Guide to Starting an LLC in North Dakota
Starting a business can be an intimidating process. There are so many things to think about – from the initial planning stages to the day-to-day tasks of running your company. If you’re looking for some help in getting your business off the ground, you’ve come to the right place. Here, we’ll provide a guide to starting an LLC in North Carolina. We’ll cover everything from the paperwork required to the taxes and other regulations you need to comply with. So read on for all the info you need to get your business up and running!
Why choose an LLC?
The Limited Liability Company (LLC) is a popular business structure for many new companies starting in the state of North Dakota. The LLC provides personal liability protection and has the potential to save money on taxes. With our guide, 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.
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.
Steps to Form a North Dakota LLC
While it can be intimidating to form an LLC for the first time, with a little research and patience, you can learn how to form an LLC in North Dakota without an attorney.
Let’s break down the steps to complete the North Dakota LLC formation process.
Total Time: 10 minutes
Step 1: Choose an LLC Name
The first step in forming a North Dakota Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of North Dakota. The North Dakota Secretary of State makes it easy to search and verify if your LLC name is available. Here is more information on doing a North Dakota LLC name search.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
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 2: Appoint a North Dakota Registered Agent
Every LLC in North Dakota is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The basic requirements to be a Registered Agent in North Dakota include:
– The agent must be a North Dakota resident at least 18 years of age or a commercial Registered Agent service 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 aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.
Learn more about the requirements for a Registered Agent in North Dakota
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 commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Step 3: File the North Dakota Articles of Organization
The paperwork to officially create an LLC in North Dakota is called the Articles of Organization. To submit the paperwork, file online through the North Dakota Secretary of State, Business Registration Unit’s FirstStop website.
When filling out the Articles of Organization, a few sections and terms can be confusing. Let’s go over a few of these sections to help get your LLC started right.
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.
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.
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 next year. By delaying the start, you may have saved yourself from filing a tax return for a partial year.
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.
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.
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.
Estimated Cost: 135 USD
IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!
You have a North Dakota LLC! Now what???
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, LLC 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.
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
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 is that 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.
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.
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 Secretary of State fee is $50 and is due November 15th of each year.
Common Questions To Starting An LLC In North Dakota
How much does it cost to start a North Dakota LLC?
The state filing fee to start an LLC in North Dakota is $135.
How long does it take to start an LLC in North Dakota?
It normally takes 2-3 weeks for the LLC paperwork to be approved by the North Dakota Secretary of State.
Is there a yearly fee for an LLC in North Dakota?
Each year LLCs must submit an annual report and $50 filing fee to the North Dakota Secretary of State.
Who can be a Registered Agent in North Dakota?
Anyone can act as a Registered Agent, provided they are at least 18 years old, reside in the state of North Dakota, and are generally available to receive documents during normal business hours.
Does an LLC need a business license in North Dakota?
It’s sometimes thought that the LLC and business license are the same in North Dakota, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.
What is a Foreign Limited Liability Company?
A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state but wants to physically operate in North Dakota. Physically operating means having a presence, such as having an office or hiring an employee.
Related: What is a foreign LLC?
What is a Professional Limited Liability Company?
Businesses that require occupational licensing in North Dakota, such as accountants, architects, veterinarians, etc., can file for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.
Is an LLC the same as a corporation?
Should I use an LLC formation service or do it myself?
What is a series LLC in North Dakota?
A traditional LLC is the most common form of LLC, however, some states allow for the creation of a Series LLC. A series LLC is comprised of a parent LLC with one or more individual series within the umbrella of the LLC. The individual series are protected from liabilities and losses suffered by the other individual series and the holding company.
Read more: What is a Series LLC?