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STARTING AND OPERATING A BUSINESS IN NORTH CAROLINA Copyright © 2004, Michael D. Jenkins
CONTENTS OF THIS SECTION:
I. INTRODUCTION I. INTRODUCTION North Carolina has a fairly typical tax and legal structure under which businesses must operate. Some of the more attractive features of the state include a dynamic business and technology environment, with a number of top-flight universities, as exemplified by its Research Triangle complex of universities and private high technology firms. Like most states, North Carolina imposes income taxes on individuals and corporations, a franchise tax on corporations, a sales and use tax, various excise taxes, with property taxes imposed at the local level. The state has also adopted a limited liability company (LLC) law, and a limited liability partnership (LLP) law, so that businesses operating in North Carolina in LLC or LLP form may obtain the advantages of limited liability, without incorporating or becoming subject to corporate taxation, generally. North Carolina represents a significant market, as it is now the 10th largest state, in terms of population. At present, the state's economy is recovering from the slowdown that resulted from the collapse of the stock market "Internet bubble" in 2000 and the events of 9-11-2001 and aftermath. In July, 2004, the state's unemployment rate was 5.0%, down sharply from 6.6% a year earlier. This is somewhat below the national unemployment rate of 5.5% for July, 2004. To view the latest federal Bureau of Labor Statistics unemployment rate data for North Carolina or any other state, visit the BLS website. In general, North Carolina has a relatively low cost of living, compared to national averages, which makes it an attractive place for recruiting employees. II. LEGAL ENTITIES -- FILING FEES AND REPORTING REQUIREMENTS. (a) In General. A business that operates in North Carolina can operate as a sole proprietorship, a general or limited partnership, a corporation, or a limited liability company. In addition, like the federal tax law, the state income tax law also recognizes S corporations, for income tax purposes, and generally allows the income or losses of an S corporation to "flow through" and be taxed or deducted at the shareholder level, rather than taxing the corporation itself as an entity. North Carolina also provides for limited liability partnerships, in which no partner is liable for debts of the partnership, in general, as in the case of a corporation or LLC, but with fewer legal formalities than are required for either a corporation or an LLC. Each of the above entities is discussed below, along with the basic requirements for forming such an entity and any general ongoing (non-tax) reporting requirements that are applicable to it. The tax treatment of each form of legal entity is discussed in Section IV below. (b) Sole Proprietorships. In general, sole proprietorships in North Carolina can be formed with no formalities. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, as well. No separate tax form filing is required, generally, for a sole proprietorship, under the North Carolina income tax law. Instead, as with the Schedule C on your federal Form 1040, you simply report the net income or loss from your sole proprietorship on your state personal income tax return. See Section IV(c) for information on the North Carolina income tax and filing requirements for individuals. (c) Partnerships. As a rule, general partnerships in North Carolina can be formed with no formalities, although it is highly advisable to have a written partnership agreement. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, for any type of partnership, including general or limited partnerships, or limited liability partnerships. A limited partnership, in which there is at least one general partner (who is liable for partnership debts) and at least one limited partner (who is not liable for partnership debts), may also be formed under North Carolina law. Unlike a general partnership, a limited partnership must generally have a written partnership agreement, and must file a certificate of limited partnership with the secretary of state, together with a filing fee of $50. A certified copy must also be filed with the Register of Deeds in the county where the limited partnership is registered to do business. Foreign limited partnerships must also register for a certificate of authority before being allowed to do business in North Carolina, and must pay a registration fee of $50. For information on limited partnership filing requirements, see the contact information for the offices of the North Carolina Secretary of State, listed in Section VI(a). Limited liability partnerships (LLPs) are a new form of partnership permitted under the laws of North Carolina. Like an LLC, an LLP provides limited liability for its owners, while retaining the tax advantages of a partnership for federal and North Carolina state income tax purposes. However, unlike an LLC, an LLP typically operates like a regular partnership, and is not required to file articles of organization. To form an LLP in North Carolina, you