Whether you’ve firmly made the decision to form a North Dakota LLC or you’d like to learn more about the Limited Liability Company (LLC) formation process in North Dakota before you decide to form an LLC, you’re in the right place and congratulations are in order. Starting a new business or expanding your existing business to a new state is always thrilling.
In this article I’ll tell you everything you need to know about the LLC formation process in North Dakota, but before I get into that I’m going to go over some of the fundamentals, like what a Limited Liability Company (LLC) is, and some of the benefits of forming an LLC.
(If you want to skip to the “How to Form an LLC” section, click here.)
Table of Contents
What Is a North Dakota LLC?
A North Dakota LLC is a Limited Liability Company formed in the state of North Dakota that is governed by the laws, regulations, and statutes of the state of North Dakota.
Why Choose an LLC?
Forming a North Dakota LLC has numerous benefits and you’ll be able to list your favorites once you’ve become familiar with how an LLC can help your business. When you compare LLCs to other business structures, such as corporations and sole proprietorships, it’s easy to see that LLCs provide clear advantages to small business owners.
1. Limited Liability and Asset Protection
The first (and possibly the most important) benefit of owning a Limited Liability Company (LLC) is the personal liability and asset protection that LLC owners receive. LLC owners can’t be held personally liable for the business debts or legal obligations of their North Dakota LLC. This is because when you form an LLC, your personal assets and personal liability are considered separate from the business debts and business assets of your Limited Liability Company by the North Dakota Secretary of State.
This means that the creditors of your LLC in North Dakota can’t list or seize your personal property (such as your car, house, or personal finances) to compensate them for the debts owed to them by your business entity. Their options are limited to the assets and profits of your North Dakota LLC.
This is a tremendous comfort to many business owners. No matter what calamity befalls your North Dakota business, (whether it be a natural disaster, economic issue, or even legal trouble) rest assured that you can come away from the experience with at least your own belongings and earnings.
Another benefit of choosing a Limited Liability Company over other business structures (such as a sole proprietorship or corporation) is the protection of your personal information.
If you were to choose a sole proprietorship for your business structure, you would need to register your personal information with the North Dakota Secretary of State, thus listing it on their website (i.e. the public record) for any person to access with a simple search.
Privacy is so important these days because hackers and cybercriminals have become experts at what they do. Your identity can be stolen with a few clicks and a few seemingly insignificant pieces of information (like your name and address), which means that criminals can use your name to run up thousands of dollars of debt in your name before you even know it’s happened.
But when you form an LLC in North Dakota, you have the option to keep your information private and off the public record.
To do so, simply hire a professional service known as an LLC formation service. One of the services they provide is registering their information with the North Dakota Secretary of State in place of yours, so you maintain your privacy, identity and credit score.
LLC formation services can cost as little as $0 plus the state filing fee. However, my favorite LLC formation service is Northwest Registered Agent, and they charge $39* plus the state filing fee.
You can also read my ZenBusiness review to find out more about their LLC formation services.
The last thing we’ll discuss that a business owner can benefit from when forming a North Dakota LLC is the tax benefits that LLCs enjoy. These benefits are most obvious when you compare the way LLCs are taxed with the way corporations are taxed.
If you were to form a corporation rather than an LLC, you would be subject to what is known as double taxation. Here’s how double taxation works:
When a corporation makes a profit, those profits are subject to corporate income tax first, and then, once the post-tax profits have been distributed to the corporate shareholders, the shareholders must pay personal income tax on the dividends they have received. This means that the profits have been taxed twice.
When you form an LLC in North Dakota, you avoid double taxation altogether. Here’s how the taxation of LLCs works:
The profitss from the North Dakota LLC are subject to company tax rates, and then those gains are transferred to the LLC members and it’s considered personal income (rather than dividends, which are subject to higher taxes). Because of this, you will only be required to pay taxes on these earnings once.
There are even more tax benefits, beyond avoiding double taxation, when you form a North Dakota LLC.
The Qualified Business Income Deduction (QBID) is a new tax advantage for Limited Liability Companies (LLCs) that was included as part of the 2017 Tax Cuts and Jobs Act.
This enables most LLC owners to get up to a 20 percent tax reduction—a benefit not accessible to you if you choose another type of business entity. This tax reduction is an excellent reason to form an LLC in North Dakota.
How to Start an LLC in North Dakota
Now that you’re familiar with what a North Dakota LLC is and some of its benefits, you’ll have a better understanding of whether forming an LLC is the right move for you and your North Dakota business. Here are the steps to follow when starting an LLC in North Dakota.
