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There are all kinds of benefits to starting and running a business in North Dakota, from tax incentives to enterprise zone programs. With a small yet industrious population, North Dakota provides exciting opportunities for new companies to carve out a niche and leverage its hungry workforce. Whether you launch your LLC in the remote Black Hills or the bustling streets of Fargo or Bismarck, here are the 11 steps to make it happen.
What is an LLC?
A limited liability company, or LLC, is a type of business entity common among small-business owners in the US. A significant advantage of running an LLC is the personal asset protection the business structure affords. Owners are generally not held financially responsible for the LLC’s business debts or legal claims. LLC owners are known as “members.” LLCs formed by one owner are single-member LLCs, whereas those created by more than one owner are called multi-member LLCs.
Is an LLC right for you?
The LLC isn’t the only business structure available to North Dakota business owners. To determine whether it’s the right fit for your new venture, consider the following:
- Do you have personal assets in need of protection? Forming an LLC in North Dakota can shield most or all of your personal assets if your business declares bankruptcy or is sued.
- Are you looking to limit your tax liability? Unless your LLC elects to be taxed as a C corporation, it’s considered a “pass-through” entity—meaning the business is subject to a single round of taxation on members’ income (personal income tax), as opposed to so-called “double taxation” (corporate and income tax). This means, by default, LLCs do not pay corporate taxes.
1. Name your North Dakota LLC
Naming your LLC is one of your most important decisions as a North Dakota small business owner. A good name is crucial to building brand recognition. Your business name should communicate your LLC’s function and mission in a short, catchy, and memorable fashion. There are also specific rules for naming your LLC in North Dakota to keep in mind:
- Your LLC name must be unique. It cannot be registered under an existing North Dakota business entity. Run a search of existing North Dakota business names through the Secretary of State’s website to ensure your desired name isn’t already used.
- Your North Dakota LLC name must contain the phrase “Limited Liability Company” or a variation on its abbreviation, i.e., LLC or L.L.C. Unlike in many other states, your name cannot simply contain the words “Limited Company.”
- Your LLC name should not be misleading. It cannot contain words suggestive of other business structures, such as “Incorporated,” “Corporation,” “Limited Partnership,” or “Limited Liability Partnership.” Likewise, your LLC name cannot contain words that would confuse it with a governmental agency—federal- or state-level—such as the IRS or the North Dakota Department of Motor Vehicles.
2. Create a business plan
Writing a business plan can help you clarify your ideas and understand how much time, money, and resources you’ll need to get started. Investors also use business plans to evaluate the feasibility of a business before funding it. A workable business plan includes your LLC’s name and a brief description of what you sell—a product, a service, or perhaps both. It might also include a market analysis, an organizational structure outline, target customer profiles, and marketing, logistic, and financial plans.
3. Get a federal employer identification number (EIN)
A federal employer identification number (EIN), essentially a federal tax ID, is a nine-digit number assigned to businesses by the US Internal Revenue Service (IRS) to track tax obligations. Think of it as a Social Security number for your LLC. You’ll need an EIN to register your LLC in North Dakota. Obtain one online through the IRS website, free of charge.
4. Choose a registered agent in North Dakota
North Dakota law requires you appoint a registered agent for your LLC. A registered agent is an individual or professional service that receives legal correspondence and official documents for your LLC. You can appoint a member or employee of your LLC. In North Dakota, your registered agent or registered agent service must maintain a North Dakota address and be authorized to conduct business in the state. Regardless of who you appoint, your registered agent must be available to receive documents at a physical address during regular business hours.
5. File your North Dakota LLC Articles of Organization
- Your LLC’s name and primary mailing address
- Your registered agent’s contact information
- Your LLC’s effective date and duration (can be indefinite)
- Your LLC’s business purpose
- Member names and addresses
You must pay a $135 filing fee upon submission of the Articles. You’ll also have to file an annual report with the Secretary of State’s office with $50 (if filed before November 15 of each year) or $100 (if filed after November 15).
6. Obtain business licenses and permits
While no general statewide business license is required of North Dakota LLCs, if you sell tangible goods subject to sales tax, you must obtain a sales tax permit (sometimes known as a seller’s permit). You can get a seller’s permit from the North Dakota Tax and Fee Administration. If your LLC operates in specific industries, you may need additional licenses. Consult this list of current required permits and contact the relevant government office for further information.
