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Starting an LLC in North Dakota is a strategic and straightforward process that offers entrepreneurs a platform to establish and grow their businesses easily. As one of the most business-friendly states in the nation, North Dakota provides a streamlined and efficient framework for entrepreneurs to form a Limited Liability Company (LLC).
From choosing a unique business name to filing the necessary documents with the Secretary of State, the journey to establishing an LLC in North Dakota is marked by clarity and simplicity.
This guide will walk you through the essential steps, ensuring that you navigate the process seamlessly and set the foundation for a successful business venture in the Peace Garden State.
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How to Start an LLC in North Dakota: Key Steps & Tips
1. Naming Your North Dakota LLC
If you have thoroughly researched your choices and have decided to proceed with the LLC formation process, the next step is selecting a name for your business. This task is more intricate than it may initially appear, as you cannot simply choose a clever or meaningful name and start establishing a brand.
It’s crucial to ascertain whether the name you desire is both available and distinct from other protected names. Subsequently, you must take measures to safeguard the chosen name.
Availability and Distinctiveness
To safeguard the branding and intellectual property rights of businesses operating in the state, North Dakota prohibits multiple companies from using identical names. Additionally, it restricts new companies from adopting names that are challenging to differentiate from those already in use.
Insider Tip: For instance, if you wish to name your new restaurant “Anne & Gilbert,” but a company in North Dakota is already operating under the name “Anne and Gilbert’s,” merely substituting the word “and” with an ampersand will not suffice to distinguish your preferred name from the existing one. Consequently, you will need to conduct a North Dakota LLC search for your second or third choice of name.
It’s important to note that your company’s formal name must include the term “Limited Liability Company” or one of its abbreviations (“L.L.C.” or “LLC”). Failure to comply with this requirement will result in the rejection of your chosen name in accordance with state laws.
Interested in a Trade Name?
If the idea of branding your business with a formal name is unappealing, North Dakota allows you to register a trade name. A trade name, also known as a fictitious name or a “doing business as” (DBA) name, is typically a less formal version of the company’s registered name and is often used in branding and marketing efforts.
For instance, while The Walt Disney Company is the formal name of the renowned studio and theme park giant, it frequently conducts business and marketing using its “Disney” DBA.
The same availability and distinctiveness research conducted for your formal name must be applied to your trade name. Failure to do so may result in the rejection of your preferred trade name.
Additionally, checking the availability of a matching URL before finalizing your company’s name is advisable, as online marketing efforts can significantly impact your business.
Protecting Your Chosen Names
An often overlooked aspect of launching a successful North Dakota LLC involves intellectual property rights. Two crucial aspects of this matter require attention:
- Ensure that your branding efforts don’t infringe on the rights of other companies, as this could lead to legal action against your business before it even opens its doors.
- Protect your branding efforts to prevent competitors from capitalizing on your hard work, potentially pursuing legal action to secure protection for your name, logo, etc., and then suing you for using it.
Before committing to a formal name on your company’s articles of organization form or registering a DBA with the state, it’s advisable to conduct a national trademark search. This step ensures that no other U.S. company is using your preferred name(s).
Once you confirm the wide availability of your chosen name, you can proceed to trademark it and protect your intellectual property rights accordingly.
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2. Choose a Designated Representative
Before proceeding with the filing of your articles of organization, it’s essential to designate a representative for your LLC. In North Dakota, individuals who are adult residents of the state and businesses authorized to conduct activities in North Dakota can be named as agents for service of process on behalf of LLCs.
The designated representative for your LLC must maintain a physical address within North Dakota and be readily available to receive legal documents and government paperwork during standard business hours.
Insider Tip: It’s permissible for either yourself or any other LLC member who is a resident of North Dakota to act as your company’s designated representative. However, the LLC entity itself isn’t allowed to serve as its own designated representative.
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3. Crafting Articles of Organization for your North Dakota LLC
Once you’ve finalized both the official name and selected a registered agent for your LLC, the next step is to submit the articles of organization to the state. Upon submission of this document, accompanied by the $135 filing fee, the state will process your paperwork, officially acknowledging your company’s existence.
Before you commence the completion of this form, ensure that you have the following information at hand:
- The formal name of your LLC
- The name and address of your LLC’s registered agent
- The principal address of your North Dakota LLC
- The names and addresses of all organizers for the LLC (along with the signature of at least one)
- A statement outlining the purpose of your company
In case you wish to postpone the establishment of your LLC, you have the option to do so for a period of up to 90 days, provided you indicate an alternative effective date on your form.
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4. Create an Operating Agreement
Developing an operating agreement for your North Dakota LLC is a crucial step in the formation process, even though it’s an internal document and isn’t required to be filed with the state. North Dakota doesn’t mandate LLCs to establish an operating agreement, so single-member LLC operators may choose to forgo this step.
However, if you’re launching a multiple-member LLC, it’s advisable to approach this task with careful consideration.
An operating agreement functions as a contract, meaning that its terms can be legally enforced in court in case of a dispute between members. Drafting this contract before the launch of your business, when you and your fellow members are aligned, can prevent internal conflicts and safeguard your interests in the event of a fellow member attempting to infringe upon them.
As it’s a legally binding contract, having a lawyer review the document before signing is a prudent step.
Your operating agreement can elucidate and formalize various crucial operational understandings. The terms often cover the following aspects:
- The powers, responsibilities, and roles of each member and/or manager
- The tax structure for your LLC
- Protocols for distribution and handling losses
- The percentage ownership of each member in the company
- Procedures for buyouts, member modifications, and dissolution
- Indemnification and liability provisions
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5. Obtain a Business Identification Number
If you’re establishing anything other than a single-member LLC without plans to hire employees, it’s essential to secure a federal employer identification number (EIN). This process is uncomplicated, free of charge, swiftly completed online, and serves as a crucial identifier for your business.
Much like a Social Security number (SSN) for individuals, an EIN is a unique nine-digit code assigned exclusively to your business. Until your business dissolves, no other entity will be assigned the same EIN.
This number plays a key role in various aspects, such as employee recruitment, tax filing, opening bank accounts, and seeking funding. When creditors or lenders need to assess your LLC’s credit, they use this number to verify your business’s corporate identity, similar to the government’s use during tax filings.
While single-member LLC operators are technically allowed to use their SSNs for the same purposes as those with EINs, obtaining an EIN is advisable. Relying solely on your SSN for tasks like opening a bank account or applying for business funding can blur the line between your personal and business finances. Moreover, exposing your SSN to unnecessary parties increases the risk of identity theft.
To safeguard your privacy, maintain a distinct boundary between your personal and business finances by using an EIN instead.
Send to:
Internal Revenue Service
Attention: EIN Operation
Cincinnati, OH 45999
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6. Annual LLC Report Submission
Anticipate the requirement to submit an annual report for your LLC to the Secretary of State. This report scrutinizes details such as the company name, address, registered agents, and member information. The filing fee for this form with the North Dakota Secretary of State is $50, and it’s due by or on November 15 each year.
You can conveniently complete the form through the online portal, although some individuals may opt to print and mail the form along with payment to the Secretary of State.
Rectifying Filing Errors
If you discover inaccuracies in your articles of organization filing, such as a spelling mistake or an address error, you can rectify them by submitting an Amendment through the online portal. The filing fee for this form is $50, and the processing time for the amendment can take up to four weeks.
Dissolving Your North Dakota LLC
Closing a business that has concluded its operations in the state of North Dakota requires proper procedures. Close any relevant bank accounts and fulfill necessary tax reporting. Distribute assets to members following the guidelines outlined in the operating agreement.
To dissolve the business with the Secretary of State, complete a Notice of Dissolution using the online portal FirstStop. The filing fee for this form is $10, and processing the request may take up to four weeks.
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Ensure Your Company’s Compliance
North Dakota Business Licenses & Permits
To operate your LLC successfully, it’s imperative to adhere to federal, state, and local government regulations. The fees and prerequisites for licenses and permits will vary based on the specific type of business license required.
North Dakota LLC Tax Filing Obligations
To maintain your business’s good standing, it’s crucial to stay current on North Dakota LLC taxes. Depending on your business’s nature, you may need to register for one or more types of taxes:
Sales Tax
If your business involves selling physical products, obtaining a seller’s permit through the North Dakota Taxpayer Access Point is typically required.
The standard sales tax rate for most retail transactions in North Dakota is 5%, with an additional 1% to 3% local sales tax rate possible.
Employer Taxes
If you employ individuals in North Dakota, registering for Unemployment Insurance Tax via the North Dakota Unemployment Insurance Employer Account System is mandatory. Additionally, enrollment in Employee Withholding Tax through the North Dakota Taxpayer Access Point is necessary.
Income Tax
State:
North Dakota’s graduated individual income tax, ranging from 1.1% to 2.9%, depends on your LLC’s income. State tax returns are due annually by April 18. For tax calculations or determining your tax bracket, refer to the North Dakota Office of State Tax Commissioner website.
Federal:
Reporting federal income tax is also necessary, using either Form 1065 (multi-member LLC) or Form 1040 Schedule C (single-member LLC).
Hiring Employees
If you intend to hire employees, ensure compliance with the law by following these steps:
- Verify that new employees are eligible to work in the US
- Report new hires to the state
- Provide workers’ compensation insurance for employees
- Withhold employee taxes
- Display workplace compliance posters in visible areas of your workspace
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How to Start an LLC in North Dakota – FAQs
What Is the Initial Cost of Establishing an LLC in North Dakota?
A $135 filing fee is required when submitting the Articles of Organization. If amendments are necessary due to errors, an extra $50 fee is applicable for the amendment.
Is It Necessary to Use an LLC Service?
While an LLC service can perform tasks that a business owner can handle independently, the latter can avoid service fees by managing the processes personally. Though state or other entity fees must still be paid for filing, the overall costs are likely to be lower compared to outsourcing the work. LLC services may be beneficial for business owners who prefer assistance with filing and access to additional legal services.
Alternatively, a local business lawyer can assist in forming the LLC, albeit at a potentially higher cost, offering a personalized relationship and expertise for various legal matters.
Do I Require a Business License in North Dakota?
Not every business in the state necessitates a business license. Some businesses, industries, and professions may be subject to federal or state licensing requirements. Additionally, a business license from the city or county may be required in certain cases.
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About the author
Dr. Gabriel O'Neill, Esq., a distinguished legal scholar with a business law degree and a Doctor of Juridical Science, is a leading expert in business registration and diverse business departments. Renowned for his academic excellence and practical insights, Dr. O'Neill guides businesses through legal complexities, offering invaluable expertise in compliance, corporate governance, and registration processes.
As an accomplished author, his forthcoming book is anticipated to be a comprehensive guide for navigating the dynamic intersection of law and business, providing clarity and practical wisdom for entrepreneurs and legal professionals alike. With a commitment to legal excellence, Dr. Gabriel O'Neill, Esq., is a trusted authority dedicated to empowering businesses within the ever-evolving legal landscape.