must register your partnership with the secretary of state and pay a filing fee of $125. Foreign LLPs, those created under the laws of another state, must also register with the secretary of state and pay a fee of $125. Every LLP doing business in North Carolina, including both domestic and foreign LLPs, must file an annual report and pay an annual fee of $200. North Carolina law also provides for formation of limited liability limited partnerships (LLLPs), which are simply LLPs that have both general partners and limited partners, like a limited partnership, but in which the general partners have the same degree of limited liability as partners in a "regular" LLP. LLLPs are are subject to the same filing fees and annual report fees and requirements as other LLPs. For more information on LLP registration and reporting requirements, see the contact information for the offices of the secretary of state, listed in Section VI(a). Note that one potential drawback of LLPs, if you will do business in other states besides North Carolina, is that some states, like California and New York, only recognize certain types of professional partnerships as LLPs. If yours is not a professional partnership, such other states may simply treat your LLP like an ordinary general partnership, with no limitation of liability. A partnership agreement, for any type of partnership, should spell out in considerable detail such matters as the following:
Partnerships, as entities, are not subject to state income tax in North Carolina. Instead, the income or losses of the partnership, as allocated among the partners, must be reported on the personal income tax returns of the individual partners (or on the corporate tax returns of any corporate partners). Partnerships are required to file an annual tax information return with the state. For details on North Carolina partnership tax return filing requirements, see Section IV(c). (d) Corporations. To form a corporation in the state of North Carolina, you must file articles of incorporation with the North Carolina Secretary of State and pay a fee of $125. A foreign corporation (one formed under the laws of another state or a foreign country), must obtain a certificate of authority before it may legally conduct business in North Carolina, by filing an application for a certificate of authority and paying a filing fee of $250. For more information on filing articles of incorporation or applying for a certificate of authority to do business in North Carolina, see the contact information for the offices of the secretary of state, listed in Section VI(a). In addition, once your corporation is formed, it will be required to file annual reports and a filing fee of $20 with the North Carolina Department of Revenue each year. Failure to file this report on a timely basis could result in suspension or revocation of your corporation's charter. In addition to paying federal income taxes on its income, a corporation that does business in North Carolina must also file corporate income tax returns with the state. See Section IV(c) for a discussion of state corporate income tax rates and tax return filing requirements. Corporations that do business in North Carolina are also subject to a corporate franchise tax. For tax forms and more information on state corporate income and franchise taxes in North Carolina, see the contact information for the offices of the Department of Revenue, listed in Section VI(a). (e) S Corporations. An S corporation is simply a regular corporation that has elected, for federal or state income tax purposes, or for both, to be taxed somewhat like a partnership, with its income, losses and tax credits flowing through to its owners, who report such income, losses, or credits on their individual tax returns. North Carolina recognizes S corporations for income tax purposes, and treats them in a manner similar to the federal tax treatment. (f) Limited Liability Companies. North Carolina, like every other state in the U.S., has adopted a limited liability company (LLC) law. Thus, in addition to the traditional choices of a sole proprietorship, partnership, or corporation, a business that operates in North Carolina may also choose to operate in the form of an LLC. In most states, LLCs are very attractive entities for many small businesses, in that they offer the same protection as a corporation from creditors for debts of the business, while offering much of the flexibility plus the flow-through tax treatment of a partnership for federal tax purposes. See Section IV(c) for a discussion of the income tax treatment of LLCs under North Carolina tax laws. To form an LLC under the laws of North Carolina, one or more persons must file articles of organization with the secretary of state, which must be accompanied by a filing fee of $125. North Carolina state law now allows formation of one-member LLCs, which qualify for treatment as sole proprietorships for federal tax purposes. Foreign LLCs, those formed under the laws of another state, must obtain a certificate of authority to do business in North Carolina, by filing an application for a certificate of authority with the secretary