In this section, you will find a number of useful resources for starting and growing your business including information and contacts for potential financing options, environmental and historical assistance and more. Please contact the organizations below for additional information.

In this section:

Local, State, and Federal Requirements

The first step in establishing a business is to determine that the proposed location is zoned properly for the proposed business. Even if you plan on working from home, a Home Occupation Permit is required.

Zoning Verification information and Home Occupation Permits are obtained from the Durham City-County Planning Department. Be sure you have your tax identification number (available from the Tax Collections office) when requesting zoning information.

The second step is to obtain a Business Privilege License. Contact the Tax Collection Offices of the City and County .

The fee for a business privilege license is determined by a fee schedule available for review at both offices.

If your business will be operated under any name other than yours or your business partner(s), file an Assumed Name Certificate with the Register of Deeds.

Office of the Register of Deeds
Durham County Administrative Complex (Ground Level)
200 E. Main St., Durham, NC 27701
(919) 560-0480

 

State Requirements

A State Privilege License and License Tax are applicable to most businesses in North Carolina. Licenses are issued annually and should be applied for before the commencement of any business activity. Contact the NC Dept. of Revenue’s License and Excise Tax Division for information on Privilege Licenses.

If your business will be incorporated in North Carolina, file Articles of Incorporation with the Department of the Secretary of State.

All retail sales in North Carolina are subject to sales tax unless specifically exempt by statute. Wholesale transactions with a registered merchant for the purpose of resale are not subject to this tax. For information regarding this or to obtain a Wholesale Merchant’s certificate of Sale, please contact the NC Dept. of Revenue, Sales and Use Division.

Certain taxes must be withheld from employee wages and submitted to the federal, state and local governments. If you will be paying wages to one or more employees, complete an Application for Withholding Identification Number for your business with the North Carolina Department of Revenue.

Other State Requirements and Tax Information

Incorporated businesses are required to file annual franchise and income tax returns with the state.

Any company employing one or more employees is required to provide unemployment insurance coverage for its workers. The NC Employment Security Commission administers employer contributions to the Unemployment Insurance Fund. For more information, contact their Durham office.

If your company will be employing three or more employees; you will be required to provide workers compensation coverage. For more information regarding Workers Comp., contact the NC Industrial Commission.

To ensure the health and safety of workers employed in North Carolina, the Department of Labor administers the Occupational Safety and Health Act of NC. The department offers free services to ensure that your business is in compliance with OSHA standards.

 

Federal Requirements

If you have employees, the “Small Business Kit” is essential for navigating federal regulations. Call the Internal Revenue Service at (800) 829-3676 and they will mail it to you with all the information you need, including Forms 940, 941, SS-4, W-2’s, W-4’s, the “Tax Guide for Small Business,” Circular E, and other federal necessities for starting a business.

As mentioned in the State Requirements section, if you have employees, complete the SS-4 Form (Application for Employer Identification Number) in order to obtain a federal withholding I.D. tax number.

Please contact the Internal Revenue Service’s local Durham office in regard to all technical questions regarding federal taxation issues. Additionally, the Chamber encourages you to inquire about their “Small Business Tax Workshops” held periodically in Durham.

Sites and Buildings

Financing Options

Central Administrative Office Tax Credit: State of North Carolina

If a corporation chooses to locate a central administrative office in Durham County, it is eligible to claim a seven percent (7%) tax credit on the new investment, not to exceed $500,000. Requirements include the creation of forty (40) new full-time administrative positions and continued operation of the facility during the following taxable year. Investment is calculated from the cost of the property if owned; or, if the building is leased, the investment is equal to the cost of payments made over seven (7) years, plus any improvements made to the property. This credit is taken by the taxpayer in equal installments over a period of eight (8) years. This credit expires if the property ceases to be used as a central administrative office; the credit will also lapse if the number of employees at the central administrative office decreases by forty (40) jobs or more. The NC Employment Security Commission provides certification of central headquarters status for firms seeking this credit.

