If you’re thinking about starting your own Limited Liability Company, then it’s important that you learn about the process, including formation times. LLC owners typically don’t have to deal with the lengthy incorporation times and strict regulations that corporation owners do, and they enjoy tax benefits as well as personal asset protection. In this comprehensive guide, we’ll tell you about the business environment in the state, how to start an LLC in North Dakota, and describe formation timelines for you.
Discovering North Dakota
North Dakota is called “The Peace Garden State” because it’s home to the International Peace Garden, which symbolizes a treaty between the U.S. and Canada and the peace between the two nations. It’s bordered by Minnesota, South Dakota, and Montana in addition to Canada. The Rocky Mountains make an appearance in the Western part of the state, as well as the Red River in the Eastern part. Because of the fertile banks of the Red River, many farms are located along it. You’ll also find hills, lakes, valleys, wetlands, and North Dakota’s highest point: White Butte. And because it was at one time completely underwater, there are a lot of fossils found in North Dakota, like clams, fish, and mosasurs.
North Dakota’s natural resources mostly come from mining. It’s home to the world's largest lignite deposit. Lignite is a variety of brown, soft coal, which has been mined there since 1873 and astoundingly there’s still enough there to last approximately another 800 years. There’s also a lot of oil, gas and petroleum in the state.
Economic Overview of North Dakota
North Dakota’s GSP, or Gross State Product, is $55.1 billion, and it had a 14.0k% growth rate from 2018-2023. The top industries by revenue in the state are Oil Drilling & Gas Extraction, Corn, Wheat & Soybean Wholesaling, Petroleum Refining, Oil & Gas Field Services, and Scientific Research & Development. The companies that employ the most people in North Dakota are Commonspirit Health, Trinity Health, Walmart Inc., Sanford Health and North Dakota state University. And the sectors that contribute the most to the state’s Gross Domestic Product are Mining, Agriculture, Forestry, Fishing & Hunting, Healthcare & Social Assistance, Real Estate & Rental & Leasing, and Manufacturing.
Business Environment in North Dakota
Usnews.com ranked North Dakota as #50 for Business Environment, #4 for Employment and #48 for Growth. It rated it #38 for Long-Term Fiscal Stability and #1 for Short-Term Fiscal Stability. Those numbers in particular should give you a good understanding of why it’s rated so low. It’s ranked #12 for Affordability and #14 for Economic Opportunity.
With a Cost of Living Index of 91.1 (the national number is 100.0) and a median household income of $66,519 (national average is $69,717), it’s easy to reckon that the state is relatively inexpensive.
State-Specific Regulations and Incentives for Forming an LLC in North Dakota
North Dakota offers a handful of incentives for business owners in the state.
- Property Tax Exemptions: Primary sector businesses, whether new or expanding, could qualify for a property tax exemption for up to 5 years. And some businesses can work with local authorities to create a PILOT (payment in lieu of taxes) deal for as long as 20 years.
- Renaissance Zones: The state has established Renaissance Zones, and if your business locates in one of them then you could qualify for state income as well as local property tax exemptions for projects, plus historical tax credits.
- Agricultural Commodity Processing Facility Investment Tax Credit: This tax credit equals 30% of an investment made in an agricultural commodity processing facility in the state. You can’t use more than $50,000 of the allowable tax credit per tax year, and there’s a limit of $250,000 for all tax years. Agricultural commodity processing facilities include those that involve the feeding, handling, milking of livestock, and holding operations which use by-products that were manufactured at biofuel production facilities.
- Sales and Use Tax Exemptions: Facilities that generate electricity, process agricultural commodities, manufacture products, process gas, refine oil, or are qualified as primary sector businesses (telecommunication and computer equipment) are exempt from sales and use taxes on certain materials and equipment.
- Income Tax Exemptions: Tourism businesses and certified primary businesses can receive an income tax exemption for as long as 5 years.
- Research Expense Credit: Some businesses can receive a corporate income tax credit depending on their research expenditures in the state. If their expenditures are above the designated base amount, then they get a credit of 25% of the first $100,000 in QRE, or qualified research expenses plus 8% for expenses over $100,000. Unused taxes can be carried back for three years, or forward for 15 years.
- Income Tax Exemptions: Certain primary businesses and tourism businesses can qualify for an exemption on income taxes for up to 5 years.
- Direct Financial Assistance: Low-interest loans as well as grants are provided through the Division of Community Services, the North Dakota Public Finance Authority, The Bank of North Dakota, the Agricultural Products Utilization Commission and the North Dakota Development Fund.
- North Dakota New Jobs Training Program: There are a variety of training programs for businesses which are accomplished through loans and grants. State income tax withholding credits from the new employees are used to repay the loans either partially or in full. The state government also provides assistance in recruiting, screening, as well as testing potential new trainees.
