How to Start a Business in North Dakota

Sole proprietorships and general partnerships are easy to form and manage as they don’t require formal paperwork to be filed. So why would you even consider something more complex?

If you want the sweet safety net of liability protection, you’ll need to form a business entity separate from you, the business owner—like an LLC or corporation. Liability protection keeps your personal assets, like your house and car, separate from your business’s debts.

So which one is right for you?

North Dakota Limited Liability Company (LLC)

A limited liability company (LLC) is a great option for business owners. The structure of an LLC is flexible, allowing the owners to choose how the company is managed and taxed. Having multiple tax classification options is one of the reasons many business owners gravitate towards LLCs.

To file an LLC in North Dakota, submit your Articles of Organization ($135) to the North Dakota Secretary of State.

North Dakota Corporation

A corporation is appealing to many business owners because, in addition to offering strong liability protection, corporations tend to draw more investors and donors. There is less flexibility for a corporation with stricter rules for how the business should be managed, but this is appealing for people looking to invest. If you’re looking to sell shares and grow the business quickly, a corporation might be the right entity type for you.

To file as a corporation in North Dakota, simply submit your Articles of Incorporation ($100) to the North Dakota Secretary of State.

Naming your business is an exciting, creative part of launching your company. But there are a few important things to keep in mind! Your business name must:

• be unique, meaning there are no other North Dakota businesses with that name already
• not be misleading to the purpose behind your business (such as including words like medicine or pharmacy when the business isn’t actually in the medical sector.)
• include identifiers such as “LLC”, “corp”, “inc.”, etc.

You can use the North Dakota Secretary of State’s online portal, First Stop, to check if the name you want to use is still available. This doesn’t guarantee that your name will be available at the time of your filing, though. For that, you’ll want to pay to reserve your business name ahead of time.

Your formation paperwork is a crucial part of forming your LLC or corporation. Forming a sole proprietorship or general partnership doesn’t require filing paperwork with the state. However, you might need a North Dakota business license.

To start your LLC or corporation, you’ll need to file paperwork with the North Dakota Secretary of State. You may file by fax, mail, or online.

• To form a North Dakota LLC, file North Dakota Articles of Organization.
• To start a North Dakota corporation, file North Dakota Articles of Incorporation.

When filling out your formation paperwork, you will need to list out your business information, such as your business’s name, purpose, and principal address. Additionally, you will need to include your registered agent’s information.

So far in this guide, we’ve dealt with public forms that you’ve had to file with the North Dakota Secretary of State. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.

Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.

Here are the major internal documents you need to organize for LLCs and corporations:

North Dakota LLC Operating Agreement

This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.

Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a North Dakota LLC Operating Agreement template that you can use as a solid foundation.

North Dakota Corporate Bylaws

Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in North Dakota.

As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a North Dakota Corporate Bylaws template you can use to get started.

Starting a nonprofit? We also have North Dakota nonprofit bylaws.

Most businesses, regardless of entity type, will need to have a valid North Dakota business license. There is no state-wide mandated business license, but between profession-specific licenses and city-specific licenses, there’s a good chance you will need at least one.

North Dakota State Business License

To own and operate a business in North Dakota, you will likely need a business license. For example, you will need a license if your business sells alcoholic beverages, fireworks, or tobacco.

You can check for your specific North Dakota board or commission in order to see what business licensing you may need.

Note: You can also check the NDSU’s comprehensive list of licenses, permits, notices, and reports required by North Dakota.

Professional Business Licenses

Professional business licenses are required for any business that is considered to offer “professional services”, such as financial, education, and medicinal services. To figure out which professional business license you will need, check the North Dakota Boards and Commission. Each board/commission will have their own processes.

Local Business Licenses

You might be required to get additional business licenses in order to operate in your local city or county. This is dependent not just on your location, but your business sector as well. For example, in Fargo, pawn brokers are required to file for a license and pay an annual fee, whereas Dickinson does not require this license. Check with your local business departments for a clear understanding of what you need.

Learn more about How to Get a Business License.

The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.

Open a Business Bank Account

To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.

Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.

Set up Payroll

Setting up payroll for your business might seem overwhelming, but the process is much more straightforward than you might think. Before hiring employees, you’ll want to:

• get an EIN
• register with the North Dakota Taxpayer Access Point (NDTAP)
• find your Employer Unemployment Insurance (UI) Contribution Rate
• determine whether you’re hiring employees or independent contractors
• prepare the forms your employees will fill out
• choose a payroll service or software

Payroll for your business can be done either by hand, on a software, or through a payroll service. How you choose depends on your business’s needs—for example, if you run an online shop with just two employees, it might be easy enough to handle your payroll by yourself. However, if you have a lot of employees or you don’t enjoy the meticulous nature of that work, you might be better off paying for a service.

Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.

Understanding your insurance requirements is an important part of starting your business. Make sure to take in your personal comfort levels and the business’s risk levels when making decisions, as well as North Dakota laws.

Not sure where to start? Here’s a breakdown of the most commonly purchased business insurance:

Workers’ Compensation Insurance

You are required by law to have workers’ compensation insurance if you have any employees that work at a business located in North Dakota.

Workers’ compensation covers employees who are hurt or injured on the job. This can cover everything from lost wages to medical bills. Without workers’ compensation, your business could face serious fines as well as a Cease and Desist Order until the insurance has been bought and the fines have been paid.

Keep in mind that private insurers cannot underwrite workers’ compensation in North Dakota.

Liability Insurance

This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.

Having a good understanding of your tax burden before launching your business is an important step. North Dakota is known for its low income rates, and there is no property tax on items like office equipment, inventory, accounts receivable—pretty much most things except certain oil/gas refineries and utilities.

Since taxes are notoriously overwhelming, we’ve broken down the things you need to know into the three categorizes of business taxes you’ll need to pay: federal, state, and local.

Federal Taxes

• LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
• Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable North Dakota corporate tax rate.

To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.

North Dakota State Business Taxes

North Dakota has low income tax rates, individual tax rates ranging from 1.1% to 2.9% and corporate tax rates ranging from 1.41% to 4.31%. Corporate income tax is decided based on the overall taxable income of the company. For example, if you have between $0 and $25,000 of taxable income, you owe 1.41%, which is $352.50, plus an additional 3.55% of any amount over the $25,000. Note: if your corporation has water’s edge election, you will have to pay an additional 3.5% surtax on your North Dakota income.

Local North Dakota Business Taxes

You might be thinking that you’re done now that you’ve dealt with federal and state taxes, but keep in mind that you will also need to pay local taxes. You will need to check with your city and county’s local tax obligations to know exactly what you need to pay. For example, in Carson, there is Sales, Use, and Gross Receipts taxes at 1%, while the ward of Burlington has the same tax type, but a rate of 1.5%.

If you want people to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:

• Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
• Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
• SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
• Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.

Every corporation and LLC must file a North Dakota Annual Report each year. You submit your annual report, along with your fee, to the North Dakota Secretary of State. Corporations must file by August 1st and have a $25 filing fee. LLCs must file by November 15th and have a $50 filing fee. For both LLCs and corporations, you can file online or via paper form in person, through fax, or in the mail.

A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.

You can apply to register your trademark with the State of North Dakota or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in North Dakota is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in North Dakota.

You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.

Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.