How to Incorporate in North Dakota vs.
How to Start a North Dakota LLC
A Guide to Choosing the Best Business Entity in North Dakota
Are you interested in starting a business in North Dakota, but not sure if you should form an LLC or start a corporation? Active Filings has the guide for you! We’ll walk you through the advantages and disadvantages of incorporating or forming an LLC in North Dakota. Throughout this North Dakota-specific corporation and LLC formation guide, you’ll discover exactly how to form either an LLC or corporation in North Dakota, and learn the disadvantages and advantages of each business type.
Once you’ve decided which business structure best meets your needs, you can hire Active Filings and have our professionals streamline your incorporation process. Sure you can sign up with a more expensive company managed by hedge fund billionaires where you’ll just be a number, or you can choose Active Filings, a small company like yours. Our professional staff will ease you through the business formation process, and pretty soon you’ll see why Active Filings is America’s most reliable business incorporation service.
Hire us to form your LLC or Corporation in North Dakota!
LLCs vs. Corporations
People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Both entities provide liability protecting for their owners, and both allow businesses to legally operate within the US. Below you’ll find the three general factors we think will help you make an informed decision.
- Ease of maintenance
LLCs are pretty easy to maintain. An LLC can opt to be managed by its members, which allows all owners to share in the business’s day-to-day decision-making, or by managers, who can be either members or outside managers. This is helpful if members aren’t experienced in running a business and want to hire people who are. Corporations have to hold meetings, keep minutes, record votes, and generally file more paperwork compared to an LLC. However, corporations are perpetual, which means they can exist as their own entity forever, whereas an LLC will generally dissolve and cease to exist upon the resignation, death, or bankruptcy of the member or members. - Desired tax structure
LLC is generally organized as a pass-through entity, meaning its profits go directly to its members without being taxed by the government on the company level. Instead, they’re taxed on members’ federal income tax returns. This makes filing taxes easier than if your business were taxed on the corporate level. Corporate profits are subjected to what can be referred to as “double taxation,” which means that a corporations profits are taxed, and then you get hit with taxes at the personal income level. The Wyoming LLC is where it’s at on tax structure. - Investors
If you plan to raise capital for your business, then incorporation probably makes the most sense. Investors prefer the favorable taxation rules of a corporations, and unlike LLCs, a corporation’s shareholders are not taxed on company profits unless profits are distributed. This means the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. LLCs If you plan to grow your small business into a larger entity and attract investors, forming a corporation is your best bet.
Don’t sleep on the idea of prestige either. While “Larry’s Vodka Bar, LLC” is a fine upstanding company, it just doesn’t sound as fancy as Amazon, Inc. When you hear the word corporation, many people think of Amazon, Apple, and Walmart. While the LLC is perfect for the small to medium-sized business, it doesn’t carry the same cache as the corporation. The corporation is the oldest recognized business entity in the US (LLCs first came into being in the late 1970s), and thus they carry with them an aura of prestige.
ND LLCs vs. ND Corporations
While we’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming an North Dakota LLC or corporation. Take a look below to see what makes North Dakota LLCs and corporations unique:
- Low Personal Income Tax
Maxing out at 2.9%, North Dakota’s personal income tax ranks as one of the lowest in the US. This should appeal to LLC owners, who get taxed as pass-through entities, which means the profits from their business are claimed on their tax return. Some states hit you for a lot more, so a top income tax of just under 3% is pretty sweet. - Corporate Income Tax
At 5.2%, North Dakota’s maximum corporate income tax rate is the 4th lowest in the US. Low corporate income taxes make for happy businesses, which in turn lead business owners to investing their savings back into their business in the form of new employees, or investing in infrastructure. - Low Formation and Annual Report Costs
North Dakota filing fees for corporations are $100, and $135 for LLCs. Pretty middle of the road with regards to the cost to form business entities in the US. As for annual reports, corporations pay $25 and LLCs pay $50. This is super affordable if you ask us. - Corporate Tax Break for Primary Sector Businesses
New North Dakota corporations that qualify as primary sector businesses (farming, mining, forestry, grazing, fishing, and quarrying) may pay $0 in corporate income taxes for the first five years of their existence if they are granted an exemption through the State Board of Equalization. This corporate tax break also applies to the packaging and processing of raw materials.