*IMPORTANT* If you’ve never formed an LLC before or you’re nervous about navigating the LLC formation process on your own, a particular type of professional service can make the process go more smoothly for you.
These services are called LLC formation services, and they not only help you gather and file all the formation documents necessary to legally establish your LLC with the North Dakota Secretary of State but also keep your information secure and help you throughout the formation process. They can cost as little as $0 plus the state filing fee, but my favorite is Northwest Registered Agent, which charges $39 plus the state filing fee.
If you’d like to know more about different LLC formation agencies or about the professional service packages that an LLC formation service has to offer your business in North Dakota, check out my article about the best LLC services.
1. Obtain Articles of Organization Form
The first step you must complete on your North Dakota LLC formation journey is to get your hands on a copy of the North Dakota Articles of Organization form from the North Dakota Secretary of State.
Here is a link to the Articles of Organization form from the North Dakota Secretary of State’s FirstStop business form database.
Because the Articles of Organization is the main formation document you’ll need to file in the state of North Dakota, the subsequent steps on this list will refer to this document.
2. Choose Your Business Name
One of the first pieces of information you’ll be required to list on your Articles of Organization form is your LLC name.
However, before you start jotting down the first brilliant idea that comes to you, you must make sure that the LLC name you’re considering hasn’t already been used by another business in North Dakota.
Fortunately for you, this is a straightforward procedure. All you have to do is go to this page on the North Dakota Secretary of State website, type the chosen LLC name into the search box, then click on the “search button” to complete the process.
In a matter of seconds, you’ll be presented with a comprehensive list of every company that has a similar business name. This will allow you to confirm if your chosen LLC name is accessible.
To be legally recognized in North Dakota, your LLC name must include the words “Limited Liability Company,” or one of the acronyms for it, such as “LLC” or “L.L.C.” There are certain other words that will require additional paperwork according to North Dakota naming requirements if you want to use them in your LLC name, such as “bank,” “credit union,” “State Department” or “lawyer.”
Once you’ve decided on a business name and you’ve checked that it’s available, you must file a Reserve Name Application, which you can file online, by mail or by fax along with a filing fee of $10.
If you don’t like the business name that you’ve had to register with the North Dakota Secretary of State, you can register for what is known as a Trade Name, Fictitious Name or DBA (“Doing Business As”) Name. This is the name you’ll present to the world on advertisements, signs, and websites, rather than the official business name you registered with the Secretary of State. You can file online, by mail, or by fax for your Trade name, and you can find the Trade Name Registration form here.
3. Choose a North Dakota Registered Agent
Another important piece of information that your Articles of Organization form asks for is your registered agent. Every North Dakota LLC is required by North Dakota law to have what is known as a “registered agent.”
A registered agent is an individual or business entity that becomes the point of contact for your LLC in North Dakota, and accepts mail, service of process, and legal documents from any government agency on behalf of your North Dakota LLC during business hours. This means that you can choose to take on the role of North Dakota registered agent for your LLC yourself, or you can choose to hire a registered agent service. I’ll go over the pros and cons of both so that you can make an informed decision about whether you want to be your own registered agent.
If you become the registered agent for your LLC in North Dakota, then you should consider the fact that you’ll have to be available to accept mail, service of process, and legal documents from any government agency (such as the North Dakota Secretary of State) during normal business hours. Since it’s likely that your North Dakota LLC also operates during normal business hours, this is a problem because you can’t be in two places simultaneously and you don’t want to stretch yourself too thin performing your registered agent duties.
If you happen to miss a service of process while acting as the registered agent of your North Dakota LLC, then you could be in legal trouble and have no way to defend yourself. Default judgements against your LLC can be financially crippling. Furthermore, if the North Dakota Secretary of State finds that you weren’t available as the registered agent of your business to receive service of process, in accordance with laws requiring your LLC to have a registered agent in the state, they could decide that your LLC isn’t compliant and revoke its “good standing” status, which means that your North Dakota LLC will no longer be able to conduct business in North Dakota.
The only plus side of being the registered agent for your LLC in North Dakota is that you won’t have to pay the fees of a professional registered agent service.
Hiring a professional registered agent service guarantees you will receive mail, service of process, and legal documents that are sent to your North Dakota LLC. This guarantee lessens the risk that your LLC in North Dakota will lose its “good standing” status with the Secretary of State and no longer be able to conduct business in the state.
The only downside to hiring a professional registered agent service is you’ll have to pay their fees, which are typically between $99 and $299 per year.
