Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
If you are looking at opening a business in North Dakota, forming an LLC, or limited liability company, is the cheapest and easiest way. There are several incentives to creating an LLC, including taking advantage of tax incentives and protections while maintaining the flexibility of having a sole proprietorship or partnership.
If you have decided to form an LLC in North Dakota is the way for you, this guide will take you through the process of creating a company step by step.
Step 1: Name Your Company
First, you will need to find a suitable name for your company before filing with the Secretary of State. There are plenty of resources you can use online to find a name for your LLC that is simple and easy to pronounce while getting your business’s point across.
Once you have a few ideas in mind, you will need to search to ensure the name isn’t already taken by another company in North Dakota. Your business name must be unique. You can search the Secretary of State’s online database to check if your business name is available.
Your LLC name should also contain Limited Liability Company or one of its abbreviations LLC or L.L.C.
If you are worried that someone else will take your business name before you file, consider filing the Reserved Name Application with the Secretary of State. By filing, you can reserve your business name for 365 days.
Step 2: Choose a North Dakota Registered Agent
By law, you are required to have a registered agent for your LLC. A registered agent can accept legal mail on your business’s behalf. You can appoint any member of your LLC or even a third party to act as your company’s registered agent, but the chosen individual must have a physical street address in North Dakota.
You can even appoint yourself to be the registered agent, but if you do, here are a few things to keep in mind:
- You must be available to accept legal mail during regular business hours.
- The address provided will be made public.
- You may be served legal papers in front of your friends, family, or colleagues.
For this reason, many people opt to hire a registered agent service. There are plenty of options out there to meet any budget.
Step 3: File the Articles of Organization
To officially form your LLC, you must file your Articles of Organization with the Secretary of State. You can file online here for a fee of $135. To complete the form, you will need the following information:
- LLC name and address
- Registered agent name and address
- Effective date and duration
- LLC’s business purpose
- Organizer name, address, and signature
Step 4: Draft Up an Operating Agreement
While an operating agreement is not a legal requirement in North Dakota, creating one is highly advisable. An operating agreement will basically lock in the structure of your business and can help settle any future disputes or even lawsuits.
The operating agreement will be an internal document only and will not be filed with the state. But this is a crucial step to complete in the very early stages of forming your LLC so that every single business member is on the same page.
Even a single-member LLC can benefit from drafting an operating agreement as it can lock in key information about your company. This can come in handy when other members join or if you employ workers in the future.
Operating agreements will look different for every business, but in general, they will include the following information:
- Management structure
- Members’ responsibilities and ownership
- How profits and losses will be distributed
- Voting rights
- Adding new members
- Departure of members
If you are unsure where to begin, with a quick Google search, you can find many templates you can use to get started.
Step 5: Get an Employer Identification Number (EIN)
An EIN is your social security number for your business. While not legally required for all LLCs, filing to get one costs nothing, so it’s worth getting one.
You will need an EIN to do any of the below:
- Hire employees
- Open a business bank account
- File federal and state taxes (if you choose to have your LLC taxed as a corporation)
You can file for an EIN online.
Cost to Start an LLC in North Dakota
The main cost to start an LLC in North Dakota is filing the Articles of Organization. To file them with the North Dakota Secretary of State costs $135. If you decide to reserve your chosen business name beforehand, there is an additional $10 fee to consider. All LLCs are also required to file an annual report fee, so keep in mind that there is a recurring $50 fee each year.
Filing the Articles of Organization yourself is definitely the cheapest option. However, if you choose, you can also hire an LLC formation service to take care of the paperwork for you for a small fee.
What To Do After Forming an LLC in North Dakota
Now that your LLC is formed, there are some critical steps to follow to make sure you are doing everything necessary to ensure that your business stays compliant and runs smoothly.
Obtain Necessary Licenses and Permits
A business license or permit is not always necessary, but depending on the type of business you have, you may need to get one. Licensing can get complicated as it can vary, and you will need to apply for these licenses on the federal, state, and even local levels. To understand what kind of licenses you may need for your business, check out the North Dakota New Business Registration page. At the local level, contact your local county clerk to understand if there are any licenses or permits you should apply for your LLC.
