North Dakota LLC

A North Dakota LLC, or limited liability company, is a business entity formed by submitting Articles of Organization to the Business Services Division of the Secretary of State's office in Bismarck. Once formed, an LLC provides limited liability protection to its owners; the business has its own liability, as well as its own rights and privileges, that are separate from those of its owners.

Types of North Dakota LLCs

There are three different available types of LLCs in North Dakota:

  • Limited Liability Company
  • Farm Limited Liability Company
  • Professional Limited Liability Company

Limited Liability Company

The most common type of LLC in North Dakota, a standard limited liability company can be organized for the purpose of transacting any lawful business except for farming, banking, or insurance. The Articles of Organization may specify the exact business purpose, or they may simply note "any lawful business" as the limited liability company's purpose.

LLCs, like corporations, are business entities where members contribute capital to the limited liability company, and LLC earnings are in turn distributed to members. However, unlike corporations, LLCs have two significant areas of flexibility:

  1. Tax classification
  2. Distribution of profits

Here's an example: Two friends might register as a two-member LLC in Williston to open a restaurant. Both members contribute an equal percentage of capital to the business, and they elect to be taxed by the IRS as a partnership (rather than as a corporation).

Now, in their LLC Operating Agreement (one of the required LLC documents to be kept on file), the members have the chance to set down the percentage of LLC profits each member will receive; this number does not have to correspond with their ownership percentages in the way that corporate shareholders are constrained to receive profits in proportion to the amount of shares each shareholder owns.

This concept is best explained by example: in this hypothetical restaurant LLC, one member lives in Williston and will oversee the day-to-day operations of the restaurant. However, the other member lives in Dickinson and therefore does not want to have as active a role in the LLC. Because of this reason, the members agree to split profits 75/25 to more accurately reflect the responsibilities and efforts of each member. (If this had been a two-owner corporation, each 50% shareholder would receive half the distributed profits, no more, no less.)

Farm Limited Liability Company

A Farm LLC in North Dakota is a type of family business, made up of not more than 15 members of close relation (or certain trusts or estates of close relations); these members must be individual family members and cannot be other corporations or LLCs. To be eligible to form a Farm LLC in North Dakota, the company itself must be primarily engaged in farming (at least 65% of the company's revenue coming from farming or ranching). In addition, at least one member of the Farm LLC must be actively engaged in these activities or must live on the farm or ranch.

If the LLC stops farming, or if the gross income of the company that comes from farm activities drops to below 65%, the LLC must either dissolve, or file an Amendment with the Secretary of State's office in Bismarck to convert to a standard limited liability company. (At this point, non-family members may be added to the LLC, as the entity would no longer be operating as a Farm LLC in North Dakota and would therefore no longer be under these restrictions.)

Professional Limited Liability Company

PLLCs also have certain restrictions placed on membership; professional LLCs in North Dakota must be made up exclusively by licensed professionals, individuals who have received legal authorization to perform the proposed services (medical services, credit unions, and educational services, for example) in the state.

Like Farm LLCs, Professional LLCs in North Dakota must be made up solely of individuals; other business entities are not eligible to act as members in a PLLC.

Foreign LLCs in North Dakota

If an LLC that has already registered in another state wishes to expand into the North Dakota—a business from Sioux Falls, SD wants to open a storefront in Fargo, ND, for example—it must register as a foreign LLC. Like domestic entities, foreign entity filings are done through the Secretary of State's office in Bismarck.

It is important to note that foreign LLCs in North Dakota (entities registered domestically in another state) cannot register nor operate as a farm LLC in the state; only domestic North Dakota LLCs are able to engage in farming in the state.

How to form a standard domestic LLC in North Dakota

Articles of Organization, the formation document of an LLC, must contain the following information:

  • LLC Name (which must be available for use in North Dakota among other registered state businesses)
  • Name and address of the registered agent, either commercial (another business entity) or noncommercial (an individual)
  • The date the LLC is to be effective (either upon filing, or on a specified future date)
  • The duration of the LLC (typically perpetual, though an end date may be provided)
  • Specific or general purpose of the LLC
  • Any other provisions the LLC would like to be placed on file with the state
  • Name and address of the organizer (the person who causes the Articles to be filed with the Bismarck state offices)
  • Individual to be contacted about the Articles
  • Signature of the organizer

Once the Articles have been submitted to the Bismarck state offices, they will be filed in about 7 to 10 business days, upon which the LLC will be a legal entity, able to enter into its own contracts and legal proceedings.

Additional requirements for a North Dakota LLC

Any LLC in North Dakota—domestic or foreign; farm, professional, or otherwise—must obtain an EIN from the IRS. (A foreign LLC should have received an EIN at the time of registration in its domestic state; however, the IRS must be informed that the entity will be conducting business in North Dakota as a foreign LLC.) This EIN will be used for tax reporting purposes and other dealings with the IRS.

All entities that register with the North Dakota Secretary of State—corporations, limited liability companies, limited partnerships, foreign entities—are responsible for filing an Annual Report with the offices in Bismarck. Failure to fulfill the Annual Report requirement will result in a late-fee penalty and, if the report is still not filed, possible dissolution.

Registering the LLC with the Secretary of State is not the end of your business filing requirements, of course. You must also obtain any business licenses and permits that your limited liability company might be required to obtain. These requirements may depend on a number of factors:

  • Your industry
  • The type of LLC (general, professional, farm)
  • State government
  • County government
  • City/Town government

Unfortunately, there is no one central government agency through which all of your business license and permit requirements can be addressed. It is important to check with all levels of government and any relevant state agencies, or speak with a corporate attorney, to determine your specific license requirements.

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Other types of businesses in North Dakota

If you're not quite sure whether forming an LLC is the right step for your North Dakota business, no problem—there are many other types of businesses you can form, each offering a variety of benefits, protections, and registration procedure. Take a look at the information contained in the links below: