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:
-
Tax classification
-
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.
Order Now
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: