Step-by-Step Guide to Forming an LLC in North Dakota

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North Dakota LLC Quick Facts

How much does it cost to form an LLC in North Dakota?

Initial LLC Filing Fee – $135

 

Recurring State Fee: Annual Report – $50

How long does it take to get an LLC in North Dakota?

It normally takes 2-3 weeks for the LLC paperwork to be approved in North Dakota.

Don’t want to form an LLC by yourself?

Let IncFile or IncAuthority guide you through the LLC formation process, so you know everything was done right. Only pay state fees!

Quick Reference

The Limited Liability Company (LLC) is a popular business entity choice structure for many businesses starting in the state of North Dakota.  The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in North Dakota without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Related: How Does an LLC Protect You?

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Costs to Form an LLC in North Dakota

To form a Limited Liability Company in North Dakota, file the Articles of Organization with the North Dakota Secretary of State.  The LLC filing fee is $135.

Approval time for the LLC is typically between 2 and 3 weeks.

Professional Limited Liability Company

Businesses that require state licensing and offer professional services such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. have the option of filing for a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to the LLC outlined below.

Foreign LLC

Instead of creating a new LLC, an out-of-state LLC wanting to do business in North Dakota will have to register as a foreign LLC by filing a Certificate of Authority Foreign Limited Liability Company Application with the North Dakota Secretary of State.

Steps to Form a North Dakota LLC

Begin by visiting the North Dakota FirstStop website or by downloading the Articles of Organization.

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

Step 1: Purpose of the LLC

In the first section, you are asked whether the LLC is being formed for general business purposes or farming.  Select the one that applies.

Step 2: Name the LLC

Enter the name you want for the LLC.  The LLC’s name also has to differ from other entity names registered with the Secretary of State.  Check on LLC name availability in North Dakota before filing to be sure the one you want is available.

Additionally, the name of the LLC must include the following phrase or abbreviations at the end of the business name:

  • Limited Liability Company
  • L.L.C.
  • LLC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

If there is a name you want to use but aren’t ready to form the LLC, the Name Reservation Application can be filed to hold the name for up to 1 year. The state filing fee for a name reservation is $10, paid to the Secretary of State.

Before settling on a name, you may want to see if a domain name is also available in order to match your North Dakota business name and website address.

Step 3: Address of Principal Executive Office

In this section, enter the street address, city, state, and zip code of the initial principal office.  This address must be in North Dakota and can be the LLC’s physical address, or it can be the address where the business records are stored.  You may not use a PO Box for the designated office.

Step 4: Registered Agent

To have an LLC in North Dakota, a Registered Agent must be identified.  The Registered Agent can either be a resident of North Dakota (Select “noncommercial registered agent”) or a Registered Agent service (Select “commercial registered agent”) that is registered with the Secretary of State.  See the Secretary of State’s Commercial Registered Agent List.  The agent must have a physical address in the state (PO Boxes are not allowed), be available during normal business hours, and act as a point of contact to receive important legal and tax documents, summons, subpoenas, etc. on behalf of the LLC.

You are not required to pay for a registered agent. Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from their personal residence or still employed.  Hiring a company like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.

Step 5: Effective Date

If you want the LLC to start on today’s date, choose the box that says, “When filed with the Secretary of State.”  Otherwise, select the box that says “Later on (month, day, year)” and enter a date less than 90 days in the future to start.

The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business will not have any activity until the start of the year.  By delaying until the following year, they will reduce the number of end-of-year filings.

Step 6: Term of Existence

In this section, you can indicate how long the LLC will remain in existence.  Most LLCs will choose a perpetual/indefinite existence; however, some businesses (usually investment-related) will have a specific closure date.

Step 7: Business Description

In this article, you can either adopt the default statement of being in business for “any lawful purpose” or provide some basic information about what the business does. It’s generally better to keep a broad statement in case the focus of the business ever changes.

Related: How to Answer the Business Description Statement.

Step 8: Other Provisions

This is an optional section and not used by most LLCs.  Here you would include additional rules for the operation of the LLC.

Step 9: Name, Address, and Signatures of Organizers

An LLC Organizer is someone involved with the formation of the Articles of Organization.  The Organizer may or may not become a member, such as a mentor, attorney, or accountant, but the initial members will all be listed as organizers.

List each organizer along with their mailing address and have them sign.

Step 10: Pay and File

Mail the Articles of Organization along with payment to:

Business Registration Unit
Secretary of State
State of North Dakota
600 E Boulevard Ave Dept 108
Bismarck, ND 58505-0500

In approximately 2-3 weeks, the LLC will be approved.

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Tasks After Forming Your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a North Dakota LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: North Dakota operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Occasionally, the bank will request a North Dakota Certificate of Good Standing to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as contractors, electricians, cosmetologists, and others must be licensed.
  • Sales & Use Tax Permit – To sell products and certain services, registration with the North Dakota Office of State Tax Commissioner will be necessary.

Related: What Business Licenses are Needed in North Dakota?

Get Business Insurance

Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:

General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won’t cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – mandatory in most states if you have employees, this insurance covers medical expenses that occur because of an accident or injury that happens to one of your employees while they’re at work.

Related: 7 Types of Insurance Your Business May Need

File the Annual Report

LLCs are required to file an annual report with the North Dakota Secretary of State through their FirstStop online filing system.  The annual report state fee is $50 and is due November 15th of each year.

Related: How to File a North Dakota LLC Annual Report

 

Common Questions When Starting An LLC

You can act as your own registered agent, provide you are a resident of the state and are generally available during normal business hours. 

It’s sometimes thought that the LLC and business license are the same, which they aren’t.  Business license requirements vary by location and the type of business being operated. 

An out-of-state LLC wanting to do business in another state will have to register as a foreign LLC with the new state’s Secretary of State.

Businesses that require state licensing and offer professional services such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. often must file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.

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