How to Form a Professional Corporation in North Dakota


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in North Dakota

Are you considering starting a professional corporation in North Dakota? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in North Dakota can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in North Dakota, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in North Dakota!

What is a Professional Corporation in North Dakota?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in North Dakota. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in North Dakota.

LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in North Dakota if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in North Dakota

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in North Dakota, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in North Dakota

After you have decided on the idea to form a professional corporation in North Dakota, deciding the name for your corporation is significant. There is a complete guide on North Dakota LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In North Dakota, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 1 year. To keep the name, you must file a name reservation application with North Dakota Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the North Dakota Registered Agent

The next step in forming a professional corporation is hiring the North Dakota Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in North Dakota. Forming a professional corporation for your service will be easier if you have Registered Agent in North Dakota.

Alternatively, you can serve as your own North Dakota Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from North Dakota.

Step 4: File the Articles of Incorporation in North Dakota

After you hire a North Dakota Registered Agent to form a professional corporation, the next step is to file the North Dakota Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in North Dakota may be done with two methods, online and by mail. The Articles of Incorporation fee may vary from different states. However, in North Dakota, it costs $100 for online and by mail filing. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to Secretary of State, State of North Dakota, 600 E Boulevard Avenue Dept 108, Bismarck ND 58505-0500.

Step 5: Write an Operating Agreement in North Dakota

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The North Dakota operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in North Dakota

The next step is to appoint the initial board of directors in your PC in North Dakota. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the North Dakota SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in North Dakota

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in North Dakota can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in North Dakota might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in North Dakota

Before your professional corporation operates in North Dakota, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In North Dakota, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in North Dakota

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the North Dakota classification of taxes for the taxes an LLC in North Dakota has to pay.

Important Information

Maintaining Professional and Business License in North Dakota

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in North Dakota

In North Dakota, you will be required to submit a report each year. The owners’ and Registered Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in North Dakota, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in North Dakota

