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North Dakota boasts low taxes, business incentive programs, special enterprise zones, and an abundance of space and resources—all advantages for business owners. Sparsely populated North Dakota presents an opportunity for your business to find and develop a niche—and thrive. Whether you’re setting up shop in the badlands or in downtown Fargo, here are the eight steps to starting a business in North Dakota.
Start a Business in North Dakota
1. Choose a business idea
You must first settle on a solid business idea for your North Dakota company. It’s one of the most significant decisions you’ll make as an entrepreneur. A solid concept forms the foundation of your new venture—it could be a product that solves an issue or a service your community needs. Here are two key questions to ask yourself before pursuing your project:
- Who is your customer? A business thrives insofar as it understands its target customer. Will you sell to other businesses or straight to consumers? Online or through a traditional brick-and-mortar storefront? To figure this out, survey prospective customers, conduct a competitive analysis of other companies in your market, analyze marketplaces that sell similar products or services (like Amazon or Wayfair), and research industry trends.
- What is your projected profitability? A business’s top priority is turning a profit. Consider all the elements that affect your bottom line, like pricing, packaging, distribution, bundling models, and subscription options. How much do you need to sell to break even? How long will it take to reach a healthy profit margin?
2. Name your business
Once you have your North Dakota business idea, choose a business name. A good title communicates what you do and catches customers’ attention. Here are a few guidelines for choosing a North Dakota business name:
- Be original. If you’re forming a limited liability company or corporation, i.e., a company with a formal business structure, the name of your business must be different from any other business registered in the state. You can run a search of existing registered businesses through the North Dakota Secretary of State office. Businesses with informal business structures, like sole proprietorships or general partnerships, are not required to have unique names unless they file for a DBA. (More on business structures and DBAs below.)
- Reserve your name. You can reserve your North Dakota business name online for a $10 fee.
- Include and exclude specific words. Depending on your business structure, you may need to include or exclude certain words. For example, LLC names in North Dakota must contain the term “Limited Liability Company,” “L.L.C.,” or “LLC.” North Dakota corporation names must include the word “Corporation,” “Company,” “Incorporated,” “Limited,” or an abbreviation thereof. Your business name cannot contain words that might confuse it with a legitimate government agency, like the FBI or North Dakota State Police.
- Adopt a DBA. If you want to conduct business under a name different from the official name you registered with the state, you need to file for a “doing business as,” or DBA, known in North Dakota as a trade name. You can register your DBA online through the Secretary of State for a $25 filing fee. You’ll need to refile your DBA every five years.
- Secure a domain name and social media handles. A unique name is also important for doing business online. Purchase a domain name (URL) and reserve social media usernames that align with your business name (or assumed name) to make it easier for customers to find you online.
3. Create a business plan
Crafting a solid business plan is crucial to the success of any company. Your plan should reflect your overall goals and give readers—including potential investors—a sense of how you intend to operate in the near and long term. Here are the critical elements of a good business plan:
- An executive summary and mission statement
- A detailed company description
- A market analysis
- Your organizational structure
- A list of products or services
- A customer segmentation report
- A marketing plan
- A logistics and operations plan
- A financial plan
You can use a free business plan template to draft your plan and tailor it to meet your business’s specific needs, or you can look at business plan examples for inspiration.
4. Choose a business structure and get started
There are four primary business structures in North Dakota: sole proprietorships, general partnerships, LLCs, and corporations. Each offers different benefits for personal liability, ownership, taxation, and funding. Here’s how they differ:
- Sole proprietorship. Sole proprietorships are owned by a single person and are the default designation for individual-run businesses in the US. A sole proprietorship is not a separate legal entity from its owner and is taxed as a “pass-through” entity, meaning all earnings are only taxed once at the owner’s personal income tax level. However, the owner is personally liable for most debts or legal damages incurred by the business. A sole proprietorship is an excellent choice if your company has little risk, low overhead, and no employees
- General partnership. General partnerships are formed by two or more owners, known as “partners.” Like sole proprietorships, partnerships are pass-through entities and are not considered legally distinct from their ownership, meaning there’s no personal liability protection for members against creditors and lawsuits. In North Dakota sole proprietors and partners pay self-employment state taxes (15.3%).
- LLC. Limited liability companies, or LLCs, combine the tax benefits of sole proprietorships and general partnerships with the personal asset protection of corporations. In other words, LLC owners (or “members”) enjoy “pass-through” taxation while still shielding themselves from liabilities like lawsuits or debt. LLCs are considered formal business structures and tend to entail more costs and paperwork than sole proprietorships and partnerships, though still less than corporations. North Dakota LLCs have a choice regarding tax treatment; they can be taxed as traditional LLCs or as S corporations, provided they meet IRS requirements.
