Hiring your first employee in North Carolina triggers reporting obligations with three different state agencies — on top of anything you already handle with the Secretary of State. Here’s a plain-language rundown of what kicks in.
NC Department of Revenue — withholding tax
Hiring employees means you’re now responsible for filing and paying state withholding taxes with the NC Department of Revenue. Set this up correctly from day one — getting it wrong creates problems for both you and your employees down the line. Details and a compliance checklist are at dornc.com.
If your business also makes taxable sales of goods, services, or certain digital property, you separately need to register with the Department of Revenue to collect and remit sales tax.
Division of Employment Security — unemployment insurance tax
Unemployment insurance tax is paid by employers — it is not deducted from employee wages. You’re generally liable for it once you have at least one worker in 20 different calendar weeks in a year, or a payroll of at least $1,500 in any calendar quarter.
To apply for a NC unemployment tax account number, you’ll complete Form NCUI 604 (Employer Status Report), available under Business Services > Forms at des.nc.gov.
NC Industrial Commission — workers’ compensation insurance
Any NC business with three or more employees — regardless of entity type — must carry workers’ compensation insurance or qualify as self-insured. A few narrow exceptions exist (certain railroad, casual, and domestic employees, small farm operations, and federal employees), but most businesses don’t qualify for them.
A few things worth knowing:
- Calling someone an “independent contractor” and issuing a 1099 doesn’t automatically get you out of this — the Industrial Commission looks at the actual working relationship, not the label.
- If you subcontract to someone without their own workers’ comp coverage, you can be liable for their employees’ work-related injuries.
- Skipping required coverage can mean financial penalties, misdemeanor or felony charges, and even imprisonment.
If you’re not sure where your business stands, talk to your lawyer or insurance agent, or reach the NC Industrial Commission directly at (919) 807-2500 or ic.nc.gov.
Bringing on your first hire and want a hand keeping the paperwork straight? NC LLC Agents can help you stay on top of your ongoing compliance obligations as your business grows.