However, when you consider the risk associated with being your own registered agent, it’s worth it just to pay the fees of a professional registered agent service. Because of this, I ALWAYS recommend that new LLCs use a professional service, rather than trying to take on the role of registered agent themselves.
If you’d like to learn more about the types of services a registered agent can provide, or find the best registered agent in North Dakota, check out my article about the Best North Dakota Registered Agent services here.
4. Choose Your LLC Address
Choosing which mailing address you register with the Secretary of State for your new business is important, as well. Each LLC in North Dakota is required to list a mailing address on the public record.
If you’ve decided to form your LLC without the use of a registered agent service, you’ll have to list the physical street address of your business. If your business doesn’t have a physical address then you’ll have to list your home or office address. Whichever address you choose to register, it’s worth noting that you can’t list a PO Box address.
However, if you do hire a registered agent service, they’ll list their registered agent address as the business address for your LLC, and you won’t have to worry about it.
5. Sign and File Your Articles of Organization
Once you’ve made sure that you’ve filled out all the sections on the form, it’s time to file Articles of Organization for your LLC.
Some of the information required includes:
- LLC name
- LLC mailing address
- Registered agent’s name and address
- LLC effective date
- LLC term of existence (either perpetual or a specific number of years)
- LLC purpose
- Organizer’s name and address
- Organizer’s signature
Of course you can list yourself as the organizer and sign the form yourself, but all of the information you list on the form will be registered with the Secretary of State and listed on the public record.
The Articles of Organization form can be filed online using the FirstStop filing system from the North Dakota Secretary of State, which is also where you can find a PDF form to print out and file by mail or fax. If you’re filing by mail, you can send the form to the following address:
Secretary of State
State of North Dakota
600 E Boulevard Avenue Department 108
Bismarck ND 58505
There is a $135 filing fee, which you can pay with a credit card or debit card if you’re filing online.
Once the North Dakota Secretary of State’s office has processed your form and the filing fee, they will contact you via mail or email. Processing typically takes 24 hours if you file online or 2–3 weeks if you file by mail.
Other LLC Activities
Contrary to what other people may have you believe, filing your Articles of Organization won’t be your last action as the owner of your new LLC. There are many other tasks you’ll be required to complete to maintain your “good standing” status with the North Dakota Secretary of State.
One of the main activities you’ll be required to perform as an LLC owner is filing your annual report. Every LLC in North Dakota is required to file an annual report, which is basically a way for the Secretary of State to ensure that the information they keep on file for your business is accurate and up to date, while also collecting fees for your LLC simultaneously. The first annual report for your LLC is due the subsequent year that you formed your LLC, so you won’t have to file your first annual report the same year you form your LLC.
After your first report, your annual report will be due by November 15th annually, and your submission requires a $50 filing fee. You can file online using the Secretary of State’s FirstStop filing system, which you can access here.
There are a number of stipulations that may require you to obtain business licenses for your LLC. For local business licenses, you can ask the clerk in the city where your LLC operates and conducts business. For state business licenses, you’ll need to check out the business licensing section of the North Dakota.gov website.
If your business performs activities such as collecting sales tax, then you likely need to register with the North Dakota Office of the State Tax Commissioner, which you can do here.
If you don’t live in North Dakota but want to form an LLC in the state, then you can form what is known as a foreign LLC. To form a foreign LLC in North Dakota, you’ll need a Certificate of Good Standing or Certificate of Existence from the Secretary of State in your home state dated no more than 90 days before your filing date, and a registered agent in North Dakota.
The steps to create a foreign LLC are much the same as creating a domestic LLC. You need to file a Certificate of Authority Foreign Limited Liability Company Application, which you can file online, or use the FirstStop system to print out the PDF and file by mail or fax. The filing fee is $135.
If all this sounds like a lot of work, that’s because it is. If you’d like some help keeping track of all the filing dates, forms, and licensing rules, you could hire a North Dakota PEO service as well as online legal services to lessen some of the burden.
North Dakota LLC Fee Summary
When you’re learning how to form an LLC in North Dakota, it’s only natural to wonder about how much it will cost to form an LLC in North Dakota. Here’s a list of the filing fees and taxes you can expect to pay for your North Dakota LLC:
Articles of Organization filing fee: $135
Name Reservation filing fee: $10
Registered Agent Fee: $99–$299 per year
Annual Report filing fee: $50
State Personal Income Tax: 1.10%–2.90%
State Corporate Income Tax: 1.41%–4.31%
After Starting Your North Dakota LLC
Forming an LLC is a major business victory, and it’s one that’s worthy of celebration. So take a moment to enjoy a glass of champagne, go out to dinner or have a nice weekend trip. But don’t stay gone for long. There’s still work to be done to ensure that your LLC has all the foundations it needs to function well as a business. Here are the three steps you need to complete after you’ve formed your LLC.