City Economic Development Investment Policy: City of Durham

The Capital Investment Incentive segment of the City’s Economic Investment Policy provides a credit for up to three percent (3%) of the new, non-residential capital investment for projects located within the designated Community Development Area (CDA), or up to one and one-half percent (1.5%) of the project investment if the facility is located outside the CDA. In no event will this incentive exceed $1 million. The following criteria apply to all projects considered under this policy:

  • If the facility is located within the CDA and within Priority Growth Line (PGL), the project must directly create at least $500,000 in new, non-residential capital investment, or ten new (10) full-time jobs
  • If located outside the CDA, but within the PGL, the project must exceed a $20 million threshold in new, non-residential capital investment or create one hundred (100) full-time jobs
  • If located beyond both the CDA and the PGL, the project must directly create at least $25 million in new, non-residential capital investment or one hundred and fifty (150) full-time jobs
  • Eligible real estate includes office buildings, health care facilities, R&D facilities and labs, and warehouse/distribution buildings

In order to qualify, the project must be located within city limits and all proposed development must be consistent with Durham’s economic and land-use goals.

Economic Development Investment Fund: Durham County

Corporations planning to develop or expand their site within Durham County may be eligible for a tax credit up to five percent (5%) of the total new or expansion capital investment, not to exceed $2 million. Funding proposals are developed to help offset specific site preparation expenses, such as site grading, road improvements, and campus amenities. Eligible industries for this investment are corporate headquarters, R&D operations, manufacturing facilities, and warehouse/distribution industries. A minimum investment threshold of $15 million and forty (40) new, full-time jobs has been established. Durham County is interested in creating quality jobs for its residents paying a competitive wage level.

EC Rider Incentive Rate for Electricity: Duke Energy Company

Duke Energy offers a four-year billing credit incentive for new and expanding industry in Durham County. This credit is applied to the participating firm’s electric bill, and will reduce annual costs by twenty percent (20%) in the first year, fifteen percent (15%) in the second year, ten percent (10%) in the third year, and five percent (5%) in the fourth and final year. In order to be eligible, the company must add a minimum of 1,000 kilowatts (kW) of new service at one delivery point, and must maintain a monthly average of 250 hours use of electricity demand. Additionally, a capital business investment of $400,000 per 1,000 kW of load added plus a net increase in full-time employees, or an increase of at least seventy five (75) full-time employees per 1,000 kW of new load within the Duke Energy service area. This incentive requires a minimum use contract commitment of ten (10) years.

Foreign Trade Zone: State of North Carolina

Under federal authorization, the North Carolina Department of Commerce has created six (6) Foreign Trade Zones (FTZs) across the state, providing a number of economic advantages for businesses involved in international trade. Zone #93 is located in the Triangle, based at the Raleigh-Durham International Airport. Companies desiring the ability to delay tariff costs until goods are ready for the consumer market may apply for a FTZ sub-zone assignment at their Durham County facility. With this designation, raw goods may be imported, processed, assembled, re-packaged or otherwise manipulated on site with taxation occurring only once the product is ready for sale.

Industrial Revenue Bond (IRB) Financing: Durham County

IRBs are supervised and approved by the state, but are issued through the Durham County Bond Authority. IRB funds may be used by a manufacturing corporation to finance land, buildings or equipment. The company must agree to pay its employees at least 110% of the average state weekly wage for the appropriate manufacturing industry. The bonds may only be used for the financing of manufacturing or industrial facilities and pollution control facilities for industry and/or related new equipment. Two types of bonds are available for business development. A Tax Exempt Bond does not subject the bond-holder’s income to federal income tax; therefore the maximum bond amount is $10 million, and a firm may not hold more than $40 million outstanding nationwide. Taxable Bonds differ in that they are not exempt from federal taxes, but do remain exempt from state taxes. Because these bonds involve more risk for the borrower, there is no federal cap on the amount that may be borrowed.

