Sole proprietorship vs C corp in North Carolina: which costs less (2026)

At $100,000 profit in North Carolina, a sole proprietorship costs $25,564 a year in tax and fees and a C corporation costs $28,856. On these figures a C corporation does not cost less at any profit up to $500,000.

+$3,292 a year

more for a C corporation than a sole proprietorship in North Carolina, at these numbers.

With these settings the switch does not pay at any profit from $10,000 to $500,000. Setting up costs $125 once in state filing fees.

North Carolina, 2026: $100,000 profit, single filer

Item	Sole prop	C corp	Change
Self-employment taxirs.gov, 2026 rates	$14,130	$0	−$14,130
Federal income taxirs.gov, 2026 rates	$8,235	$5,098	−$3,137
State income taxncdor.gov, checked Oct 23, 2026	$3,199	$2,766	−$433
Annual Reportsosnc.gov, checked Oct 23, 2026	$0	$18	+$18
Payroll tax on your salaryirs.gov, 2026 rates	$0	$6,504	+$6,504
Payroll service and tax return (estimate)	$0	$2,000	+$2,000
North Carolina franchise tax (C corporation)ncdor.gov, checked Oct 23, 2026	$0	$200	+$200
State corporate income taxncdor.gov, checked Oct 23, 2026	$0	$1,087	+$1,087
Federal corporate income tax (21%)irs.gov, 2026 rates	$0	$11,183	+$11,183
Yearly cost	$25,564	$28,856	+$3,292

What these figures count

State income tax, and state taxes on the business itself: franchise, LLC, S corp, gross receipts and excise taxes.
Social Security and Medicare on both sides of an owner salary, federal unemployment tax and the state's new-employer rate.
The 20% qualified business income deduction with its income limits and the professional-service rule.
Yearly report fees, and a cost you can change for payroll and the business tax return.

Many S corp calculators leave out state taxes and the QBI deduction, which can make the election look better than it is.

Yearly cost at each profit level

Profit	Sole prop	C corp	Difference
$30,000	$5,785	$7,837	+$2,052
$50,000	$11,077	$13,146	+$2,069
$75,000	$17,767	$19,563	+$1,796
$100,000	$25,564	$28,856	+$3,292
$150,000	$42,660	$48,727	+$6,067
$200,000	$60,338	$67,783	+$7,445
$300,000	$102,970	$107,435	+$4,465

Federal and North Carolina tax and fees, single filer, revenue 1.5 times profit, default salary for S and C corps. "Difference" is C corporation minus Sole proprietorship.

What the switch takes in North Carolina

File the Articles of Incorporation (Form B-01) with the state: $125 (fee).
Get an EIN from the IRS (free, online) and open a business bank account in the new name.
Incorporate with the state, then issue shares to yourself.
Register with North Carolina as an employer and run payroll for your own salary: federal Forms 941 each quarter, Form 940 and a W-2 each year. New employers pay North Carolina unemployment tax at 1% on the first $34,200 of wages. des.nc.gov See what payroll costs.
Federal return each year: Form 1120, due April 15 for a calendar year.
State upkeep each year: Annual Report, $18 a year, due 15th day of the 4th month after fiscal year end (April 15 for calendar year). New for you: North Carolina franchise tax (C corporation).

What changes between the two

A C corporation pays 21% federal tax and North Carolina corporate tax on its profit, and the owner pays tax again on dividends (the double tax). A sole proprietorship pays no federal income tax itself: profit lands on the owner's return, where the 20% qualified business income deduction can apply.

The figures assume all C corp profit after tax is paid out as dividends. Profit kept in the company to grow it is taxed only at the corporate rate until it is paid out, which is where a C corp can come out ahead.

Questions

How much does it save at $100,000 in North Carolina?

Nothing. C corporation costs $3,292 a year more ($28,856 against $25,564).

When does a C corp make sense in North Carolina?

Mostly when profit stays in the company, when outside investors need one, or for the qualified small business stock exclusion. For an owner who takes the profit out, the second tax on dividends usually costs more. On these figures it never costs less up to $500,000.

More for North Carolina

Common cases in North Carolina

Other states