Make it easier to start and manage a small business through one online portal.
For many North Carolinians, starting their own business is daunting. Those that have taken the leap often find themselves drowning in paperwork and regulations. North Carolina can do more to nurture our entrepreneurs.
To start, North Carolina should make it easier to start a small business using a single online form. A comprehensive small business portal effectively reduces the burden on small businesses by streamlining paperwork into one on-line management system. According to the state of Maryland’s Business Express website:
“All filings through this portal…will be processed with the Department of Assessments and Taxation within 7 business days…After completing the online registration process, you will receive all the necessary licenses and account numbers for your business.”
If only it could be so easy in North Carolina. The “Start Your Business” page on the Business Link North Carolina website suggests six steps and includes more than a dozen different links and phone numbers. Governor McCrory’s state government efficiency team, NC GEAR, wrote in its final report, “Entrepreneurs face challenges navigating how to register their business and file taxes,” and recommended a new state website.1
One online portal will also provide a single point of contact for small business services. Consolidating the state’s points of contact to one would reduce the burdens for small business owners and increase the likelihood that the state’s resources would be utilized.
Reduce the tax burden on truly small businesses and startups.
In North Carolina, the corporate tax rate is lower than the personal income tax rate of 5.75%. But many small businesses aren’t corporations and business income is taxed at the higher personal income tax rate. In addition to the lower corporate rate, tax incentive programs disproportionately target large corporations.
In 2012, the NC General Assembly exempted the first $50,000 of net business income for owners who include business income on their personal income taxes, but the exemption was quickly eliminated in 2013.
North Carolina shouldn’t abandon this idea, but instead reinstate the exemption with a limit on the size of the business. Limiting the exemption to only businesses with $250,000 or less in net business income will ensure that relief goes to the small business owners that need it most. Tax relief will let small business owners keep more of what they earn, while giving them a boost that might help their business grow.
North Carolina should also extend the exemption to start-ups in their first five years regardless of total business income. Start-ups and firms smaller than 20 employees account for the majority of job growth in any given year2—making them critical to North Carolina’s future economy.
To be fair to the mom-and-pops, start-ups and other small businesses and signal our prioritization of North Carolina’s small business climate, the state should provide some tax relief.
1 NCGEAR. (March 2015). Report to the Joint Legislative Commission on Government Operations.
2 Stangler, D. (2010). High-Growth Firms and the Future of the American Economy. Ewing Marion Kauffman Foundation.