Investment Tax Credit: State of North Carolina

If a corporation investing in Durham County makes a significant investment in machinery or equipment, it is eligible for a seven percent (7%) tax credit on all investment dollars exceeding $1 million. If investment takes place within the State Development Zone, this $1 million threshold is no longer applicable, and the firm may take a credit on the total amount of funds. In order to qualify, the employees of the firm in question must be hired at a wage equal to 110% of the state’s average weekly wage (100% of state average if the jobs are located within the SDZ). All credits received must be taken in equal installments over the seven (7) years immediately following installment, and the equipment must remain in use within state and/or SDZ boundaries for those seven (7) years or credits will be forfeited.

Downtown Prime Rate Loan Program: Downtown Durham, Inc

This city program organizes local financial institutions, allowing them to provide low-interest business loans for the acquisition and rehabilitation of Downtown Durham properties, as well as purchase of capital equipment for downtown use. There is a maximum origination fee levied of one-half percent (0.5%) and the minimum loan amount is set at $25,000. Currently eight (8) local banking institutions participate in this valuable funding assistance program

Downtown Low Interest Loan Program: Downtown Durham, Inc.

Administered by Downtown Durham, Inc. under authority of the city, the Low Interest Loan Program offers applicants that qualify for the Prime Rate Loan program the opportunity to have the city purchase up to one-half the loan from the bank at two percent (2%) below prime, not to exceed $500,000. A one-half percent (0.5%) origination fee will be charged, but the city will not involve themselves in further decisions made by the involved lenders. The result of the combination of the Low Interest Loan program and the Prime Rate program (see previous) is a loan provided at one percent (1%) below prime to qualifying firms.

Research & Development Tax Credit: State of North Carolina

Firms located in North Carolina are eligible for a tax credit of up to five percent (5%) of the state-apportioned share of the expenses for increasing research activities. Eligible corporations must be registered for the federal income tax credit under Section 41(a) of the Internal Revenue Code, and the credit must be taken on the taxpayer’s current yearly tax return.

Research Expansion Tax Credit: United States Government

Under Title 26, section 41 of U.S. Tax Code, select corporations are eligible for a research credit equal to twenty percent (20%) of the excess qualified research expenses for the taxable year, over the base period research expenses. Base period research expenses are the average qualified research expenses for each year of the three (3) years preceding the taxable year in which the credit is being taken. This credit is applicable to both in-house and contract research activities. All research must be performed solely for the purpose of discovering information which is technological in nature; this research must also be intended for use in the development of a new or improved business component for industry, and all activities must be relegated toward a specific purpose.

SBA 504 Loan: United States Government

This program provides long-term, fixed-rate financing for a corporation’s major assets, including land and buildings. Working in conjunction with a local Community Development Corporation (CDC), the Small Business Administration (SBA) provides financing for small area businesses. Most 504 projects involve a secured loan from a private-sector lender which covers up to fifty percent (50%) of the project cost, as well as a loan from the CDC which covers up to forty percent (40%) of the project cost, leaving a contribution of at least ten percent (10%) equity from the affected business. The maximum loan amount allowed by SBA is $1,500,000 when meeting the job creation criteria or a community development goal; the maximum SBA loan is $2.0 million when meeting a public policy goal; the maximum loan for “Small Manufacturers” is $4.0 million. (For further information click the link above for the United States Small Business Administration) All proceeds from SBA 504 loans must be used for fixed asset projects. Allocated funds may not be used for working capital, the consolidation of debt, or refinancing. Eligible firms must be for-profit and fall within the SBA guidelines. Loans will not be made to businesses engaged in rental real estate development or speculation.

Facade Improvement & Mural Grant Program: Downtown Durham, Inc.

Properties that are located within the boundaries of Downtown Durham and are classified as either commercial or residential buildings are eligible for this city improvement program, administered by Downtown Durham, Inc. Several grants will be awarded for up to 50 percent of the project cost, not to exceed $2,500 per project (certain exceptions may receive additional funding). This program’s objectives are to improve building appearances and to create a visually attractive downtown. Qualifying projects include, but are not limited to, brick surface repair, signage replacement, canopy installation, and mural painting.

