depending on the nature of your business and how you want people to perceive your business.  

Using your own name

Using your own name is the easiest way to start your sole proprietorship. However, some potential customers might not find it appealing. But if you already have a good customer base that is steadily growing, you might not have to change the business name at all and just work on improving your personal brand. 

If you decide to use your own name and not get a DBA, you don’t need to do anything, and you can start conducting your business without a fictitious name or trade name. In the event that you want to name your business later on, you can always obtain a DBA anytime. 

Setting up a DBA

On the chance that you do decide to name your business, you can go ahead and obtain a DBA from the Secretary of State in North Carolina. But before you do, you need to make sure that you choose a name that is unique, easy to remember, and relevant to your business. In addition, you also need to check if the name is available because businesses in North Carolina cannot have the same name or highly similar names. 

To check for the availability of a name, you need to visit the North Carolina Secretary of State’s Website to search the business database using their business name search tool. Upon doing a quick search and confirming that the name you want is available, you can go ahead and file for the DBA. 

To file for a DBA, you need to visit the County Register of Deeds. You can use this website to find the nearest one in your area. But before visiting, you can go ahead and fill out the assumed business name form to get a head start. Note that you will need to get the form notarized before submitting it to the register of deeds. 

The DBA fee is $26, and the good thing about DBAs in North Carolina is that they do not expire, which means you wouldn’t have to renew every now and then. 

How to Check if a Business Name is Taken

State licenses

Now that you have a DBA, you can either start operating your business or might need to obtain specific licenses depending on the type of business you are about to run. 

Some businesses like liquor stores and professions like accounting firms need a business license or more to operate legally, and you can check this page from the North Carolina Secretary of State website to learn more about the licenses your business needs. Aside from state licenses, you can also get an employer identification number if you wish to hire employees. 

North Carolina taxes

Unlike other business entities like LLCs, incorporations, corporations, and general partnerships, tax payments for your sole proprietorship are easy.

Instead of filing separate tax forms, the business’s income and expenses are reported on the owner’s personal tax return. The owner is required to report the business income on Schedule C of their individual tax return (Form 1040) and pay self-employment taxes, which include Social Security and Medicare taxes.

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