How to Start a Business in North Dakota
Not sure how to start a business in North Dakota? Look no further—this comprehensive, step-by-step guide gives you a detailed look at all of the important pieces for starting a business in the Flickertail State. North Dakota offers new business owners tax exemptions, a booming economy, and a wage/salary credit program. Sound enticing? We’ll go over everything you need to know about registering your business and protecting your assets as you form your LLC or corporation.
Start Your North Dakota Business TodayLet's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File North Dakota Annual Report
Apply for Trademarks
1. Pick a Business Structure
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.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a North Dakota nonprofit?
A nonprofit in North Dakota is formed in much the same way as a for profit corporation. You fill out the required paperwork and submit your nonprofit Articles of Incorporation ($40) to the North Dakota Secretary of State.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
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.
Can I reserve a business name in North Dakota?
If you’re not quite ready to fill out your formation documents, consider reserving your business name ahead of time. It costs $10 to reserve your business name, and the reservation is good for 12 months. You can reserve your business name with the Reserved Name Application on North Dakota’s online filing system (First Stop).
What is a DBA?
A DBA is your “Doing Business As” name, also called a trade name. Your trade name is any name your business uses that isn’t your company’s legal name—the one listed on your formation documents.
According to NDCC, Section 47-25-01, your trade name must be registered with the Secretary of State—unless you are a partnership. To register a trade name, you simply fill out the Trade Name Application through North Dakota’s online filing system (First Stop). It costs $10 to file, and the registration is good for five years.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
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.
What is a registered agent?
A registered agent is a company (or person) that receives legal mail on your business’s behalf. Your registered agent will need to be available at a local North Dakota address during regular business hours. Many people choose to hire a registered agent service, such as Northwest, to ensure maximum privacy and security.
How can I keep my information off the public record?
Information such as your registered agent’s name and address, will automatically become public record in North Dakota. Because of this, the best way to keep your information off public record is to keep your information off of the documents as much as possible!
A registered agent service like Northwest is a great way to ensure this privacy. We use our address and business name on any documents filed with the state, keeping your information private.
4. Draft Internal Records
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.
5. Get North Dakota Business Licenses
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.
How do I get a North Dakota business license?
The process to obtain state and local business licenses depend on the requirements of that particular license. Generally speaking, however, you just fill out the application set forth by the individual board/commission in your area, pay any applicable fees, and wait to hear back.
How much does it cost to get a North Dakota state business license?
The cost of any licenses that you may need for your business depend entirely on the individual license. For example, the North Dakota Retail Alcohol Beverage License bases it fees on your city’s population and the month you’re applying.
How do I get a professional license in North Dakota?
The process is pretty much the same for any business license, professional or otherwise. Check with your individual business sector’s board/commission and fill out the paperwork required.
How do I get a local business license?
How you get a local business license depends on the county and city. The information required for each application will vary, however, you’ll likely need to include basic information such as your business’s name and address.
6. Organize Your Money
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.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
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.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
7. Get Business Insurance
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.
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.
Do business owners need workers' compensation insurance in North Dakota?
Business owners do not need to have workers’ compensation insurance for themselves, as the coverage is only required for employees, not employers. However, depending on your personal comfort level with risk, you might consider getting coverage for yourself anyway. Your personal health insurance plan might deny claims for business-related injuries, and you might find yourself wishing you had coverage.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
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.
- 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.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-corps, but LLCs can also apply for C-corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in North Dakota, the corporate tax rate ranges from 1.41 to 4.31%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-corp tax election.
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%.
9. Build Your Business Website
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.
10. File the North Dakota Annual Report
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.
What if I don’t file an annual report in North Dakota?
If you do not file your annual report to the North Dakota Secretary of State, you will be charged a late fee. Corporations will be charged $45 if they file between August 2nd and November 1st, with the fee jumping to $85 if filed after November 1st. LLCs are charged a flat rate of $100 if they file after November 15th. For both LLCs and corporations, you have six months to file or the Secretary of State can dissolve your business.
11. Apply for Trademarks
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.
How do I register for a trademark in North Dakota?
If you want exclusive right to your trademark in North Dakota, you must file the Trademark/Service Mark Registration with the Secretary of State’s Business Division. Though it is not required, businesses often trademark their business name to ensure that they are the only ones who can advertise with that name.
According to ND 47-22-05, the application requires:
- the name and principal address of the company applying
- the goods/services in connection w the trademark
- the way the trademark will be used
- the date when it was first used in general and also when it was first used in North Dakota by the applicant
- a statement that the applicant is the owner of the mark and no one else has any rights to the mark in the state
This application is good only for the state of North Dakota. Your right to the trademark lasts for ten years.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.