How to Incorporate in North Dakota
To start a corporation in North Dakota, you must file Articles of Incorporation with the Business Registration Unit. You can file the document by mail or fax. The Articles of Incorporation cost $100 to file. Once filed with the state, this document formally creates your North Dakota corporation. Hire Active Filings and we’ll make sure this process goes smoothly, plus you’ll be afforded some privacy when our name and address is used as your registered agent.
North Dakota uses the same form for both normal business corporations and farm corporations. Farm corporations will need to mark the farming box and also complete an Initial Report for Farming or Ranching. Are you a farm? If not, your business is just a regular business corporation.
Your name must include “Corporation,” “Incorporated,” “Company,” “Limited” or an abbreviation for one of these words. You can’t use “trust” or “bank” unless you have prior approval from North Dakota’s Department of Financial Institutions.
This street address is the official address of your corporation. When you hire Active Filings, our address goes here.
This is the person or business who receives legal mailings and service of process from the state. You can be your own registered agent or hire someone to act as one. We recommend Active Filings.
If you listed a noncommercial agent, you’ll need to provide a registered office address. The address must be a street address in North Dakota and will become part of the permanent record of your corporation. Active Filings already has our address on record with the state, so if you hire us you can skip this section.
When do you want your North Dakota corporation to start? If you want it to start right away, tick the first box. If you’d prefer to start on a specific date, you can check the second box and enter an effective date up to 90 days in the future.
Your purpose is what activity your corporation plans to engage in. North Dakota allows for a general purpose, so it’s sufficient to put “any lawful purpose” in this section.
For each class or series of shares, list how many shares you’re creating and their par value.
Your incorporator signs your Articles of Incorporation. This doesn’t have to be anyone special or even someone affiliated with your corporation. When you hire Active Filings we’ll be your incorporator.
How to Start an LLC in North Dakota
By filing your Articles of Organization with the North Dakota Business Registration Unit, you formally create your corporation. You can file the document by mail. The Articles of Organization cost $135 to file, and once filed with the state, this document formally creates your North Dakota LLC.
Is your LLC a farming or ranching LLC? If not, you’re just a regular LLC and don’t have to mark the farming box.
Your name must include “Limited Liability Company” or an abbreviation. Most businesses go with “LLC.” Example: Don’s Computers, LLC. You can’t use any words that could suggest you’re a bank, like “banking” or “trust.”
This street address is the official address of your LLC and can’t be a PO Box. Hire us as your registered agent, and you can use our North Dakota address as your principal address.
This is the person or business who receives legal mailings and service of process from the state. You can be your own registered agent or hire someone to act as one. We recommend Active Filings.
If you have a noncommercial agent, list the address where the agent will be available to accept legal notifications. This North Dakota street address will become part of the permanent public record of your LLC. Or, hire a commercial registered agent like us and skip this section.
Most LLCs choose to start right away, but if you want to put off it’s existence for up to 90 days, you can put that date here.
Unless you want your LLC to expire at a certain date, skip this section.
Most LLCs put a general purpose, stating that LLC is organized for any lawful purpose in the State of North Dakota.
ND Annual Report Requirements
All North Dakota corporations, LLCs, and partnerships are required to file an annual report each year with the North Dakota Secretary of State. Think of it as the state wanting to take the pulse of your business. Did you make any changes to members, directors, addresses, phone number, or change your registered agent?
What information do I need when I’m filling out the annual report?
Name and address of business.
Names and addresses of officers and directors (if a corporation).
Names and addresses of managers or members (if an LLC).
Name and address of your registered agent.
Type of business your company is involved in.
When is my annual report due?
