When starting a business in North Dakota, the first step is to assess your idea. You can use several methods to evaluate a venture’s feasibility. At the core, researching the market and potential customers to determine if there is enough demand for your product or service is essential. Additionally, it’s important to consider the competition and how you can differentiate yourself from them.

Want to learn more about a particular business idea and get industry information, trends, costs to start, tips, and more? Our library of over 300 business ideas will help you learn more and take your next steps.

Once a solid business idea is in place, it’s time to start putting the wheels in motion and start working on the business plan. A business plan is a document that outlines your company’s goals and objectives, as well as how you plan to achieve them. It should include detailed information about your market analysis, financial projections, management team, marketing strategies, operational plans, and more.

Many people only consider writing a business plan because the bank asks for one to get funding. While that’s a valid reason, writing a business plan gets the ideas out of the entrepreneur’s head and helps create a roadmap for where they want the business to go. Like most builders wouldn’t build a house without blueprints, an entrepreneur shouldn’t build a business without a business plan.

Related: How to write a business plan

The next step to starting a business in North Dakota is selecting a legal business entity. A business entity (also called a legal or business structure) is how a business is organized to conduct business. It’s important to choose the right type of business entity for your new business, as it will determine how you are taxed and the legal liabilities of the owners or shareholders.

In North Dakota, the most common forms of business entities are sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

A sole proprietorship is a type of unincorporated business owned by one individual. This type of entity offers simplicity and flexibility in terms of management and taxation. However, the owner has unlimited personal liability for all debts and obligations incurred by the business.

A general partnership is similar to a sole proprietorship but involves two or more individuals who share ownership and management responsibilities. All partners have unlimited personal liability for all debts and obligations incurred by the business.

A corporation is a separate legal entity from its owners, meaning it can make a profit, be taxed, and be held legally liable for its own actions, which are legally separate from its owners. The owners have limited personal liability for any debts or obligations incurred by the corporation.

Related: How to form a North Dakota corporation

Finally, a Limited Liability Company (LLC) combines features from both a sole proprietorship/partnership and corporation by providing limited personal liability for its owners while allowing them to manage their own businesses without having to adhere to corporate formalities such as holding annual meetings or keeping minutes.

Related: How to form a North Dakota LLC 

If you are planning to start a business in North Dakota, there are certain licenses and permits that you need to obtain to operate legally. Depending on the type of business and its location, the requirements may vary.

Business Licenses: The state of North Dakota doesn’t have a general business license; however, a city license may be needed to operate a business.

Employer Identification Number (EIN): An EIN is a unique identification number the Internal Revenue Service (IRS) assigns for tax purposes. You can apply for an EIN online through the IRS website. Most businesses, including corporations, multi-member LLCs, and partnerships, will need an EIN. Sole proprietorships with no employees are not required to get one, but they may consider doing so as they will use the owner’s social security number.

Sales & Use Tax Permit: If you plan to sell goods or services subject to sales tax, you’ll need to apply for a Sales & Use Tax Permit with the North Dakota Office of State Tax Commissioner.

Professional Licensing: Some services, such as auctioneers, electricians, door-to-door home repair sellers, cosmetologists, and others, require state licensing in North Dakota.  While this isn’t a license on the business, licensing is required to operate.

Business Name Registration: Sole Proprietorships & General Partnerships operating under a fictitious business name, a Trade Name Registration, sometimes known as a DBA or Doing Business As, will need to be filed with the North Dakota Secretary of State.  

Zoning: Before starting to operate a business (even if it’s home-based), be sure to check local zoning ordinances before starting to operate out of a location.

Related: What business licenses and permits are needed in North Dakota?

Separating business and personal funds is an important step for anyone not only in North Dakota but for any small business owner in general. Maintaining separate accounts for personal and business finances is crucial for several reasons:

Legal protection: If you operate your business as a North Dakota LLC or corporation, keeping your business and personal finances separate is crucial to preserve the limited liability protection. Mixing personal and business funds can lead to “comingling funds” and “piercing the corporate veil,” which means your personal assets could be at risk in the event of a lawsuit or business debt.

Tax compliance: Separating business and personal expenses makes it easier to file accurate tax returns, as it simplifies tracking and categorizing deductible business expenses. It also helps avoid potential issues with the Internal Revenue Service (IRS) during audits, as financial transactions can be easily located.

Financial management: Separating your business and personal finances enables you to have a clearer understanding of your business’s financial health. It helps in tracking cash flow, managing budgets, and making more informed financial decisions for the company.

Credit-building: Establishing a separate business credit profile by using a business bank account and credit card can help you build a strong credit history for your company. This is important when seeking business loans or lines of credit in the future.

Obtaining the funds to start a small business can be a complex and challenging exercise.

Not only are there unfamiliar terms like collateral, equity, assets, liabilities, and others, but there are several sources of funding with different rules, processes, and costs.

From conventional bank loans, Small Business Administration (SBA) loan guarantees, investors, small business grants, and many others, it can be difficult to understand what is available and best for your business. Each funding option has its advantages and drawbacks, so assessing your business’s specific needs and goals is crucial before making a decision.

Related: Understanding the different types of business funding

Hiring employees is our next step, and it’s important to be aware of the regulations and requirements for hiring your first employee. There are federal and state laws and regulations to understand, such as minimum wage, overtime pay, workers’ compensation insurance, unemployment insurance taxes, and labor laws, among other things.

Employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., withholding state and federal income tax, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.

Related: Steps to hiring your first employee in North Dakota

Many small business owners overlook the importance of having adequate insurance coverage and without the right insurance policies, businesses can be exposed to financial risks that can put their future success (and owners) in jeopardy.

Business insurance is designed to protect businesses from potential losses due to accidents, property damage, and other unforeseen events. It can also provide protection against legal liabilities that may arise from injuries or damages caused by employees or customers on the premises.

Every business will have unique needs, but before opening the doors to your business, there will likely be several types of insurance policies that should be considered.

Related: Types of insurance your business may need

It’s easy to underestimate the critical role that bookkeeping plays in the success of a small business. Bookkeeping is the process of recording, organizing, and maintaining the financial transactions of a business. It not only keeps the business compliant with state and IRS tax requirements, but can also be used to track and monitor trends to maximize profits.

Related: Setting up accounting for a business