Are you planning to form a corporation in North Dakota? Congratulations! You’re already halfway there because you found us.
A corporation is a business structure separate from its owners, who are called shareholders. It can enter into contracts, apply for loans, own properties, hire employees, and pay taxes.
You can form a corporation as a C corporation, an S corporation, or a nonprofit corporation:
- A C corporation, like all corporations, is a separate legal entity. A C corporation is also taxed separately, meaning it files taxes for the business; the individual shareholders also pay taxes on their share of the company’s profits on their individual tax returns, which is known as “double taxation.”
- An S corporation allows the profits to “pass through” to the shareholders, meaning those profits are only taxed once (at the individual shareholder level).
- Nonprofits are considered charitable and can apply for tax-exempt status with the IRS; income for a nonprofit goes to benefit its cause.
How do I form a Corporation in North Dakota?
Steps to form your North Dakota Corporation
- Name Your Corporation
- Appoint Directors
- Choose an North Dakota Registered Agent
- File the North Dakota Articles of Incorporation
- Create Corporate Bylaws
- Draft a Shareholder Agreement
- Issue Shares of Stock
- Apply for Necessary Business Permits or Licenses
- File for an EIN and Review Tax Requirements
- Submit your Corporation’s first report
To start a corporation in North Dakota, you must file the Articles of Incorporation with the office of the Secretary of State. To simplify the process of forming a corporation in the state of North Dakota, we’ve put together 10 easy steps to form your business:
Step 1: Name Your North Dakota Corporation
Naming your North Dakota corporation is a huge consideration, as it has far-reaching implications for your business. The state requires that you choose a name that is different from any other registered businesses in North Dakota.
North Dakota corporations are required to have the following words or abbreviations:
But it cannot have any words or abbreviations that describe other business types, such as “Limited Liability Company” or “LLC.”
To check if the name you want is available, you can perform a business entity search. If there are no other businesses registered with the same name, you can reserve it by filing a Reserved Name Application online for $10.
If you want to use a “doing business as” (DBA) name, you will need to file a Trade Name Registration form for $25. You can also file this form online. Businesses use DBA names to attract customers with catchy and easy monikers.
When checking DBA names, you should also take a look at trademarks. Trademarks can be reserved at the state and federal levels, with the federal level offering more protection. Visit the United States Patent and Trademark Office (USPTO) website to see whether your business name or logo is federally trademarked and here for the state-level trademark.
Step 2: Appoint Directors
To form a North Dakota corporation, only one initial director is needed. And the incorporator, the person who started the business, can take the position until new directors are voted in, or until the number of directors is specified in the corporate bylaws.
Directors don’t necessarily have to be shareholders, but shareholders can be directors.
Step 3: Choose an North Dakota Registered Agent
A corporation is required to appoint a registered agent as a designated contact to receive important legal documents and official state correspondence for the business. These may include such things as tax filing correspondence or service of process (notice of a lawsuit).
A registered agent can be a person, corporation, limited liability company, or a commercial registered agent service that:
- Has a physical address in the state
- Can be available (in person) during office hours
Step 4: File the North Dakota Articles of Incorporation
The Articles of Incorporation is a document filed to create a corporation. Upon filing and paying $100, the Secretary of State issues a Certificate of Incorporation as proof that all requirements have been performed.
The Articles of Incorporation must include the:
- Name and address of the business
- Name and address of the registered agent
- Names, signatures, and addresses of the incorporators
- Names and addresses of the initial board of directors and corporate officers
- Purpose of the business
- Number of authorized shares and its par value
Authorized shares refer to the maximum number of shares that a company is allowed to issue as agreed upon in the Articles of Incorporation. If you plan to issue more than one class of shares, it should also be listed in the articles with the par value of each class.
If you want to customize the articles to override default provisions, partner with professionals like ZenBusiness who are aware of state requirements to make sure you file accurately and launch your business officially.
Step 5: Create Corporate Bylaws
Corporate bylaws contain the rules for managing the business and regulating its internal affairs. As an official document, it must also be signed and filed with the corporate record.
Bylaws typically include:
- How shareholders will conduct votes
- The rights, duties, and qualifications of directors
- How often the board of directors will meet
- Procedures for replacing directors
- How shares are distributed, sold, or transferred
- The rights, duties, and qualifications of officers
- The procedures for solving internal disputes
- The procedures for amending the bylaws
Bylaws do not need to be filed and are not legally required in the state of North Dakota. However, you are encouraged to have them since it is often required by financial institutions for opening business bank accounts or applying for loans.
Step 6: Draft a Shareholder Agreement
A shareholder agreement is a contract among the stockholders that outlines their rights and responsibilities.
A shareholder agreement may include:
- Names and contact information of all the shareholders
- The pricing of shares and the number issued
- A stipulation for dividend distribution
- Description of shareholder responsibilities
- Rules and regulations regarding the appointment of officers
- Shareholder voting rights and provisions on what constitutes a majority vote
- Procedures needed to allow changes on previous agreements
- A provision for the sale or transfer of shares
- A plan for the distribution of assets if the business closes
This agreement can be drafted from a template, but you may want professional assistance, as it is still a legally binding document.
