Are you looking to form a professional limited liability company (PLLC) in North Dakota, but you’re not sure how the formation process works? There are several important steps when it comes to creating a North Dakota PLLC that is compliant and able to do business in the state.
What is a North Dakota Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In North Dakota, a PLLC is an LLC that is formed to provide a professional service to the public that requires a license prior to rendering such service, such as services rendered by physicians, attorneys, and accountants.
The North Dakota PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in North Dakota have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in North Dakota (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In North Dakota, the name of a professional limited liability company must contain the words "professional limited liability company" or "limited liability company" or the abbreviations "P.L.C.," "PLC,” "P.L.L.C.," "PLLC," "L.L.C.," or "LLC.” Other than the foregoing, you may not use any other word or abbreviation in the name indicating that the PLLC is a corporation, limited liability company, or limited liability partnership. The name also may not contain any word or phrase that indicates or implies the PLLC is organized for a purpose other than the purpose set forth in the company’s Articles of Organization.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can use the North Dakota Secretary of State’s online Business Search tool to check if a name is available. If it’s available, you can reserve the name for up to 12 months for $10 by submitting a Reserve Name Application. Name reservations are renewable for additional 12-month periods.
Step Two) Designate a Registered Agent
Every PLLC in North Dakota is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
In North Dakota, you can appoint either a commercial registered agent or a noncommercial registered agent. Commercial registered agents are registered as commercial registered agents with the North Dakota Secretary of State. A noncommercial registered agents can be an individual residing in North Dakota, a domestic or foreign corporation, or a domestic or foreign limited liability company.
A corporation or limited liability company appointed as a noncommercial registered agent must be registered with the North Dakota Secretary of State, be in good standing, and have a North Dakota business address.
Without a registered agent, you could lose your good standing with the state of North Dakota, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your North Dakota professional limited liability company, you will fill out the Articles of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of the PLLC
- Address of PLLC’s principal executive office
- Name of the PLLC’s registered agent
- If appointing a noncommercial registered agent, the street address of such registered agent
- Effective date of the Articles of Organization, if other than the filing date
- Duration of existence of the PLLC, if not perpetual
- Profession to be practiced by the PLLC
- Any optional provisions agreed to by the members
- Name(s) and address(es) of the member(s)
- Name(s) and mailing address(es) of the organizer(s)
You can file the Articles of Organization either by mail, in person, or by fax with the North Dakota Secretary of State’s Business Registration Unit. The Articles of Organization must be accompanied by a certificate from the regulating authority of your PLLC’s profession certifying that each of the members of the PLLC is licensed to practice the profession.
Note that architecture and landscape architecture PLLCs are permitted under North Dakota law to have unlicensed minority owners so long as such PLLCs also file a certificate from the PLLC identifying the minority owners and the express law authorizing such minority ownership.
Cost to Form a PLLC
North Dakota assesses a filing fee of $135 for the Articles of Organization.
The Business Registration Unit can take up to four weeks to review and process your Articles of Organization.
Step Four) Create an Operating Agreement
After you register a PLLC in North Dakota, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
Your PLLC may be subject to North Dakota income tax and other state business taxes, such as Sales & Use Tax, depending on the nature of your PLLC’s business and how your PLLC elects to be treated for federal tax purposes. You can learn more about business taxes in North Dakota on the North Dakota Tax Commissioner’s website.
Once you’ve determined your state tax obligations, you can use the North Dakota Taxpayer Access Point to electronically file certain tax returns, make payments, apply for tax accounts, and more.
Depending on where in North Dakota your business is located, you may also need to pay some local taxes. You should be sure to check with the city and county in which your PLLC does business to confirm whether your business is subject to any additional taxes. Resources for businesses in the four largest cities in North Dakota are available online: Fargo, Bismarck, Grand Forks, and Minot.
Step Six) Obtain Business Licenses and Permits
A generic state business license is not required for businesses in North Dakota. You may need other state permits or licenses, however, depending on the nature of your business. You can find general licensing information on the State of North Dakota’s website. You can also find a list of state boards and commissions that issue certain licenses, including industry- and profession-specific licenses, on the North Dakota Governor’s website. You should contact your city and county as well to confirm whether you will need any local permits, licenses, or registrations to legally operate your business.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in North Dakota
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
In North Dakota, if you have one or more employees, you are required to obtain workers’ compensation insurance through North Dakota’s Workforce Safety and Insurance, or WSI. WSI is the sole provider and administrator of North Dakota’s workers’ compensation system. If your PLLC will have any employees, you will need to apply for insurance through WSI. Visit the WSI website for more information, including instructions on how to apply for insurance. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
In North Dakota, income is reported on an income tax form. These forms are available on the North Dakota Tax Commissioner’s website. You will need to determine which form is appropriate for your PLLC based on its tax classification status.
Understand annual reporting
PLLCs are required to file an Annual Report with the North Dakota Secretary of State on or before November 15th of each year, starting the year following the year in which the PLLC was initially registered. The Annual Report helps ensure that your PLLC’s information on file with the Secretary of State is current and must be submitted by mail or fax on the form provided by the Secretary of State. A copy of the Annual Report must also be submitted to the regulatory board of the profession for which your PLLC was formed.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.