of state and paying a filing fee of $250. In addition to initial filing fees, an LLC formed in North Carolina must subsequently file annual reports with the secretary of state and pay an annual report filing fee of $200 with each such annual report. A foreign LLC is also required to file an annual report and pay the applicable filing fee of $200. For more information on filing articles of organization for an LLC, see the contact information for the offices of the secretary of state, listed in Section VI(a). III. BUSINESS ACQUISITIONS (a) In General. When acquiring an existing business, there are a number of state legal and tax issues you or, preferably, your business attorney, should attend to before closing the purchase. These include matters such as doing a title search for any real property that is being acquired, checking for any recorded security interests on personal property items, and thoroughly researching county, state, and federal records for any judgment liens, tax liens, or other liens, before property is acquired. You will also benefit from consulting a tax advisor before the agreement of sale is negotiated, in order to seek a structuring of the agreement so that the purchase price is allocated among the assets in a way that favors you. You may be able to obtain considerable tax savings if the purchase price is allocated in a way that gives you the best possible tax results under federal and state income tax laws, and other state tax laws, such as sales/use tax or property tax laws. Depending upon the state (or states) in which the seller's assets are located, you may also have to comply with state bulk sale or bulk transfer laws. You should also obtain tax releases from various state taxing agencies, as discussed below. (b) Bulk Sale Laws. Typical bulk sale laws require either publication of legal notices to all creditors in advance of the sale and recording of such notices in some cases, or maintenance of detailed lists of the property to be transferred, for inspection by the public. North Carolina has a bulk sale law and you will need to comply with this law when you purchase assets of an existing business. Failure to do so will expose you to liability to any creditors of the seller who do not get paid off when the sale of the business occurs. North Carolina's bulk sale law closely follows the bulk transfer provisions of the Uniform Commercial Code. The basic requirements, when purchasing the assets of business in a bulk sale, are as follows:
Compliance with the bulk sales law should be handled by a competent business attorney, as its requirements are quite specific and very technical in nature. (c) Tax Releases. When you acquire an existing business, you will want to make sure that you do not unwittingly become liable for any unpaid taxes owed by the seller. Typically, to protect yourself, you will need to receive a tax release or releases from various state taxing agencies, for such taxes as sales and use tax, income tax withholding, and state unemployment taxes, in each state in which the seller does business. If you fail to obtain such a release or written statement from the tax agency that the seller is not delinquent on any tax payments, you will be held responsible for such tax if it is not withheld from the purchase price proceeds and paid to the state at the time the sale of the business transpires. In North Carolina, the seller should obtain and provide you a tax release for unemployment taxes, from the Employment Security Commission. You should also require the seller to obtain a transcript from the Department of Revenue, showing the status of the seller's payments and filings of state sales and use tax returns. (d) Unemployment Tax Rating of Seller. In addition to obtaining tax releases, you may find it advantageous to succeed to the seller's unemployment tax experience rating, if the seller has a tax rate lower than you would otherwise obtain as a new business. To obtain the seller's favorable experience rating as a successor employer, you will need to apply on a timely basis to the North Carolina Employment Security Commission, requesting that you be treated as a successor employer, which is usually automatically approved. IV. NORTH CAROLINA TAXES AND OTHER GENERAL REQUIREMENTS. (b) State and Local Licensing. Nearly any business, operated anywhere in the United States, will have to have at least one government license of some kind. In most cases, this will be a local license, issued by your city or county. Before you open your business, contact your local city or county hall and find out if your particular business needs one or more local licenses. Most kinds of local business licenses are granted upon payment of a fee, with no further requirements, except possibly for annual or other periodic renewal fees. However, if you are engaging in any kind of food business, you will usually need to also obtain a health department permit and show that you are in compliance with health department food-handling requirements. In addition, be sure to check with an attorney or local government zoning or planning department officials to determine if your business will be in compliance