Pros and Cons of Establishing an LLC in North Dakota
There are both benefits and downsides when it comes to business ownership in North Dakota.
Tax rates are low in the state. It has a corporate income tax rate of between 1.41- 4.3%, a personal income tax rate of between 1.10 and 2.90%, and sales taxes in the state are 5%, although with the addition of local taxes they can go up to 8.5%. In particular, the personal income tax is great for LLCs because they’re typically taxed as pass-through entities.
It’s relatively cheap to start an LLC in North Dakota, with formation fees of only $135. That’s important because a lot of entrepreneurs are hyper-aware of initial formation costs. In comparison, Massachusetts has a $500 filing fee.
64% of the state’s population is within working age. That means the majority of the state makes up its pool of workers.
And it has a Business Survival Rate of 77%.
But it’s not all good.
WalletHub points out that even though the state has a huge workforce, the human capital in the state is so low it was ranked 49th in the country. So even though there are workers in the state, they aren’t well-skilled, diverse, or educated. Add to that the fact that the state has an unemployment rate of only 1.9%, and that means that you’re left with a small pool of people to fill your position. You’ll have to compete with other businesses in the state to attract employees, too, which means offering incentives and benefits, which can be costly. And once you do finally attract an employee, because of the low levels of human capital in the state, they likely won’t bring much to the table. The state-wide staff shortage is really affecting companies.
Labor costs landed it in 32nd place, which means the cost of doing business in the state is expensive. The average cost of general labor in the state is $20 per hour, while the nationwide average is $18 per hour.
And the Average Growth in the Number of Small Businesses in North Dakota was ranked 47. So while it’s easy for some businesses to survive in the state, it’s incredibly difficult for them to grow. During the past couple of years, BisMan Food Co-Op, Crossroads and Borrowed Bucks’ Roadhouse have all closed.
Procedure of Establishing an LLC in North Dakota
Before you blaze the trail and form your LLC, you need to know how! Here’s everything you need to know about LLC formation in the state of North Dakota.
Necessary Documentation for Filing an LLC in North Dakota
Let’s get right to it. The first thing you need to do is gather up all your documents and applications. Here are the documents you’ll need when filing.
- Articles of Organization Form: The Articles of Organization form is basically your application to get an LLC. A lot of important information about your business is required on this form, such as its name, duration, purpose, address and registered agent, as well as a list of LLC members and an explanation of its management style.
- Operating Agreement: The Secretary of State doesn’t make creating an Operating Agreement a legal requirement for LLCs, but it strongly suggests it. An Operating Agreement provides a lot of information about how LLC members should behave and how your business will operate, and you can refer to it any time a problem arises or you get stuck. Some of the things it includes are contact information for each LLC member and an explanation of the roles and contributions of LLC members, a detailed description of the shares of each member and how profits and losses will be distributed among them, how to add or remove members (including what to do if a member dies), and information for managers, such as voting rights and meeting schedules.
- Employer Identification Number (EIN): An Employer Identification Number, or EIN, is how government agencies identify your business. It’s handy when filling out forms because you can use it instead of your Social Security Number, which adds a layer of privacy and protection, and you’ll need one to hire employees and to open a business bank account. You can get one for free and receive it immediately on the IRS website.
- Name Reservation Application: After you’ve decided on a good name for your company, you must file a “Reserve Name” application with the North Dakota Secretary of State.
- Initial Report: In North Dakota, LLCs are required to file annual reports. The first one must be submitted with your Articles of Organization. After that, your annual report is due the next year after you’ve formed your LLC.
- Tax Registration: Not only do you need to register your new business with the IRS, you need to register it on a state level. This helps for things like collecting sales tax, and makes paying state income taxes a bit easier. To register, sign up with the North Dakota Office of the State Tax Commissioner.
- Business Licenses: Your business is likely to need a business license from the state government, as well as licenses and permits from county and local governments. To find out about business licenses on the state level, check out the business licensing tab of the North Dakota.gov website. For county and city permits, check in with county and municipal clerks.
Legal Requirements for Starting an LLC in North Dakota
Here’s a step-by-step guide for forming a Limited Liability Company in North Dakota.
- Get an Articles of Organization Form: This is the primary formation document in North Dakota, so it’s vital to the LLC formation process. You can obtain one from the North Dakota Secretary of State.
- Pick a Viable Business Name: There are a lot of requirements involving business names. For instance, they can’t be too similar to each other, so if another business in North Dakota is using a business name that’s close to the one you want to use, it’s not legal for you to use it. To find out whether the business name you’ve chosen is available to use, you can run perform a business search on the Secretary of State website. Once you’ve found one that’s available and meets all of the legal requirements, you also need to file a “Reserve Name” application.