Congratulations on making it through such a dense page of information!  Now remind yourself of why we love Durham >>

Environmental and Historical Assistance

Federal Brownfields Tax Incentive: United States Government

Mechanics&FarmersArchitecture01 w WM

Through the Taxpayer Relief Act of 1997, the United States Environmental Protection Agency (EPA) has been given power to help spur the cleanup and redevelopment of brownfields sites in distressed urban
and rural areas.  This act gives the developers of qualified brownfields properties the ability to fully deduct from federal tax liability all cleanup-related site costs in the year in which they occur.  The incentive is applicable only to properties that meet specified land use, geographic, and contamination requirements.  To be eligible, the property must be held by the party which receives the tax incentive and hazardous materials must be present, or potentially present.  In order to receive the tax credits, the property must be located within an EPA Brownfields Pilot Area (a census tract with at least 20 percent of its residents living below poverty, or a census tract of 2,000 residents or less which is zoned for at least 75 percent industrial use).

 

State Brownfields Tax Incentive: State of North Carolina

The Brownfields Property Reuse Act of 1997 enacted legislation that encourages the removal of impediments to the redevelopment of contaminated properties.  In order to expedite the redevelopment of these sites, the Department of Environment and Natural Resources (DENR) offers a covenant-not-to-sue to the prospective developer if they agree to properly secure the property for reuse.  It is important to note that while these defined liability benefits are extended to the prospective developer, the Brownfields Program does not change legal liability for responsible parties on-site.  Additionally, the Voluntary Cleanup Program (VCP) allows parties responsible for the contamination of a site to assist in the cleanup of that site in a timely and cost-effective manner.  The VCP allows firms to hire a Registered Environmental Consultant who will oversee and certify site cleanup activities on behalf of the state, satisfying DENR regulations on a private-sector timeline.

 

Tax Incentive for Brownfields Redevelopment: State of North Carolina

dukegardens01 w WM

This amendment to NC General Statutes creates a partial tax exemption for the value of qualifying improvements to a brownfields site during the project’s first five (5) taxable years.  In year one, 90 percent of the appraised value for qualified improvements is excluded; in year two, 75 percent; year three, 50 percent; year four, 30 percent; and in year five, 10 percent will be excluded.  In order to qualify, prospective developers must show that they have not caused or contributed to the contamination of the site.  Projects must also emphasize redevelopment, and they must have public benefit commensurate with the relief provided.

 

 

Federal Historic Property Investment Incentive: United States Government

The federal government offers a 20 percent tax credit for the rehabilitation of certified historic structures.  A 10 percent tax credit is also offered for the renovation of non-historic, non-residential structures which were built before 1936.  For both credits, the rehabilitation involved must be substantial, and the building must be depreciable.  These credits are not applicable to exclusively owner-occupied structures.  The owner must hold the building for five full years after the renovation has been completed, or the credit must be repaid.  This repayment amount is pro-rated based upon the number of years since the credit was originally taken.

 

State Historic Property Investment Incentive: State of North Carolina

A 20 percent state tax credit for the rehabilitation of income-producing historic buildings and properties is available for firms investing in these structures, as well as a 30 percent state tax credit for qualifying rehabilitation of non-income producing historic structures, including owner-occupied personal residences.  Eligible buildings are listed on the National Register of Historic Places, or are listed as a contributing building in a National Register Historic District.  In addition, the rehabilitation of the property must be substantial; for income-producing properties, expenses must exceed either the adjusted basis of the building or $5,000 within a 24 month period.  For non-income producing properties, the rehabilitation expense must exceed $25,000 within a 24 month period.  All work on income-producing property must meet the Secretary of the Interior’s Standards for Rehabilitation, and work on all other properties, must be approved by the North Carolina Historic Preservation Office.


durham 31 _90Q1092(1)         historicstagville11 w WM