The pandemic spurred a flurry of new business creations, so much so that the onslaught of applications momentarily overloaded the N.C. Secretary of State’s office.
Onset by job interruptions, the entrepreneurial swell of new business applications that began in 2020 has continued to roll in steadily in North Carolina. Meanwhile, it has dropped off more sharply elsewhere in the country, according to Secretary of State Elaine Marshall.
“It’s been an 18-month explosion,” Marshall said Tuesday. “It has made us almost dizzy – it’s unbelievable.”
Starting around June 2020, filings for new businesses in the state began steadily climbing, and by 2021, they had skyrocketed.
Last year’s total broke the state record, at 178,300 new businesses created statewide, a 40% jump from the 2020 total and 77% higher than 2019, when 100,300 new businesses started, according to N.C. Secretary of State data.
First-quarter filings this year broke another state record, 4% ahead of the first quarter of 2021. Including the second quarter, the first half of 2022 statewide tracked closely behind 2021, at 93,000 new business creations compared to 96,000 (a 3% dip).
New filings locally have shown similar trends: Between the first halves of 2019 and 2021, new business filings more than doubled in New Hanover County, spiking 123% from 1,202 to 2,687 for the first two quarters of each year, respectively. Activity in the first two quarters in New Hanover County this year has tamed, down 10% year-over-year to 2,409 – still double pre-pandemic numbers.
The latest quarter was the third-most robust for new filings in state history, behind the first quarter falling in second place, lead by the second quarter of 2021. Local trends appear to mirror these quarterly records, according to N.C. Secretary of State spokesperson Tim Crowley.
In Brunswick and Pender counties, new filings are still breaking records. Over 1,000 new Brunswick County businesses registered with the state in the first two quarters this year, more than doubling the first half of 2019 and up about 7% over last year’s record pace.
New Pender County filings reached 565, up from 522 in the first half of last year, dramatically higher than the 236 seen in the first two quarters of 2019.
In general, Marshall described this year’s continued strong pace as the continuation of a post-pandemic turning point.
To cope with the surge, Marshall’s office quickly instituted new technology in fall 2020 to help streamline the filing process by ensuring applicants could only move forward if they had accurate information entered into the system, cutting down on staff time and user errors.
“If there's one thing that irritates business people, that is a delayed turnaround – and that's unacceptable in this day and time,” Marshall said. “They don't have to form in North Carolina. They could form somewhere else and then domesticate here. But we are far better than our neighbors, the logical places that folks might think to go to form [businesses].”
If applicants have everything prepared with no errors, it takes the state between three and five days to approve a new business filing, Marshall said. There are also expedited options available for an upcharge whereby new businesses can obtain same-day approval.
Marshall touts her office’s transparency and quick turnaround times, which allow business filings to quickly appear in the state’s free online database. “We have free access to our database, which contains a lot of information that businesses would need to make good decisions,” she said, citing the availability of lending documents, bankruptcy filings and collateralized assets online.
“I have people that tell me they check every day,” she said. Roughly half a million items are viewed on her office’s website daily, she said.
Some portion of the initial spike in filings was driven by businesses frantically seeking reinstatement to be eligible for Paycheck Protection Program funds, Marshall acknowledged.
In general, it’s difficult for the N.C. Secretary of State to track economic impact or job creation prompted by the new businesses, Crowley said.
Some single-purpose corporations are formed simply to hold land, Marshall said. “If you drive by a new fast food place going up, that could possibly be three LLCs,” Marshall said. “The numbers are not as clear to be able to tell us about the economic activity of the individual corp.”
However, the overall trend can be attributed to a wave of entrepreneurialism, Marshall said.
Filings for minority- and women-owned businesses spiked by the double digits, according to Crowley. Child care responsibilities and disrupted school routines may have prompted the boost in female-led filings. “It was a way that people could add a little more certainty to their life,” Marshall said.
In the office’s 2021 survey of new businesses created in 2020, Marshall said they found the majority of businesses reported they “saw an opportunity” as the reason for creating the new venture; this challenged Marshall's assumption that losing a job was the primary motivation.
Marshall said she hopes the entrepreneurial trend continues throughout the year. Major projects the state recently landed, including VinFast, Boom Supersonic and the new Toyota battery plant, will spin off new suppliers, she said.
“All of those are going to attract other businesses,” she said. “The opportunities here in North Carolina, in my opinion, are unlimited for creative people and hard-working [people].”