What taxes apply to a new small business?

Taxes for New Small Businesses in North Carolina

When starting a small business in North Carolina, understanding your tax obligations is essential for smooth operations and compliance. Below is a practical overview of the key taxes that typically apply.

State Taxes to Consider

• Corporate Income Tax: If your business is structured as a corporation, you will be subject to North Carolina's corporate income tax. The rate is a flat percentage applied to taxable income.
• Franchise Tax: Corporations and LLCs taxed as corporations must pay an annual franchise tax based on the greater of their capital stock or a calculated measure of assets.
• Sales and Use Tax: Businesses selling tangible goods or certain services must collect and remit sales tax. Use tax applies to purchases made out of state for use in North Carolina.
• Withholding Tax: If you have employees, you must withhold North Carolina income tax from their wages and remit it to the state regularly.
• Unemployment Insurance Tax: Employers pay this tax to fund state unemployment benefits. Rates vary based on your business history.

Federal Taxes to Plan For

• Federal Income Tax: Based on your business structure, income is reported on your personal or business tax return.
• Payroll Taxes: Employers must withhold Social Security and Medicare taxes and pay the employer portion.

Operational Tips for Managing Taxes

• Register Early: Register your business with the North Carolina Department of Revenue to obtain necessary tax accounts.
• Automate Payroll: Use payroll software to manage withholding, unemployment insurance, and federal payroll taxes efficiently.
• Maintain Accurate Records: Keep detailed bookkeeping to track taxable sales, payroll, and deductible expenses.
• File Timely Returns: Stay aware of filing deadlines for state and federal taxes to avoid penalties.
• Consult Resources: Use North Carolina Department of Revenue resources for updates and specific tax rates as of 2026.