North Dakota is a great place to do business. With one of the lowest costs of living in the nation, alongside an excellent early survival rate for startup companies, ND entrepreneurs have a lot to be thankful for!
Are you interested in starting a North Dakota company? There are many steps to follow, from the initial planning stages to the day-to-day operations of your business. This article explains how to start a business in North Dakota, from start to finish.
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your North Dakota business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
Finding the appropriate name for your North Dakota business is the first concrete step of this section. And it’s a very important step, so it’s wise to take your time here.
Start by brainstorming some ideas. Think about the type of business you want to run, the industry it will be in, and what kind of messaging you want to convey to your customers. You’ll want to land on a name that is memorable, unique, and well-suited to your line of work.
It’s also very important to choose a name that is unique. In other words, you need to find a name that is not already registered by another company. This is one of the formal rules for North Dakota companies: You must use a distinguishable name that’s unique from any other company registered in North Dakota.
To confirm if a name is available, you can conduct a business name search. This will show you the database of companies that are already registered so you can see if your desired name is taken or not.
There are other business naming rules to be aware of, as well, including:
- Names for LLCs need to contain “limited liability company”, or select approved abbreviations such as “LLC” or “L.L.C.”
- Names for corporations need to contain “corporation”, “incorporated”, or select approved abbreviations such as “corp” or “inc”
- Other rules may apply. More information here and here.
- The full rules for LLCs are here (10-32.1-11, page 9) and corporations here (10-19.1-13, page 13)
When you find a name that you want and have confirmed that it’s available, you can move on to the next step.
North Dakota trade names
When researching names, it’s worthwhile to consider your future options, including the use of trade names. A trade name is an assumed name (otherwise known as a DBA) that can be registered once a business is established. The business can then do business under the trade name, in addition to its formal business name.
For example, ABC, LLC could register a trade name under “ABC Painting Supply”, and go on to do business under either ABC, LLC or ABC Painting Supply. The potential to use trade names in the future means you’ll have more flexibility in how you market and brand your company. More information can be found here.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans.
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers, and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited liability company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in North Dakota
Now it’s time to actually form a legal business entity in the state of North Dakota. To do this, you will need to submit documents to the ND Secretary of State, through their online FirstStop portal. There are several other important steps as well, which are discussed below.
There are two broad options here: You can either do all the work on your own, or you can pay for a service to help you with it.
Services such as Northwest Registered Agent, ZenBusiness, and Incfile provide entrepreneurs with personalized services to help them get their new companies formed. Basically, these services will serve as middlemen between you and the state agencies and will help to make the entire process simpler and more efficient.
It’s optional to use a service; however, it can save you a lot of time and hassle, so it’s well worth considering.
For those using a service, simply sign up and you’ll be walked through each step that you need to take.
For those doing the work on their own, the basic steps typically include:
- Naming your company (see notes in section 2 above)
- Choosing a registered agent (the registered agent will be tasked with receiving legal documents, notice of lawsuits, etc. for your company)
- Filing paperwork with the state
- Obtaining business licenses and permits if necessary
- Applying for an EIN from the IRS
More specific steps for each of the most popular business entities are listed below.
Form a North Dakota sole proprietorship
Follow these steps:
- Decide if you will operate under your legal name, or use a trade name
- If you use a name other than your own, you may need to register a trade name/assumed name
- Apply for a business license and/or other necessary permits from local governments (city/county), as needed
- More information here
Form a North Dakota LLC
Follow these steps:
- Name your new LLC (see notes above)
- Choose a North Dakota Registered Agent (or use a service such as Northwest Registered Agent). This ND Registered agent will be responsible for receiving legal documents, notice of lawsuits, etc. on behalf of your company
- File the LLC Articles of Organization online with the ND Secretary of State, and pay the $135 filing fee
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form a North Dakota corporation
Follow these steps:
- Decide on your desired corporate tax structure (S corp or C corp)
- Name your new corporation
- Choose a Registered Agent for your business (or use a service – see above)
- Hold an organizational meeting and appoint directors
- File the ND Articles of Incorporation online and pay the $100 filing fee
- Apply for an EIN from the IRS
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: North Dakota may require additional permits and/or licenses in order to operate legally in the state. Check the North Dakota business licensing page for more information.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).
Whenever you hire a new employee, you are legally required to report the new hire within 20 days of the employee’s first day of work. And your company will also need to register for withholding tax, as well as unemployment insurance tax.
There will likely be other tax reporting requirements as well. Speak with your accountant for details.
At this point, you also should look into setting up your payroll system – whether you handle it yourself, or use a payroll service.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
North Dakota business FAQs
Still have questions about running a business in North Dakota? Here are some answers to frequently asked questions.
What are some business resources in North Dakota?
ND entrepreneurs will have access to a wide variety of helpful resources, small business incubators, counseling programs and more. The North Dakota Small Business Development Center (SBDC) is perhaps the best place to start, as the SBDC provides free services including business coaching, consultations and online training. They can also help connect you with other useful resources in your area. SCORE North Dakota is another great resource, which has offices in Bismarck, Minot, Fargo and Grand Forks.
What is the minimum wage in North Dakota?
The North Dakota minimum wage is $7.25 per hour, which is the same as the federal minimum wage. There is an exception for workers who receive tips, who may be paid cash wages of a minimum of $4.86 per hour. However, these workers’ total wages (cash wages + tips) must equal at least the $7.25 federal minimum wage. If they do not, the employer must make up the difference.
Keep in mind that it is possible for individual cities or counties to impose their own minimum wage laws that may exceed North Dakota’s minimum wage. Check with local government officials in your area to ensure your business is compliant with all local rules.
What business taxes does North Dakota have?
There are a variety of state taxes that North Dakota firms must pay. This includes sales tax (5% on the state level, plus local taxes — for example the total sales tax in Bismarck is 7%) and use tax.
How do I dissolve an LLC or Corporation in North Dakota?
To shut down a business in the state of North Dakota, the owner(s) must “dissolve” the company. This involves several steps, but the most important is to file voluntary dissolution paperwork with the North Dakota Secretary of State. You may also need to file a final tax return and close down your business tax accounts.
Closing a business in North Dakota can be complex, so it’s recommended to work with an attorney or CPA for this process.
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