7. Understand North Dakota tax requirements
North Dakota LLCs can be taxed as corporations, limited liability partnerships, or single-member LLCs—which are taxed much like sole proprietorships. You assume different tax obligations depending on the tax structure you choose for your LLC. Taxes you may be responsible for an LLC member include:
- Personal income taxes. Regardless of how you form your LLC—as a pass-through tax entity or corporation—you and your business partners will pay taxes on income earned through the LLC at your personal-income levels. North Dakota’s personal income tax rate ranges from 1.1% to 2.9%, depending on your income bracket.
- Corporate taxes. If you elect to form your LLC as a corporation, it will pay taxes on all profits generated before they’re distributed to shareholders, at which point they’re taxed again at the shareholders’ income levels. In North Dakota, the corporate tax rate is 1.41% to 4.31%, depending on earnings.
8. Prepare an LLC operating agreement
An LLC operating agreement is a legal document that outlines how your North Dakota LLC intends to conduct business. Though not required by state law, an operating agreement can provide a proposal for internal operations and accountability, laying out who does what and when. An operating agreement typically includes:
- Your LLC’s name and primary address
- How long you plan to run the LLC (perhaps indefinitely)
- Information on the LLC’s registered agent
- Information about the Articles of Organization
- The business’s purpose and mission statement
- An organizational chart listing members and their respective investments
- How profits and losses are divided between LLC members
- The process for admitting new members and offboarding outgoing ones
- An overall management plan
- Various indemnification and liability provisions
9. Examine business insurance options in North Dakota
Unexpected losses can wreak havoc on a budding business. While LLCs offer a degree of personal asset protection, you may still want to purchase insurance to protect your business and its property. Standard policies in North Dakota include:
- Workers’ compensation. North Dakota law requires businesses with full or part-time employees to purchase workers’ comp, which covers injuries or illnesses suffered on the job.
- General liability insurance. General liability insurance provides broad, general coverage, covering your business for any legal actions resulting from accidents, injuries, or negligence.
- Commercial property insurance. Commercial property insurance helps replace commercial property lost or damaged during operations. It can cover costs associated with fire, weather damage, or theft.
- Professional liability insurance. Professional liability insurance protects businesses that dispense professional advice with a high bar for competency, like law, accounting, or real estate. This insurance covers service if you’re hit with a malpractice suit.
- Cyber liability insurance. Data breaches and ransomware can harm your customers and your business. Cyber liability insurance helps if you have to inform customers about an attack, compensate them in case of a claim, and pay for credit monitoring for affected customers.
The Small Business Administration maintains a list of forms of insurance your North Dakota LLC may need.
10. Understand financial considerations
Aside from insurance, you’ll inevitably make other investments in your North Dakota LLC. These expenses might include renting an office, storage, or retail space, commissioning a professionally designed website, or paying for advertising, equipment, and software. You may also want to hire one or more lawyers, accountants, or other professionals. These costs can quickly add up. Luckily, there are accessible funding options, like Shopify Capital, which lets you repay funding as a percent of your store’s daily sales, so payments flex with your business. Consider opening a business bank account to handle cash flow and overhead.
11. Market your LLC
- Market research. Understanding your LLC’s target customer is essential, which you can accomplish by conducting thorough market research.
- Advertising and promotion. Create and place ads yourself, or hire an agency to do it. Advertising may seem dated, but it can be effective for getting the word out about your brand.
- Social media. Successful businesses today maintain an online presence across social media platforms like Facebook, Instagram, TikTok, and YouTube. Consistently publishing content that aligns with your brand can garner more visibility in North Dakota and further afield.
- Public relations. Develop strong relationships with media outlets in North Dakota and around the country to bring attention to your business organically.
- Customer retention. Leverage your marketing materials, digital tools, and social media presence to build genuine customer relationships. Turn them into repeat customers and encourage them to spread the word to friends, family, and colleagues.
Starting an LLC in North Dakota FAQ
How much does it cost to form an LLC in North Dakota?
Starting an LLC costs at least $135 to register the business with the North Dakota Secretary of State’s office. You’ll also have to pay at least $50 to file an annual report.
Do you need a registered agent for your LLC in North Dakota?
Yes, all LLCs in North Dakota must nominate a registered agent or registered agent service with an in-state mailing address.
How do LLC state taxes work in North Dakota?
Unless your LLC elects to be taxed as a corporation, earnings are taxed once, at the personal income level of LLC members.