Corporations need to fill out and file their Annual Report by August 1st. LLCs need to do this by November 15th. Both can be filled out online at the state’s FirstStop homepage. You’ll create an account for your business, if you haven’t already. Then you’ll navigate and click on “My Records.” Click on your business name and a pop-up screen will appear on the right hand side. See “File Annual Report” and click on it. If filing online, you can pay the fee with a credit card. If mailing your form, you will have the option of printing out your form. Or hire us to do this for you, saving you time and stress.
Mail Annual Report to:
Secretary of State
State of North Dakota
600 E Boulevard Avenue Dept. 108
Bismarck, ND 58505-0500
How much does this report cost?
Corporations pay $25.
LLCs pay $50.
North Dakota Business Taxes
Paying taxes is like going to the dentist. No one wants to do it. Taxes are, however, an integral part of successfully doing business in America. While we’re not tax professionals, we definitely will do our best to try and explain what kind of taxes your business will be expected to pay.
How will my corporation be taxed?
Corporations face “double taxation.” First they pay taxes on net profits from the business, and then get hit a second time when taxed on the dividends they receive from those earnings. Dividends are taxed at the shareholder’s personal tax rate. An LLC doesn’t have this problem, which means anyone looking to form a corporation should take note of a state’s corporate income tax and personal income tax. By filing IRS Form 2553 (Election by a Small Business Corporation), a corporation with 100 or fewer shareholders can elect to be taxed as an S Corp. Of course, if a corporation chooses S Corp status, they’ll have to jump through a few extra hoops and meet certain requirements required by the IRS.
How will my LLC be taxed?
Single member LLCs, meaning it’s just you running your business, are treated like sole proprietorships by the IRS. This means that any profits or losses your LLC experiences, will pass-through to you as the single owner. All you have to do is file a Schedule C, which reports profits or loss from your business, with your personal tax return (IRS Form 1040). It should be noted that an LLC can elect to be taxed as a corporation under Subchapter C, by filing IRS Form 8832 (Entity Classification Election), or as a corporation under Subchapter S by filing IRS Form 2553 (Election by a Small Business Corporation).
What if my LLC has more than one member?
As with a single member LLC, the IRS will view your multi-member LLC as a partnership. The LLC will retain it’s pass-through tax status, with a few wrinkles with regards to paperwork. Instead of one member filing a 1040, instead each member will have to file a Return of Partnership Income form (IRS Form 1065). This document lets the IRS check and make sure each owner is reporting their income properly. Beyond that, each LLC owner will attach a Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.) to their Form 1040. This form shows the IRS each member’s share of the LLC’s profits and losses.
Here’s a tip: If your LLC is going to have more than one member, it would be a good idea to draw up a simple operating agreement. Most states don’t require an LLC to have one, but with so many cooks in the kitchen, you’ll want clear documentation with regards to ownership percentage, voting rights, distribution of profits and losses, as well as rules for buying out a member. You won’t be require to file the agreement, but it should be signed by each member and kept with the LLC’s important documents.
Beyond the basic information you’ll also need:
• payroll documents
• bank and credit card statements
• accounting documents
• partnership agreements
• depreciation schedules
• gross receipts
• checking and savings account interest
What tax form(s) does an North Dakota business need to file?
Corporations: Form-40
Partnerships: Form ND-58
LLCs: Form ND-1
What’s the North Dakota corporate tax income rate?
$0 – $24,999 1.7%
$25,000 – $49,999 4.23%
$50,000+ 5.2%
What is North Dakota’s personal income tax rate?
$0 – $39,450 1.10%
$39,450 – $95,500 2.04%
$95,500 – $199,250 2.27%
$199,250 – $433,200 2.64%
$433,200+ 2.90%
When are my business tax returns due?
Your business tax returns are due 15th day of the 4th month following the end of the taxable year (for fiscal year filers).
What if I need an extension?
North Dakota offers a 6-month extension to businesses that have an approved Federal tax extension (IRS Form 7004), which brings the ND filing deadline to October 15 (for calendar year filers).