Step 7: Issue Shares of Stock
A corporation sells shares of stock to acquire capital for the business. It’s required to issue at least some of the shares authorized in the Articles of Incorporation.
Stocks may be issued privately or publicly. Smaller corporations may issue stocks privately to the founders, employees, or private investors. A public corporation issues some of its shares for public purchase and needs to file quarterly statements with the U.S. Securities and Exchange Commission (SEC). In North Dakota, stocks offered to the public must also be registered with the North Dakota Securities Department unless the shares are exempt from registration requirements.
Step 8: Apply for Necessary Business Permits or Licenses
The state of North Dakota does not have a general business license. You can find some information about state licensing here, but to learn what you need to operate within and outside the city limits where your business is located, you’ll need to contact the city or county auditors for information on permits and zoning ordinances that apply to your company.
Licensing is an important step for setting up a company, but there is no one-stop shop to do it all. You’ll need to research what federal, state, local, and industry-specific licenses and permits your corporation needs.
Step 9: File for an EIN and Review Tax Requirements
Corporations need a Employer Identification Number (EIN) to pay taxes, hire employees, and open bank accounts. The application process for an EIN is free and can be easily done online.
In addition to federal corporate income tax, as a business in North Dakota, you must file a corporate income tax return with the state. You can find out more information about specific taxes related to your industry here. You may also be responsible for sales taxes and local taxes imposed by local divisions and supervised by the tax commissioner.
Step 10: Submit Your Corporation’s First Report
Businesses incorporated in North Dakota must file annual reports with the Secretary of State. Reports are due on or before Aug. 1 of every year. It can be done online through the electronic filing system, FirstStop.
An annual report must include the:
- Business name
- Name and address of the registered agent
- Business address
- Description of the business’s purpose
- Names and addresses of directors and officers
- Corporation’s stocks information, including the total number of issued shares and classes and their face value
- Signature and title of the person filing the report
How much does it cost to start a corporation in North Dakota?
The cost to form a corporation in North Dakota varies depending on the size, location, and industry. But at a minimum, you’ll pay the filing fee of $100 for the Articles of Incorporation.
Other initial costs may include business licenses and permits, a name reservation fee, a trade name application fee, and other additional fees. Recurring costs may include registered agent fees and annual reporting fees.
ZenBusiness can assist you in this process. We offer comprehensive plans that help minimize the headaches associated with incorporation for small businesses in North Dakota.
What are the benefits of a corporation in North Dakota?
North Dakota has a robust economy that offers a lot of incentives to new businesses, such as financial aid through grants, and a growing energy sector.
A corporation may be more complicated and costly to form, but it does offer the strongest personal liability protection. It also has immortality where it can own properties in perpetuity, undisturbed by shareholders leaving the company or selling their shares.
Corporations go through double taxation and face increased red tape, but they can also more easily raise capital. Loans are also easier to secure with the increased credibility of being a corporation.
How is an North Dakota corporation taxed?
Because C corporations are separate taxable entities from their owners, they have to file corporate returns. Shareholders also have to file their income from the corporation on their personal tax returns, which means C corporations are double-taxed. This applies to both federal and state corporate income tax in North Dakota.
S corporations have a pass-through tax structure. While S corporations are still considered separate legal entities, all the profits gained by the corporation go directly to the owners’ personal tax returns and are not taxed at the corporate level. North Dakota recognizes the federal S corporation status, so this applies to both federal and state corporate income tax.
Nonprofit corporations can apply to be tax-exempt from federal and certain state taxes, but they have to adhere to strict regulations. Employees for the nonprofit do pay income tax on their salaries.
North Dakota Corporation FAQs
- Does running a corporation in North Dakota involve more paperwork than running other types of businesses?
Yes, because corporations are the most complex business structure and involves the filing of yearly reports and detailed record-keeping.
- What is the difference between an LLC and a corporation in North Dakota?
In North Dakota, a limited liability company (LLC) can set different ways of distribution of profit. It is also easier to form and maintain but still offers protection from personal liabilities and debts just like a corporation.
- How do I change my corporation’s name in North Dakota?
You will need to complete the Articles of Amendment form online and submit it to the Secretary of State. The fee is $20.
- How many people are needed to form a corporation in North Dakota?
At least one person is needed to form a corporation.
- Can I form my North Dakota corporation online?
Yes. You can do all of your incorporation steps online.
- How do I dissolve my North Dakota corporation?
You could file the Articles of Dissolution by Incorporators if the corporation never issued any shares and has no outstanding debts.
Otherwise, you must first file a Corporation Intent to Dissolve with the Secretary of State. After that, you have two choices, which are:
You give notice to creditors by publishing once a week for four weeks in an official newspaper in the county where your registered agent and principal executive office are located and writing to known creditors/claimants. You can file the Articles of Dissolution if:
90 days have passed since creditors/claimants were notified
60 days have passed since a claim was rejected and the creditor did not proceed with other measures
180 days have passed since the corporation filed the intent with the Secretary of State
Payments were made to creditors/claimants
All remaining assets of the corporation were allocated
If you don’t give notice, you can only file after:
Two years have passed since the intent was filed or payments were made to all known creditors/claimants
All remaining assets of the business were allocated
No proceedings are pending against the corporation
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