One of the first decisions a prospective business owner will be faced with is what structure the entity will take. The basic choices are sole proprietorship, partnership, corporation, or limited liability company (LLC). The latter has become a popular choice for North Dakotans because it combines the best of a sole proprietorship (pass through taxes) and an S or C corporation (protection for personal assets in the event of a lawsuit. North Dakota is not as amenable to online LLC creation as many others, requiring many of the filings to be done by snail mail or fax. Don’t let that discourage you, though. The forms can be found online and easily printed.
Name the LLC
Before sinking too much time into the application process, check the business name database maintained by the North Dakota Secretary of State’s office to make sure the name you want isn’t in use elsewhere. North Dakota law requires that the name contain the words “Limited Liability Company,” or an abbreviated version such as “LLC” or “L.L.C.” Most people tack it on the end. Bear in mind you don’t have to include the LLC on your sign at your place of business. It just must be included in the official database record that way. If you have a name you like but aren’t ready to form the LLC yet, you can reserve it for a full year for a $10 fee. The reservation form is only accepted by postal mail or fax.
Articles of Organization
The primary form needed to form your LLC in North Dakota is called the Articles of Organization. As with the name reservation form, you can find this on the Secretary of State’s website and print it out for mailing or faxing. The filing fee is $135. Information you should be prepared with to complete the form would be the name of the LLC and registered agent as well as the names and addresses of additional organizers. You’ll also need the beginning and end (if applicable) dates of the business, and its purpose.
Choose a Registered Agent
You’ll notice that the Articles of Organization requires you to list a registered agent with a physical address inside North Dakota. The purpose for this is to have a person who can personally be served legal papers in the event the LLC is sued. You could choose your attorney, yourself, or anyone else you want to serve in this capacity. The only requirements or that the person be a resident of North Dakota, or a foreign or domestic LLC or corporation licensed to do business in the state.
Taxes and Other Regulations
All businesses engaged in selling a good and/or service must register with the North Dakota Office of the State Tax Commissioner. This creates an obligation to collect sales tax under a unique number and remit it back to the state. This is a step in the process that allows you to register online. Remember to check with your local government (city and county). There’s a good chance you will be required to obtain a business license from each.
If your LLC has more than one member, intends to have employees, or chooses to be taxed as a corporation, you should obtain an Employer Identification Number (EIN) from the IRS. This can also be done online; no fee is involved.
All corporations and LLC’s within the state are required to file an Annual Report with the Secretary of State’s office by November 15th of each year. The first report is due the year after you officially create the LLC. This filing can be done online at a cost of $50.
A final word on the topic of creating a North Dakota LLC. While no government agency mandates you have an operating agreement, most tax and legal professionals think it is a good business practice. The general idea is to document the ownership structure and operating policies for those – present and future – who might be associated with the company, and eliminate confusion or misunderstanding.
As already mentioned, North Dakota is not quite up to par with some other states when it comes to creating an LLC entirely online, but there are a few steps in the process where you can take advantage of that option.