I am unable to create a new Note in Notes on my macbook

With iCloud on for Notes, I am not able to create a new Note or folder on 'iCloud' or 'On My Mac'. The button to create a new note is greyed out and clicking on 'New Folder' does nothing. There is nothing on the side panel that I can select.

With iCloud off for Notes, I am able to create a new Note or folder on 'On My Mac'.

However, I would like to create notes with iCloud.

Any ideas how I can fix this? I am on macOS Catalina (Version 10.15.4).