A North Dakota professional corporation is a business entity that provides a level of legal protection to individuals who provide licensed professional services. All businesses should consider a formal entity structure, but there are some that would do better as a corporation than other types. See the ZenBusiness entity guide to see what’s right for you.
This article will show you how to start a North Dakota professional corporation (PC). But first, let’s learn what a PC structure looks like and if it’s the right one for your business.
A PC is a business structure that’s separate from its owners, who are called shareholders. PCs are owned and managed by licensed professionals. The state issues licenses for accountants, chiropractors, contractors, engineers, health care workers, and many other professionals.
Professional limited liability companies (PLLCs) consist of one or more owners who are called members, while PCs are owned by shareholders who hold stock in the company. The IRS views PLLCs as pass-through tax entities by default, while PCs generally have to pay corporate income tax. Shareholders are also taxed on dividends.
Due to the complexity of managing a PC, it’s most appropriate for larger companies that want a higher level of liability protection. It’s important to note that in North Dakota, an individual may not be an owner or executive of more than one PC that provides the same professional service.
It’s essential that you determine your shareholders and their initial stock proportions upon formation. You’ll need this information before you can file your Articles of Incorporation.
You and the other founders of the PC will need to appoint an initial board of directors to lead the company. At your first board meeting, you’ll designate officers to manage the daily business.
Choosing a unique North Dakota PC name is an important step, and there are a number of state laws that the entity must follow to qualify for PC status.
According to the Professional Organizations Act of the North Dakota Century Code, your PC name must contain one of the following words or abbreviations:
Check with the Secretary of State’s business directory to see if another company is using your name. If not, you have the option to reserve your available name for up to 60 days through the Secretary of State or by using ZenBusiness’s convenient name reservation service.
To help solidify your brand, choose a web domain name for your new company. Use ZenBusiness’s domain name service to check the availability and claim your new website address.
You may choose to use a doing business as (DBA) name, also known as a trade name, that differs from your corporate name. You must file a Trade Name Registration with North Dakota’s Secretary of State to secure exclusive in-state rights.
Selecting a registered agent is a legal requirement for all PCs. Whether an individual or business, a registered agent must have a registered office in North Dakota, and the agent must be available during regular business hours. A North Dakota PC cannot serve as its own registered agent.
ZenBusiness’s North Dakota-based registered agent partners can accept summons, subpoenas and legal documents as well as correspondence from the Secretary of State on your behalf. This frees you from the cumbersome need of staying on-site during business hours or potentially missing an important notice, which could have negative consequences.
Forming a North Dakota PC requires submitting Articles of Incorporation by an incorporator. You can act as your own incorporator and prepare and file your government documents, or you can have someone like an attorney do it on your behalf. To complete your Articles of Incorporation, you’ll need the following information:
You must also file:
A licensed professional member may complete and file these documents online using North Dakota’s e-file system. Filings require a $100 fee that’s paid electronically.
North Dakota PCs must keep permanent corporate records at the principal business location for compliance and auditing purposes. These may include:
Your North Dakota PC must have one or more directors who share the same profession as its shareholders. Incorporators record all director appointments in a signed document called the incorporator’s statement, which must be kept in the corporate record.
Corporate bylaws detail how the PC should be run, as well as assigning rights and duties to members and other possible events like dissolution and conflict resolution. Although you don’t have to file the bylaws themselves with the state, a PC must have a working set of bylaws in their corporate record that are approved by the initial directors.
A PC’s incorporator must arrange and attend the first board meeting, and set the following agenda:
It’s essential to keep detailed minutes of all board meetings, including discussions and decisions, because they’re part of the corporate record. Keep in mind that an incorporator can be an owner or shareholder in the PC, but they do not have to be. Once these tasks are complete, the incorporator’s job is finished.
North Dakota PCs need a federal Employer Identification Number (EIN) to operate. The IRS issues this number and uses it to identify your PC on financial documents. You can get this number through ZenBusiness or the IRS.
Usually, a C corporation pays federal taxes on profits at the corporate level, and shareholders’ pay personal income tax on their dividends, a concept known as double taxation. An S corporation designation eliminates this problem if the organization meets certain requirements for the number and type of shares and shareholders.
PCs that are taxed as C corporations or S corporations for federal income tax purposes are treated in the same manner for state income tax purposes.
Your PC may need to pay additional local taxes, so check with your local government offices to see what taxes you’re responsible for. Industry-specific information is available through the State Tax Commissioner.
Licensing is an essential step for setting up a North Dakota PC, but unfortunately, there’s no central informational resource.
North Dakota PCs don’t need a general business license, but you may need other state-level permits or licenses. You can find more information by contacting the state’s licensing board.
To find out what local and industry-specific licenses and permits your PC needs, you can do your own research or use the business license report service from ZenBusiness.
A North Dakota PC provides personal liability protection from creditors seeking to collect unpaid debts owed solely by the PC, but insurance can provide an extra layer of protection if a client or employee is injured on-site.
North Dakota doesn’t require businesses to hold general liability (GL) insurance or commercial property coverage, but it’s a good idea because it protects business owners from a variety of possible legal claims.
Although there’s no minimum coverage requirements, shareholders in your PC will likely want malpractice insurance. A North Dakota PC will protect you from other PC owners’ malpractice suits, but not from your own professional malpractice.
Your North Dakota PC must obtain mandatory workers’ compensation insurance for all part-time, full-time, and seasonal workers unless you qualify for an exemption. The North Dakota Workers’ Compensation program has more information about these requirements.
For shareholders to receive some of the liability protection that comes with operating a North Dakota PC, personal assets must remain separate from corporate assets. A business bank account achieves this goal while simplifying recordkeeping. Have your EIN and Articles of Incorporation ready when you apply.
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or are looking to register a domain, our goal is to help you succeed. Check out our services and contact us today to see how we can help you grow your company.
The filing fee for your Articles of Incorporation is $100 plus $25 for your annual report if received on or before August 1. All filings are completed online, so payments are made electronically.
No. You don’t need a lawyer, but it could be helpful to have one check over the process.
Yes, North Dakota allows professionals to form PLLCs.
Yes. Professionals that offer two or more services can form a North Dakota PC together if allowed by in-state licensing laws related to each profession.
Professional corporations default to a C corp status when formed. You may elect to have your PC classified as an S corp if you meet certain requirements and apply with the IRS. Usually, you must have fewer than 100 in-state shareholders and the board must approve the election.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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