- Carefully Choose a Registered Agent: Every LLC is required to have a registered agent, which is a person or business that will accept mail and service of process for your business at their address during business hours. There are a few legal requirements registered agents must meet, like having a physical address in the state, but other than that you’re allowed to choose anyone you want for the role, like a family member or friend, or a professional registered agent company. Because your registered agent can mean the difference between the life or death of your business, and can affect the good standing of your entire company, many business owners choose to hire a professional registered agent service for added assurance.
- Choose Your LLC Address: Your business address is listed on the public record so that government agencies, customers and process servers can contact you. But that means that using your home or personal address isn’t the best option because it causes a number of privacy issues. To avoid this, you could request to use your registered agent’s address, or look into a virtual address for your business.
- Sign and File Your Articles of Organization: Ensure that all of the forms are completed and that the information is accurate, then sign and file them. You must submit the Articles of Organization to the North Dakota Secretary of State. And if you sign them yourself, then you’ll be publicly listed as the LLC organizer for your company, which you can avoid by using an LLC formation company instead.
Time Frame for Establishing an LLC in North Dakota
This is the main event! In this section we’ll tell you all about how long it will take to get your LLC in North Dakota.
How Long Does the Initial Paperwork Take in the State of North Dakota?
Approval time is the complete time from when you submit your documents until your LLC is finally approved, which includes processing times. Approval time to file by mail takes somewhere between 2-3 weeks, or 5 business days if you file online.
Processing Times in the State of North Dakota
Processing time for mail and online filing takes 5 business days (plus mail time in the event of mail filing).
Common Delays in the LLC Formation Process in North Dakota
There are a few things that can slow the formation process, and you should know about them before you file.
- Volume of Filings: When the Secretary of State’s office is swamped with applications, it understandably takes them longer to process them all. Many LLC applications require manual review by an actual person, and if you add hundreds of filings to that equation it could cause longer processing times.
- When You File: Certain times of the year or week could affect your processing times. Most businesses file at either the beginning or the end of the year, which causes a delay in processing times due to high filing volume. And because the Secretary of State’s office only processes filings on business days, filing on, before or during a holiday or weekends could delay the formation process because no one will be in the office on those days.
- Document Errors: Your formation documents are expected to be pristine, with no errors, typos, or any other such funny business, and all of the information requested must be included. On top of all of that, you’re usually required to include two copies of your Articles of Organization. If you make a mistake, forget to add information, or don’t include the required number of copies, then your application could be rejected. And the time it takes you to correct the information and re-submit your documents will certainly cause a delay.
Expedited Processing for LLC Formation in North Dakota
Anyone who’s interested in getting an LLC in a rush will understandably be interested in information about expedited processing, which is what this section of the guide covers.
What Are the Expedited Options Available?
Unfortunately, the state of North Dakota doesn’t offer any expedited processing options. The fastest way to get an LLC in the state is to choose online filing.
Additional Costs for Expedited Services in North Dakota
Ordinarily, expedited service fees are an extra fee you have to pay in addition to the state filing fee. But since North Dakota doesn’t offer expedited processing, you won’t be charged any extra fees for it.
Comparing LLC Formation Time Frame in North Dakota with Other States
There are numerous reasons to compare the formation time frames of other states with North Dakota’s. For starters, it helps to put the time frames in the state of North Dakota into perspective. And for another, it could help you decide whether you’d rather form a foreign LLC and fill out the Certificate of Authority Foreign Limited Liability Company application.
Brief Comparison with Key States
Just to recap: processing time to file online or by mail is 5 business days, and there isn’t an expedited processing option.
North Dakota isn’t the only state not to offer expedited processing, so we won’t knock it for that. There are a couple of states with insanely slow expedited processing, however. Maryland has 7 day expedited processing, and Arizona has a 5 day expedited option. When it comes to online filing, it could be slower. It takes 14-16 days in Arizona, 2 weeks in Maryland, and 13-15 days in Texas. And 5 day processing for mail filing isn’t the slowest, either. It takes 5-8 weeks in Maryland, 5-6 weeks in Washington, 6 weeks in Pennsylvania, and 8 months in New York.
There’s definitely faster options, as well. West Virginia, Nevada, Montana, Michigan and Delaware all have 1 hour expedited processing options. Quite a few states offer immediate processing for online filing. And believe it or not, Ohio and Kentucky have 1 day processing on mail filing.
Why is North Dakota a Favorable Place for Forming an LLC?
North Dakota is a good choice for forming an LLC because it has low filing fees, which cut down on business startup costs, low tax rates which are great for any business, and a high business survival rate which indicates that new businesses have a shot in the state.