with all local zoning and planning restrictions. If you own or rent any type of facility, you will generally need fire department permits, showing that you meet fire safety codes and any construction or improvements to an existing structure will usually require a building permit. If you intend to simply operate your business from your home, you may be in violation of local zoning requirements, but this is less likely to be a concern if you don't have clients, customers, suppliers, or employees coming to your house on business, on a regular basis. State governments have also traditionally required special licenses for many kinds of professionals, such as physicians, dentists, lawyers, and accountants. To further protect consumers, North Carolina has expanded the list of occupations that must be licensed by the state to include many other occupations. Most state licenses not only require payment of fees, but are only issued for a given profession or occupation upon showing that you have completed certain educational or experience requirements, or passed certain tests, or some combination of the foregoing. Some of the types of activities and occupations that require special state licenses in North Carolina include the following:
For information on state licensing and business registration requirements in North Carolina, see the contact information for the offices of Business Licensing Information Office, listed in Section VI(a), and ask for a Master License Application. (c) Income and Franchise Taxes. North Carolina has both an individual income tax and a corporate income tax, as well as a franchise tax on corporations. The North Carolina individual income tax is imposed at a maximum tax rate of 8.25%, on taxable income in excess of $200,000 for couples filing jointly (or over $120,000 for a single taxpayer). Individual taxpayers generally pay state income tax on their business earnings from a sole proprietorship, or on their share of the earnings of a pass-through entity, such as a partnership, S corporation or LLC. A North Carolina personal income tax return must be filed with the Department of Revenue each year by the 15th of April. Partnerships, or entities taxable as partnerships, such as LLCs, are not subject to state income taxation in North Carolina, but must file an information return with the North Carolina Department of Revenue each year, showing each partner's share of taxable income, losses, and credits, on Form D-403. The partnership information return is due by April 15th of the following year, in the case of a calendar year partnership. Individual taxpayers doing business as sole proprietors, or who are partners in partnerships or members of LLCs, are required to make payments of their estimated North Carolina individual income taxes, on Form NC-40, if their net tax liability (not covered by withholding) equals or exceeds $1,000. Estimated tax payments are due in four installments, on the 15th day of the 4th, 6th, and 9th months of the taxable year, and the 15th day of the first month of the following year. To avoid penalties for underpayment of estimated tax, you must either pay in 90% of the current year's tax, or 100% of the previous year's tax. The North Carolina corporate income tax rate on corporations (other than S corporations) is 6.9% in 2000 and later years. The state corporation income and franchise tax return must be filed with the Department of Revenue each year by the 15th day of the third month following the end of the taxable year, or by March 15th in the case of a corporation whose taxable year is the calendar year. Corporations are required to make estimated tax payments of their state corporate income tax in advance, if their tax liability for the year equals or exceeds $500. Estimated tax payments are due in advance, in four equal installments, on the 15th day of the 4th, 6th, 9th, and 12th months of the taxable year. The total estimated tax that must be paid in is usually equal to 90% of the actual tax liability for the year. However, if the preceding year was a full year of 12 months, the current year payments need only be equal to 100% of the prior year's tax liability, if less. Other exceptions to the penalty may also apply. These exceptions to the requirement that 90% of the tax be paid in for the current year do not apply to "large corporations," as defined under the federal Internal Revenue Code. Otherwise, penalties will be imposed for failure to make the required estimated tax payments on a timely basis. The corporation franchise tax is an annual tax imposed on corporations for the privilege of doing business in the state. The annual tax is equal to $1.50 for each $1,000 of the tax base, which is the highest of the three following amounts:
The minimum amount of the annual franchise tax is $35. S corporations are recognized under the North Carolina tax law, and are generally treated the same as for federal tax purposes. However, an S corporation that has any nonresident shareholders must file a nonresident shareholders' agreement to pay North Carolina tax, or else must withhold North Carolina state income tax on the nonresident shareholder's proportionate share of the taxable income and remit the withheld tax to the state. In North Carolina, a limited liability company (LLC) is taxed in the same manner as a partnership, thus avoiding the possible double taxation of income that can occur with a corporation. Note that under IRS regulations an LLC is now able to elect to be treated as a partnership if it has more than one owner, or as a sole proprietorship if it does not, for federal tax purposes. North Carolina law now also recognizes the validity of a one-owner LLC. Note that it is not always entirely clear whether an LLC is a "single-member LLC" LLC or not, where the "single owner" is a married couple who hold the entire ownership of the LLC in some form of co-tenancy, such as joint tenants with right of survivorship, tenants by the entirety, or as tenants in common. The federal Internal Revenue Service (IRS) has taken a very lenient position in Rev. Proc. 2002-69, where a couple hold the LLC interest as community property, ruling that the IRS will accept whatever choice the couple make, either to disregard the LLC as an entity (treating it as a "single-member LLC") or to treat it as a partnership between the husband and wife. However, North Carolina is not a community property state, so where the LLC is owned by a husband and wife in some form of co-tenancy, it is unclear whether the IRS treatment would be as lenient as for community property owners, since the IRS has not issued any published rulings on whether an LLC can be a disregarded entity if held in one of the various forms of co-tenancy by a married couple, rather than being held as community property. Thus, it is also unclear, where an LLC is owned by a husband and wife as co-tenants, whether North Carolina would treat the LLC as a single-member LLC or as a partnership. LLCs are not subject to the North Carolina franchise tax, unlike corporations. (d) Sales and Use Tax. North Carolina imposes a general sales tax on retail sales of tangible personal property and certain types of services at the statewide rate of 4.5%, or 4% on or after July 1, 2005. In addition, local governments are allowed to adopt local sales taxes, with counties and cities generally imposing a 2% tax rate, up to a maximum of 2.5%. Various classes of taxable items are subject to tax at reduced rates of 1%, 2% or 3%, or at other reduced rates, and most such items are fully exempted from the 1% local option (county) sales taxes. The state sales tax rate on food was reduced to 3% and 2% in 1997 and 1998 and was totally eliminated as of May 1, 1999, although local sales taxes continue to apply to food purchases. The exemption for food purchases does not apply to restaurant meals, food sold through a vending machine, alcoholic beverages, soft drinks, or dietary supplements. Certain of the reduced-rate items also have a maximum sales tax amount per item, such as $80 on certain farm equipment and $300 on a manufactured home. Sellers are required to register with the Sales and Use Tax Division of the State Department of Revenue and obtain a sales tax identification number. Register on Form AS-RP1, which you can download or fill in on-line at the Department of Revenue web site, at the web address listed in Section VI(c). Some of the major categories of goods and services that are subject to sales or use tax in North Carolina include:
Major categories of goods or services that are exempt from sales tax in North Carolina include:
There are numerous other exemptions from the sales tax, the most important of which is the resale exemption. If you are a wholesaler or retailer who purchases goods that you will resell, your purchase of such goods may qualify as an exempt sale for resale. Similarly, if you sell goods to wholesalers or retailers for resale by them, your sale may also qualify as an exempt sale for resale. In any such transaction, the exemption is ordinarily available only if the purchaser gives the seller a valid resale certificate, certifying that the items are being purchased for resale, and not for use or consumption by the buyer. A shadow tax, the use tax, is also imposed at the same rate as the sales tax. It is primarily intended to tax property that is acquired from sources outside of the state, in transactions not subject to sales tax, when such property is used or consumed within North Carolina. Use tax may also apply to items purchased on an exempt basis, such as for resale, if such items end up being used or consumed, instead of being resold. For more information on North Carolina sales and use tax registration and compliance, see contact information for the offices of the Department of Revenue, listed in Section VI(a). (e) Real and Personal Property Taxes. In North Carolina, as in every other state, any business real estate you own will be subject to real property taxes. In general, there is little that you must do, unless you wish to challenge your assessed valuation, since the assessor will bill you for each year's property taxes as they come due. North Carolina also imposes personal property taxes on tangible personal property, but exempts the inventories of wholesalers, retailers, and manufacturers. North Carolina formerly imposed a statewide personal property tax on many types of intangible personal property, but this tax was repealed in 1995. (f) Other Business Taxes. North Carolina imposes a number of other taxes on businesses, including:
Chain store taxes based on the number of stores in North Carolina were repealed as of January 1, 1997 (g) Trade Names. A trade name, also known as a fictitious or assumed name, is any name used in the course of business that does not include the actual legal names of all the owners of the business. Thus, if your business goes by any name other than your own real name, it is operating under a trade name. The same is true of a corporation, if it operates under a name other than its legal name. A trade name might also be one that suggests the existence of additional owners, by using such words as "company," "associates," or "group." In most states where you do business, it will be necessary to register a trade, fictitious, or assumed name, so that people who do business with you can find out who the actual owners of your business are. You may also want to register any such trade name, as a means of protecting against other companies usurping that particular trade name. If your unincorporated business operates under an assumed name in North Carolina, you must file an assumed name registration certificate with the register of deeds in each county where you do business under the assumed name. V. EMPLOYER REQUIREMENTS IF YOU HAVE EMPLOYEES (a) Employer Registration and Withholding. If you have any employees, you will already be withholding federal income tax and FICA taxes from their wages. Since North Carolina imposes a state income tax on the income of individuals, you will need to also withhold North Carolina income tax from the wages of your employees. Before you begin to pay wages, you must register as an employer with the Department of Revenue. Note that, since 1998, if you make payments to a nonresident independent contractor that exceed $1,500 in a calendar year, you will also be required to withhold North Carolina state income tax, at a flat rate of 4%. This will include any payments made to a foreign limited or general partnership that has no permanent place of business in the state. Payments to a foreign LLC or corporation that has a certificate of authority to do business in North Carolina are exempt from this withholding requirement. For more information on North Carolina income tax withholding and registration requirements for employers, see the contact information for the offices of the Department of Revenue, listed in Section VI(a). (b) Unemployment and Other State Payroll Taxes. If your business employs one or more individuals in each of 20 weeks during any calendar year or if your payroll amounts to $1,500 in any calendar quarter, you, as an employer will be required to pay state unemployment tax based on the amount of such wages paid. Also, an employer who acquires all or any portion of a liable business in North Carolina is immediately subject to the tax. Employers subject to the North Carolina unemployment tax are required to register with the Employment Security Commission by completing Form NCUI 604, Employer Status Report, and submitting this form for a determination of liable status. New employers are required to pay tax at a rate of 1.2% in 2004 on the first $16,200 of wages paid to each employee. A 0.2% training and reemployment tax has been added to the basic rate of 1.0% for the years 2000 and later. After you have had employees for a while, you will develop an unemployment tax experience rating. This rating is based on the number of employees you terminate who then claim unemployment benefits and the amount of such benefits paid to those former employees, under complex formulas. The state will inform you when they have assigned you an individual tax rate based on your firm's experience rating. That rate may be higher or, if you have had relatively few benefit claims charged to your account, lower than the standard new employer tax rate you initially were paying. All state unemployment taxes are imposed upon you as the employer, and, under North Carolina law, cannot be charged to your employees or withheld from their wages. For more information on your North Carolina unemployment tax obligations as an employer, see the contact information for the offices of the Employment Security Commission of North Carolina, Unemployment Insurance Division, listed in Section VI(a). (c) Workers' Compensation. Workers' compensation insurance is a state-mandated insurance requirement for most employers, in almost every state. In North Carolina, virtually all businesses with three or more employees are required by law to have workers' compensation insurance, except those able to self-insure. However, certain agricultural employers with fewer than 10 regular employees, certain sawmill logging operators, and all domestic employers with fewer than 10 employees are exempt. Firms having one or more employees who are engaged in activities in which radiation is used or is present are not exempt, however. Corporate officers, partners, and owners who are employed in the business