Open a Business Bank Account
Separating your personal and business finances is an important step to establish. The best way to do this is by opening a separate business bank account. Although opening a bank account for your LLC is not obligatory, it will make your life much easier when you can see exactly what your business expenses are, which will come in handy when tax season rolls around. Most banks will ask for your EIN and a copy of your Certificate of Organization to open a business bank account.
File Annual Reports
All LLCs in North Dakota must file an annual report on November 15th with the Secretary of State. You can file and pay the $50 fee online. The first annual report for your LLC is due in the year following the formation of your business. So, if you formed your LLC in 2022, your first annual report would be due on November 15th, 2023.
Filing the annual report just involves ensuring all of the information regarding your LLC remains up to date in the state’s files. If you hire an LLC formation service, some even make sure you meet all deadlines, including those to file the annual report each year.
Failure to submit an annual report on time will incur a penalty fee. And failure to submit one at all may result in the dissolution of your LLC.
Get Business Insurance
The best way to protect your business is to get business insurance. There are many types of insurance that can fit all needs, so do your research to find the best option. Some of the most common types of insurance include:
- General liability insurance – the common type of insurance that covers all basic needs of a small business.
- Business property insurance – it helps to replace your business property if anything gets damaged, lost, or stolen.
- Workers compensation insurance – a must if you have employees; this protects your employees in the unfortunate event of a workplace accident.
Hire an Accountant
Taxes can get complicated. It is a massive headache for many business owners when tax season rolls around. For this reason, many LLC owners will choose to hire an accountant to take care of the business’s finances. You can either hire one and put them on your payroll or decide to hire a third-party service. Whatever you choose, your accountant will help not only do your business’s taxes but also keep everything money-related running smoothly. By hiring an accountant, you will have one less burden as an LLC owner.
Businesses of all sorts need to have some kind of an online presence. Many companies choose to do this by creating a website, but social media should be a focus too. Platforms like Facebook, Instagram, Twitter, and TikTok will help your business reach new audiences and broaden the reach of your LLC.
How To Keep Your LLC Compliant in North Dakota
Once your LLC is formed, your LLC must stay compliant with the state of North Dakota. To do this, you should:
- File and pay for your annual reports
- Make sure your licenses and permits are valid
- Comply with North Dakota’s business regulations
- Stay up to date on any changes in the state’s business laws
- Hire a business attorney if you have any doubts
Tax Filing Requirements for LLCs in North Dakota
The default tax structure for LLCs is as a sole proprietorship or partnership. So, instead of your LLC paying taxes, you must pay taxes on any earnings on your personal tax return. This applies to any other members of the LLC.
On the federal level, you will need to pay self-employment taxes. However, if your LLC has more than one member, the IRS will consider your company a partnership. In this case, each member would need to file a Return of Patnerhisp Income form in which you would report your income.
If you are a business that will be collecting sales tax, you must register with the North Dakota Office of the State Tax Commissioner – you can register online.
Frequently Asked Questions
How long does it take to register an LLC in North Dakota?
Generally, registering an LLC in North Dakota takes about 2 to 3 weeks. Expect it to take another extra week if you mail your Articles of Organization to account for delivery time. Unfortunately, the state does not offer any expedited filing.
What tax structure should I choose for an LLC in North Dakota?
Most LLCs in North Dakota default as pass-through entities (sole proprietorship or partnership). This means that the LLC itself does not pay any taxes, but the members must pay taxes on their share of the profits on their personal tax returns. The advantage of this tax structure is that your LLC would avoid double taxation.
However, some bigger and high-earning LLCs may profit from being taxed as a corporation. Hire a business attorney or accountant to understand if this would be the best tax structure for you. They will be able to best advise you on whether it would be worth switching to being taxed as a corporation.
Should you hire an LLC formation service in North Dakota?
You can certainly form your LLC yourself in North Dakota. If you want to save money, this is also the cheapest way to form your business in the state. However, many LLC formation services can handle the paperwork and even take on the registered agent responsibilities. Hiring an LLC formation service may be a good option if you prefer to focus on growing your business instead of filing paperwork. Check out our LLC services guide for the best options.
Filed under: North Dakota Business Guides