Step 1. Create an Operating Agreement
Although North Dakota law doesn’t require LLCs to draft Operating Agreements in order to transact business in the state, it is highly advisable.
The purpose of an LLC Operating Agreement is to provide your business with instructions about how it should operate. A good LLC Operating Agreement should list each LLC member, detail whether the LLC is member or manager-operated, designate which members have the authority to make decisions for the company, and describe the ownership percentages of each member as well as their shares of profits and losses.
Your Operating Agreement should also describe the roles of each LLC member, who their supervisors are, the members and departments they should most closely work with and the roles of each department. If your Operating Agreement is equipped with explicit instructions on the operation of your LLC in this way, it will prevent many workplace disagreements.
Your Operating Agreement should also include a section that describes the succession protocol for LLC members. Many business owners leave this section out of their Operating Agreements, but it’s important. Adding this section to your Operating Agreement means that your LLC members will have clear instructions about what to do if an LLC member leaves or if new members join, which means that there will already be a plan in place in the event that a disagreement between LLC members results in someone leaving.
Your Operating Agreement is crucial to the success of your business because it dictates how it will function. Your business is required to operate according to the instructions outlined in your Operating Agreement, so a faulty instructional framework could stifle your business. But getting your Operating Agreement right means that your business is able to grow without being held back by operational instructions that don’t allow room for things like change and innovation.
If you haven’t written an Operating Agreement before, a few options are available to ensure that you get it right. The first is the free Operating Agreement template that Northwest Registered Agent provides for LLCs. You also have the option to hire an online legal service to guide you through drafting your Agreement so that you get the legal wording right. And, of course, if you hire an LLC formation service they will typically draft an Operating Agreement on behalf of your company as part of their services.
Step 2. Apply For an Employer Identification Number
The next step is to apply for a North Dakota EIN (Employer Identification Number) for your LLC. An Employer Identification Number or EIN is a type of federal tax identification number that you need if you plan on collecting sales tax or hiring employees and it will qualify your LLC for certain business licenses and permits. Of course, you aren’t required to hire employees or to collect sales tax to obtain an EIN; this is simply a number that identifies businesses for federal taxes and makes it easier to pay employees.
It’s quite easy to obtain an EIN from the Internal Revenue Service. All you have to do is go to the Internal Revenue Service (IRS) website here between 7 a.m. and 10 p.m. to fill out the application and submit it online.
If you’ve hired an LLC formation service, they’ll typically apply for an EIN on behalf of your LLC, which saves you time and hassle.
Step 3. Open a Business Bank Account
The last step on your journey to provide your LLC with the proper business foundations is to open a business bank account to keep track of your business finances.
This important step is often overlooked by LLC owners, but it’s well worth the trouble.
Many business owners use their personal bank accounts for both business expenses and personal expenses and then try to determine for tax purposes whether an old transaction was made for a business purpose. There are two very good reasons not to do this.
The first reason is that although you may think you’ll know the difference between business and personal transactions later, it’s a lot harder to make that determination several months after the transactions were made, especially when you try to determine the difference between several hundred transactions. Because of this, opening a business bank account that is dedicated to business transactions makes tax season a lot less stressful.
The second reason you shouldn’t use your personal bank account for business expenses when you form an LLC is that it puts your personal information, identity, and personal finances at risk. Using your personal bank account for business transactions negates the limited liability and personal asset protection you gain when you form a North Dakota state LLC.
So to save yourself undue stress during tax season and to maintain your privacy and personal asset protection, open a business bank account.
To open a bank account for your LLC you’ll need what is called a “bank kit.” This kit includes a number of documents, such as your EIN, Operating Agreement, and Articles of Organization. You can gather up these documents yourself and get certified copies of them, or hire an LLC formation service which will prepare a bank kit for you.
Starting a North Dakota LLC is a momentous occasion, and you should be applauded for having the bravery to take charge of your professional life, so congratulations!
If you decide not to use an LLC formation service (which can cost as little as $0 plus state filing fees), there are five important steps you must take in order to establish your North Dakota LLC. They are as follows:
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
While navigating through the red tape and legal language is a difficult procedure that takes up a lot of your time (especially if you’re doing it on your own), finishing it will be the first of many rewarding phases you’ll complete on the road to establishing your entrepreneurial empire.
So, once again, congratulations and best of luck to you on the rest of your business path!