North Carolina has been listed in the top five best states for business by Forbes in its annual “Best States for Business Report” since 2006. In fact, the state has held the top spot for three years in a row, from 2017 to 2019.
People have been flocking to North Carolina over the past decade due to the state’s affordable housing, low cost of living, and attractive tax rates. Due to the high influx of people, the Tar Heel State has one of the highest net migration rates in the US.
The state has the smallest union workforce in the US in terms of percentage of total employment. As a result, labor expenses are 8 percent lower than the national average, ranking sixth in the country.
Here are a few small business statistics that should help you understand what it takes to run an enterprise in the Old North State.
Quick North Carolina Small Business Statistics for Entrepreneurs
- Small businesses represent 99.6% of all private enterprises in the state.
- Approximately 45.1% of North Carolina’s workforce works for small businesses.
- Military veterans make up 6.3% of workers and own 8.4% of businesses.
- Racial minorities account for 19.3% of small business ownership.
- North Carolina’s per capita disposable income is $46,117.
- In 2019, small businesses exported goods worth $6.1 billion.
- Between March 2019 and March 2020, 27,657 new businesses opened in North Carolina, while 24,921 closed, for a net gain of 2,736.
- The state’s per capita consumption expenditure is $35,718.
- The 2021 CNBC “Top States for Business” report ranks North Carolina at #2 out of 50 states.
- Construction is the second largest industry in the state in terms of small business investment, fueled by an influx of new home owners and affordable house prices.
North Carolina Small Business Statistics
1. What is considered a small business in North Carolina?
The Small Business Administration’s (SBA) definition of a small business has evolved over time and is now industry specific. Currently, this definition is based on the North American Industry Classification System (NAICS).
The SBA understands that there are considerable disparities in competitiveness, entrance and exit costs, distribution by size, growth rates, and technological development among industries. Although the SBA defines 500 employees as the threshold for the majority of industrial enterprises and $7 million in revenues as the limit for the majority of service, retail, and construction firms, other industries have differing values.
Going by this definition, there are 964,280 small businesses in North Carolina that represent 99.6% of all businesses in the state.
North Carolina accounted for 187,229 of all new business applications submitted nationwide (over 5.8 million) from January 2021 to January 2022, ranking seventh among states. However, when adjusting for population, North Carolina had 1,785 applications for every 100,000 residents, which was in line with the national average and ranks 15th among states.
Opening a business in North Carolina can be a daunting process especially for first-time business owners who are not aware of the complicated red tape involved in the registration process. It is highly advisable to seek the services of an LLC (limited liability company) formation service who’ll not only assist you with filing the paperwork but will be the official liaison between your business and the Secretary of State’s office.
Read my review of the best LLC services in North Carolina to learn more.
2. How many people are employed by small businesses in North Carolina?
There are currently 1.7 million people employed by small businesses across all 100 counties in North Carolina. The minimum wage in North Carolina matches that of the federal minimum wage rate at $7.25 per hour for non-tipped employees.
The exception to this wage includes tipped employees for whom the state minimum wage is $2.13 per hour as long as the hourly wage and tips together meet the minimum wage, and full-time students and apprentices, who may be paid a subminimum wage rate that is no less than 90% of the state’s standard minimum wage.
3. North Carolina small business statistics by industry
The professional, scientific, and technical services sectors cumulatively account for the largest share of small businesses compared to other industries in North Carolina, a total of 120,826. Approximately 98,387 of these businesses are nonemployer businesses, 20,838 have between 1–19 employees, and 1,601 have 20–499 employees.
The mining, quarrying, and oil and gas extraction industries have the least number of small enterprises, 276 in total.
4. North Carolina small business ownership by ethnicity
North Carolina has a population of 10,488,084 people, with an annual population growth rate of 1.1% for the five years to 2019, ranking 11th out of the 50 US states. White/Caucasian Americans represent the largest ethnic group at 70.6% of the population. They are followed by Black/African Americans (22.2%), Hispanic/Latino Americans (9.8%), Asian Americans (3.2%), American Indians and Alaska Natives (1.6%), and Native Hawaiians and other Pacific Islanders (0.1%).
Here’s a breakdown of how small business ownership is distributed among these groups:
- White/Caucasian — 731,150
- Black/African American — 131,437
- Hispanic/Latino — 55,138
- Asian — 37,511
- American Indian and Alaska Native — 3,400
- Native Hawaiian and Other Pacific Islander — 450
5. North Carolina small business ownership by gender
Women own a total of 358,783 small businesses in the state. Around 325,000 of these firms are nonemployer businesses while 33,783 have employees. Men own 506,417 small businesses, 404,000 are nonemployer businesses while 102,417 have employees working for them.
There are, however, 41,983 small businesses owned by both men and women.
6. Business taxes in North Carolina
The majority of LLCs in North Carolina are pass-through tax entities. In other words, the burden for paying federal income taxes is passed through the LLC to the individual LLC members. LLCs do not pay income taxes by default; only its members do.
However, in some situations, the owners of an LLC elect to have their firm taxed as a corporation. In this case, the LLC would be subject to the North Carolina corporate tax. The top corporate income tax is 2.5%.
It is critical that you pay your taxes on time as a North Carolina business owner. Failure to file returns on time may result in a penalty. The longer you wait to file, the higher the penalty, and you may lose your company license outright.
In such a situation, you need a registered agent. They will not only assist you with tax filing, but will also send you regular compliance notifications to remind you of future filing deadlines. Read my review of the best registered agents in North Carolina to determine which agent will best fit your business’s needs.
7. How COVID-19 affected small businesses in North Carolina
North Carolina has the 50th highest economic exposure to COVID-19 of all states in the US based on the percentage of employees working in industries with a high or medium-high degree of exposure to COVID-19.
In North Carolina, 35% of all employees, or 1,786,501 people, work in industries with a high or medium-high degree of economic exposure to COVID-19. A quarter of all employees in North Carolina work in industries with a low or medium-low degree of economic exposure to COVID-19, totalling 1,295,979 people.
8. Small business financing in North Carolina
The Community Reinvestment Act of 1977 (CRA) mandates federal bank and thrift regulators to encourage such institutions to assist in meeting the credit requirements of the local communities in which they are situated.
Large banks are required by the Community Reinvestment Act to disclose new small business loans. In 2019, reporting banks paid out $2.9 billion in loans to North Carolina firms with $1 million or less in revenue. Total reported new lending to firms was $2.8 billion for loans of $100,000 or less, and $7.6 billion for loans of $1 million or less.
9. North Carolina small business export statistics
A total of 11,015 identified firms exported goods worth $30.6 billion from North Carolina in
2019. Of those exporters, 9,567—or 86.9%—were small. Small firms exported goods
worth $6.1 billion, making up 19.9% of exports by identified firms.
The Final Word
North Carolina has an unrivaled quality of life. It’s no surprise that visitors from all over rush to the state, with its magnificent beaches and breathtaking mountains, as well as many charming locations in between. Add to that the central East Coast position, temperate climate, and low cost of living, and it’s easy to understand why North Carolina is one of the most populous states in the country.
- US Small Business Administration
- Forbes – Best Places for Business
- CNBC – Top States for Business
- Western North Carolina Vitality Index
- Tax Foundation
- US Census Bureau