- Corporation. Corporations can issue stocks to shareholders for an ownership stake in the business, creating more fundraising opportunities. A corporation is considered an entirely separate entity from its business ownership, protecting owners’ personal assets if the company fails or is hit with a lawsuit. Because of this added layer of liability protection, corporations are subject to corporate taxes, meaning business income is taxed at the corporate level and again at the personal-income levels of owners and shareholders. North Dakota corporations, like corporations elsewhere, must file corporate income tax returns with the state.
Obtain a federal employer identification number (EIN)
Once you’ve decided on a legal business entity for your North Dakota business, apply for a federal employer identification number (EIN) through the Internal Revenue Service (IRS) website, free of charge. An EIN is a nine-digit number assigned to businesses by the IRS for assessing taxes—like a Social Security number, but for companies. Having an EIN makes it possible to file federal and state taxes and can help secure credit accounts and cards for business expenses.
Incorporating in North Dakota
To officially launch your North Dakota business entity, you must file formation documents with the Secretary of State’s office (unless your company is a sole proprietorship or general partnership). Here’s how to incorporate your business in North Dakota:
- Corporations. If you’ve chosen to start a corporation, file Articles of Incorporation with the Secretary of State office with the $100 fee.
- LLCs. If you’re starting an LLC, file Articles of Organization with the Secretary of State and pay the $135 fee.
You may also want to open a business bank account. While this isn’t required, the IRS recommends that all small businesses maintain business bank accounts separate from their owners.
5. Obtain business licenses and permits
North Dakota does not require businesses to obtain a general statewide business license. However, it does require a permit if you operate in specific industries, such as the sale of alcohol or tobacco, construction contracting, or professional lobbying. If you plan to sell products or services subject to sales tax, you’ll also have to apply for a sales and use tax permit.
6. Examine business insurance options in North Dakota
Unforeseen losses can spell disaster for new businesses. While some business structures like corporations and LLCs offer personal asset protection, you may still want to purchase insurance to cover your products, vehicles, and other property. Types of business insurance you may need or want to consider include:
- Workers’ compensation insurance. All North Dakota businesses with employees or that plan on hiring employees, full or part time, must purchase workers’ comp to cover injuries workers might incur.
- General liability insurance. General liability insurance covers general financial losses, like property damage or legal fees. Although not required by state law, it’s not a bad policy to have—and if you want to rent an office or storefront, your lease may require it.
- Product liability insurance. Product liability insurance protects your business against legal claims of bodily injury or property damage related to products you make, distribute, or repair.
- Professional liability insurance. Professional liability insurance covers financial losses from malpractice claims brought against businesses that provide advice, like law firms or health care practices.
- Business owner’s policy. Think of a business owner’s policy (BOP) as a small business insurance package deal. The specifics vary, but BOPs often include general liability insurance, commercial property insurance, and workers’ compensation.
The Small Business Administration also maintains a list of insurance policies your new North Dakota business may need.
7. Understand financial considerations
On top of purchasing insurance, you’ll likely have to make other investments to get your North Dakota business up and running. This might include renting a brick-and-mortar retail space, getting a professionally designed business website, or paying for advertising, equipment, or bookkeeping software. You may want to hire lawyers, accountants, or other professionals to support your endeavors. You might also be responsible for special taxes, like the unemployment tax, and other state and federal taxes. These startup costs can quickly add up. Luckily, there are accessible resources to help you obtain funding, like Shopify Capital, which allows you to repay funding as a percent of your store’s daily sales, so payments flex with your business.
8. Market your business
Marketing means attracting potential customers and figuring out what works to convert them into customers. A solid marketing plan for your North Dakota small business may include these elements:
- Market research. Market research is the key to identifying and leveraging your business’s target market, giving you a sense of how to compete and stand out in the marketplace.
- Advertising. Get the word out through ads, online or in print. You can do this yourself or hire an agency to design and place ads on your behalf.
- Social media. Today, nearly every successful business maintains social media accounts across multiple platforms—including Facebook, Instagram, YouTube, and TikTok. Consistently, publish content that aligns with your brand identity and work to increase customer engagement.
- Public relations. Identify and cultivate relationships with media outlets—both in North Dakota and across the US—to help organically increase your visibility.
- New business and customer retention. Build genuine relationships with customers to keep them returning and spreading the word to friends, family, and colleagues.
Starting a business in North Dakota FAQ
How much does it cost to start a business in North Dakota?
At a minimum, it costs $100 to start a corporation in North Dakota and $135 to start an LLC, which accounts for state filing fees. You may also need to purchase specific licenses if you operate in particular industries.
Does North Dakota require a business license?
North Dakota does not require a statewide business license. However, you must obtain a license or permit if you operate in specific industries, like construction or liquor sales.
Is North Dakota a good place to start a business?
North Dakota is a great place to start a business. Because of its relatively small population and business community, there’s an opportunity to carve out a niche and stand out from the competition. Research North Dakota’s demographics, business laws, and infrastructural offerings to ensure your new venture can benefit from the state’s unique business ecosystem.