may be exempted from coverage, but corporate officer/employees are counted in determining whether the business has three or more employees. Workers' compensation provides wage loss and medical benefits to employees injured on the job and it protects you, as an employer, from legal action for damages for injuries or job-related illnesses suffered by your employees. In effect, it is a "no-fault" insurance system for work-related injuries or illnesses. Thus, if you fail to obtain required workers' compensation insurance, and an employee is injured on the job, you will have opened yourself up to unlimited liability and severe legal consequences, so it is very important to obtain workers' compensation insurance for your employees. Be aware that neither general liability nor health and accident insurance can properly substitute for workers' compensation insurance. As an employer, you must notify injured employees of their benefits and post a notice (Form 17) in the workplace informing your employees of their workers' compensation coverage. In addition, you, or your insurance carrier, must mail a Form 19 to the Industrial Commission within 5 days of the occurrence or report of an injury to an employee that causes more than one day's absence from work or $2,000 or more in medical treatment, other than treatment provided at the workplace. For more detailed information regarding your obligations as an employer under the North Carolina workers' compensation laws, contact your insurance carrier or see the contact information for the offices of the North Carolina Industrial Commission, listed in Section VI(a). (d) State Wage and Hour Laws. Some employees of certain small firms not engaged in interstate commerce are not covered by the federal minimum wage and overtime laws. However, even if few or none of your employees are covered by the federal wage-hour laws, if, for example, because your firm does less than $500,000 a year in gross sales and the employees in question are not deemed to "...engage in (interstate) commerce...," they will still generally be subject to the North Carolina wage-hour laws, which currently provides for a state minimum hourly wage of $5.15. The North Carolina minimum wage will increase at the same time and to the same level as the federal minimum wage in the future. Note that, as under federal wage-hour laws, certain classes of executive, administrative, and professional employees are exempted from the North Carolina wage-hour rules. Besides the federal wage-hour posters that you must display in the workplace, you must also display a state wage-hour poster, which you can obtain from the Wage and Hour Bureau of the North Carolina Department of Labor. In addition to wage-hour laws, most businesses are subject to federal child labor laws, which put numerous restrictions on the working hours and kinds of work in which minors under the age of 18 may engage. Your business must also be aware of similar state child labor laws, in North Carolina. A youth employment certificate is generally required before you may hire a minor. (e) State Occupational Safety and Health Laws. Approximately half of the states have their own OSHA-like agency, charged with administering the state's own occupational safety and health laws. The remaining states have no such enforcement agency, and thus rely instead on the federal Occupational Safety and Health Administration (OSHA) to administer the federal job safety rules within such states. North Carolina is one of the states that has its own OSHA-type agency. To determine if your workplace is in compliance with federal and North Carolina job safety requirements, you may wish to contact the Division of Occupational Safety of the North Carolina Department of Labor and request a free on-site safety consultation. You will not be cited for any violations detected, provided that you promptly correct the unsafe conditions. This treatment differs from the rules for consultations by federal OSHA inspectors, who are required to cite you for any violations they find. For information on your job safety and health obligations as an employer, required posters, and possible on-site safety consultations, see the contact information for the Division of Occupational Safety, listed in Section VI(a). The North Carolina Department of Labor provides a single poster that covers state labor law requirements regarding occupational safety and health, as well as workers' compensation, minimum wage/overtime laws, and state unemployment insurance, all in one poster. (f) Other Miscellaneous State Labor Laws. Other North Carolina labor laws you need to be aware of, as an employer, include the following: (1) Wage payments to terminated employees. Employers are required to designate a payday, which can be daily, weekly, semimonthly or monthly, in general. Whatever the regular payday may be, you must pay final wages to any employee who quits or is terminated no later than the next regular payday. (2) Right-to-work laws. About half the states have enacted "right-to-work" laws, which guarantee that no person may be denied employment for refusing to join a union or for not paying union dues, thus