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.

Then, after choosing which business formation best meets your needs, you can hire Active Filings to incorporate your business in North Dakota for you. We’ll streamline the process and make it painless. Our starter package begins at only $25 (plus North Dakota fees), and we’re sure that you’ll find out in no time why Active Filings is America’s most reliable business incorporation service.

Hire us to form your LLC or Corporation in North Dakota!

North Dakota LLCs vs. North Dakota 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.

Advantages and Disadvantages of North Dakota LLCs and 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
  • Corporate Income Tax
    At 5.2%, North Dakota’s maximum corporate income tax rate is the 4th lowest in the US.

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.

North Dakota LLC and Corporation Maintenance

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?

 

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

Taxes, not everyone likes them, in fact most people don’t, but they are an integral part to owning and operating a business. While we’re not tax professionals, we can give you a little insight into how your corporation or LLC might be taxed.

Corporations: The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This is what we mean when we say corporations face “double taxation.” If you are forming a corporation, you’ll want to pay attention to not only the state’s corporate tax, but also it’s income tax rate, as you will be on the hook for both.

LLCs: For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity. One of the most significant benefits of an LLC is that of pass-through taxes. LLC owners don’t have to file a corporate tax return. An owner simply reports their share of profit and loss on their individual tax return. This prevents double taxation, your business paying taxes and you paying taxes.

 

What tax form(s) does an North Dakota business need to file? 
Corporations: Form 40
LLCs:  Form ND-1

What’s the North Dakota corporate tax income rate?
$0+          1.700%
$25,000+ 4.230%
$50,000+ 5.200%

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).

Hire us to form your LLC or Corporation in North Dakota!