Q. Must I incorporate my business?
A. No. There are several entities that may be chosen when starting up a business, including a Sole Proprietorship, Partnership, Limited Partnership, "S" corporation, "C" corporation, Professional Association, and the Limited Liability Company. There are certain advantages and disadvantages to each entity. Some provide limited liability protection for the owners, some allow for pass-thru taxation, etc. You should consult with a competent attorney to decide which entity is right for you and your new business. Once you have chosen the appropriate entity, the attorney can assist you with required filings and completion of the organization of your company.
Q. What is an LLC?
A. If you are opening up a new business, the Limited Liability Company (LLC) or the Professional Limited Liability Company (PLLC) may offer an attractive alternative to a traditional business entity.
Most people are familiar with corporations and partnerships, but many are unaware of the benefits and drawbacks of an LLC. An LLC typically functions like a partnership. Its "members," unlike shareholders in larger companies, generally act as owners and managers. A hybrid of sorts, the LLC combines advantages of both corporations and partnerships; minimizing the formality requirements while offering owners liability protection and advantageous tax treatment. The statutes governing LLC's allow for flexibility in the operation of the LLC. LLC's can be managed by all of its members (member-managed), as partnerships generally are, or it can be managed by selected managers (manager-managed). In addition, the statute allows for an operating agreement that can override most of the statutory defaults and provide even more flexibility.
Limited Liability Companies are quickly becoming the entity of choice for business owners seeking a flexible structure, pass-through tax status and limited liability protection. Because the LLC is still relatively new, there are still questions about how LLC's can be used and how courts will interpret the laws governing this type of business in the future.
To create an LLC, articles of organization must be filed with the Secretary of State. A $125 filing fee is currently required. An operating agreement is also an important part of the LLC set-up. Consult your attorney or contact the Corporations Division of the Secretary of State for more information.
Q. How can I finance my new company?
A. Entrepreneurs have all kinds of options for financing a business. Some rely on credit card debt and loans, others rely on investors and equity financing. Some utilize both debt and equity financing. Sources of capital include financial institutions, federal and state government sources, private investors, and local or not-for -profit sources. The Small Business and Technology Development Center publishes an Annual Capital Opportunities Report for Small Businesses. To receive a copy, contact Tiffany Martin at 1-800-258-0862. Before deciding on a particular type of financing, you should consult with an attorney who can ensure compliance with federal securities laws or other regulations relating to financing.
Q. What kind of licenses and permits do I need for my business?
A. This depends on the type of business you plan to operate. Certain services are regulated by North Carolina General Statutes, such as general and electrical contracting, plumbing, day care, and health care services. If you are providing any of these, or other services that are regulated, you will need to comply with applicable statutory regulations and licensing procedures. Depending on the type of service you are providing and your location, there may also be state and local privilege licenses or zoning permits required.
Certain products, such as liquor, food and drugs, are also regulated and if you plan to distribute these types of items, you may require specific licenses or permits.
Certain companies will have to comply with federal requirements, such as those engaging in aviation, imports and exports, or mail and telephone orders.
Contact the Secretary of State's Business License Information Office for more information on licensing or consult your attorney who can help determine which licenses will apply to your business.
Q. What if I want to hire employees?
A. If you plan to hire employees, there are many federal and state regulations with which you must comply. These include, but are not limited to, tax withholding requirements, unemployment compensation, worker's compensation, and wage and hour regulations. It is very important that you consult with an attorney before hiring employees to ensure compliance with such regulations. The North Carolina Department of Labor, the Employment Security Commission, the North Carolina Industrial Commission, and the North Carolina Department of Revenue are a good place to start gathering information.
You should discuss with your attorney whether you will need job applications, employment contracts, employee handbooks, written policies relating to sexual harassment, employment benefit packages, or other documents that relate to employees.