banning either "union shop" or "agency shop" agreements, or both. In a union shop, an employee not belonging to a union may be hired but then must join the union, usually within 30 days. In an agency shop, an employee need not join the union but, to remain employed, must pay union dues. North Carolina has a right-to-work law. (3) State anti-discrimination laws. In addition to compliance with federal anti-discrimination laws, employers of 15 or more employees must also be aware of and comply with state civil rights laws in North Carolina, and must display a poster informing employees of their rights. You can obtain this poster from the Raleigh office of the Human Relations Commission, at the address listed in Section VI(a). (4) Reporting new hires. Under new federal welfare reform laws, employers in all states are now required to report newly-hired (or rehired) employees to a designated state agency (the New Hire Reporting Program, for North Carolina employers) within 20 days after the date of hire. See the address information for filing such reports, in Section VI(a). VI. STATE SOURCES OF HELP AND INFORMATION (a) Key State Agencies Contact Information. North Carolina, as many states have done in recent years, has set up a "one-stop" center to help your new or existing businesses to obtain all necessary state licenses and permits from a single office, the Business Licensing Information Office (BLIO), without your having to go from agency to agency to meet all the legal and regulatory licensing requirements. While currently maintained by the Secretary of State, this office will soon be moved to the Department of Commerce, so that the address information (below) for the BLIO may have changed by the time you read this. Due to the business community's need for assistance with the licensing and registration process, BLIO has established an accessible, one-stop system, The Master License Application Program, which assists the business community with identifying, acquiring and maintaining the licenses and permits needed to conduct business in North Carolina. The BLIO serves new and existing businesses by:
To obtain business registration forms and information on starting or relocating your business in North Carolina, contact:
OFFICE OF THE SMALL BUSINESS OMBUDSMAN. This agency has been set up specifically to assist small businesses in complying with state government requirements, with an emphasis on environmental issues. To contact this office through their hotline, call or fax:
SECRETARY OF STATE. Contact the office of the secretary of state for information on:
STATE SALES TAX. Obtain your sales and use tax license or permit and information on the North Carolina sales and use tax law from the Department of Revenue, at the address listed above for that agency. STATE UNEMPLOYMENT TAX. Contact the following state agency to determine whether you are an employer subject to payment of state unemployment taxes, and for registration as an employer if you are subject.
(b) Small Business Development Centers. A number of Small Business Development Centers (SBDCs) are located throughout North Carolina to assist you. These centers, usually located on college campuses, provide a wealth of start-up information and sponsor frequent business-oriented seminars. Contact the lead office below for information, or for the location of other SBDCs nearer to you.
(c) Internet Sites. If you have access to the Internet, there is a wealth of state and even local business information provided by state and local governments. All states now have a state government Web page, and most major state agencies also have sites on the Internet where you can obtain useful small business information on matters such as state taxes, financing sources, or the addresses and phone numbers (or e-mail addresses) of various state and federal agencies' offices in North Carolina. Since new sites are appearing constantly, you might also want to search for other North Carolina government Web sites by using one of the popular Internet search engines, such as Google, Lycos, Excite! or Yahoo. To start your Internet search for North Carolina government information, you may want to begin with the following Internet sites: State of North Carolina Web page: Secretary of State Web page (corporate, LLC and partnership filings, and Business Licensing Information Office): North Carolina Department of Revenue: North Carolina Department of Labor Web site: Employment Security Commission of North Carolina (state unemployment tax): North Carolina Industrial Commission (workers' compensation) Web page: North Carolina New Hires Reporting web page (download forms or file reports of new hires on-line): North Carolina Human Relations Commission (anti-discrimination agency):(d) Financing Sources. For information and help on locating financing for your small business, contact the nearest U.S. Small Business Administration office in North Carolina, or contact the following state agency:
The address of the SBA District Office in North Carolina is:
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Copyright © 2004 Michael D. Jenkins
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