A professional corporation takes a lot of time to process and pursue. However, with the help of the North Dakota Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in North Dakota.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a professional corporation in North Dakota?
A professional corporation in North Dakota is a business that is formed for the purpose of providing professional services, such as those of a lawyer, doctor, architect, or accountant.
What are the advantages of forming a professional corporation in North Dakota?
A professional corporation in North Dakota offers a number of advantages, such as limited liability protection, personal asset protection, and the ability to raise capital.
How do I form a professional corporation in North Dakota?
To form a professional corporation in North Dakota, you must file articles of incorporation with the North Dakota Secretary of State, obtain a Employer Identification Number (EIN) from the IRS, and register with the North Dakota Department of Revenue.
What are the required documents to form a professional corporation in North Dakota?
The documents required to form a professional corporation in North Dakota include Articles of Incorporation, a Statement of Authority, and a Certificate of Good Standing.
What is the filing fee to form a professional corporation in North Dakota?
The filing fee to form a professional corporation in North Dakota is $125.
What is the filing fee to register a professional corporation in North Dakota?
The filing fee to register a professional corporation in North Dakota is $25.
What is the annual report fee for a professional corporation in North Dakota?
The annual report fee for a professional corporation in North Dakota is $25.
Does North Dakota require professional corporations to have a board of directors?
Yes, North Dakota requires professional corporations to have a board of directors composed of at least three individuals.
Does North Dakota require professional corporations to have a registered agent?
Yes, North Dakota requires professional corporations to have a registered agent who is available during business hours to accept service of process.
Does North Dakota require professional corporations to have a business license?
Yes, North Dakota requires professional corporations to obtain a business license from the city or county in which they are located.
How often does a professional corporation in North Dakota need to file an annual report?
A professional corporation in North Dakota must file an annual report with the North Dakota Secretary of State within 90 days of its anniversary date.
Does North Dakota require professional corporations to hold annual meetings?
Yes, North Dakota requires professional corporations to hold annual meetings of the shareholders and directors.
What type of tax requirements are there for a professional corporation in North Dakota?
A professional corporation in North Dakota is subject to federal, state, and local taxes.
Does North Dakota have any special regulations for professional corporations?
Yes, North Dakota has specific regulations for professional corporations, including requirements for capitalization, shareholder rights, and officer and director liabilities.
How does a professional corporation in North Dakota dissolve?
A professional corporation in North Dakota may be dissolved by filing articles of dissolution with the North Dakota Secretary of State and providing notice to creditors.
What are the requirements to form a Professional Corporation in North Dakota?
To form a Professional Corporation in North Dakota, you must file the Articles of Incorporation with the North Dakota Secretary of State. The articles must include the name of the Professional Corporation, the purpose of the corporation, the duration, the registered agent and address, the number of shares of stock, and the names and addresses of the incorporators.
What is the cost to form a Professional Corporation in North Dakota?
The filing fee for the Articles of Incorporation is $100.
What is the procedure for forming a Professional Corporation in North Dakota?
The procedure for forming a Professional Corporation in North Dakota includes filing the Articles of Incorporation with the North Dakota Secretary of State, obtaining a federal employer identification number, and preparing corporate documents such as bylaws and shareholder agreements.
Does North Dakota require a Professional Corporation to register with the state?
Yes, a Professional Corporation must register with the North Dakota Secretary of State.
Does the Professional Corporation need to appoint officers?
Yes, the Professional Corporation must appoint officers in accordance with the North Dakota Business Corporation Act.
Does North Dakota require a Professional Corporation to have a registered agent?
Yes, North Dakota requires a Professional Corporation to have a registered agent in the state.
What taxes does a Professional Corporation in North Dakota have to pay?
A Professional Corporation in North Dakota must pay state and federal income taxes, as well as North Dakota franchise taxes and any applicable local taxes.
Is there a minimum amount of capital required to form a Professional Corporation in North Dakota?
No, there is no minimum amount of capital required to form a Professional Corporation in North Dakota.
What happens if a Professional Corporation in North Dakota fails to comply with state law?
If a Professional Corporation in North Dakota fails to comply with state law, it can face a variety of penalties, including fines and suspension of the corporation’s rights and privileges.
Are there any fees associated with a Professional Corporation in North Dakota?
Yes, a Professional Corporation in North Dakota must pay annual fees to the Secretary of State for the privilege of doing business in the state.
Does North Dakota require a Professional Corporation to have a board of directors?
Yes, North Dakota requires a Professional Corporation to have a board of directors.
What is the time frame for forming a Professional Corporation in North Dakota?
The time frame for forming a Professional Corporation in North Dakota depends on the complexity of the Articles of Incorporation and the efficiency of the North Dakota Secretary of State.
Does North Dakota require a Professional Corporation to have a seal?
No, North Dakota does not require a Professional Corporation to have a seal.
What types of activities can a Professional Corporation in North Dakota engage in?
A Professional Corporation in North Dakota can engage in any activities for which the professional corporation was organized, as well as other activities as allowed by law.
Are there any reporting requirements for a Professional Corporation in North Dakota?
Yes, a Professional Corporation in North Dakota must file annual reports with the Secretary of State.
Is there a deadline for filing the Annual Report of a Professional Corporation in North Dakota?
Yes, the Annual Report of a Professional Corporation in North Dakota must be filed by June 30 of each year.
How can I find out more information about forming a Professional Corporation in North Dakota?
You can find more information about forming a Professional Corporation in North Dakota by visiting the North Dakota Secretary of State website.

Also Read

Why North Dakota Professional Corporation is So Important

Professional corporations, or P.C.s, are a critical component of the business landscape in North Dakota. These entities provide individuals in various professional fields, such as doctors, lawyers, accountants, and engineers, with opportunities to work together in a collaborative and regulated environment. By forming a P.C., professionals can pool their resources, expertise, and liability protections to create a more robust and competitive business model. This ultimately benefits not only the professionals involved but also the clients and customers who rely on their services.

In the state of North Dakota, where the economy is primarily driven by agriculture, energy, and healthcare industries, professional corporations play a vital role in ensuring that these sectors remain competitive and efficient. For example, in the healthcare industry, where medical malpractice claims can be a significant concern, forming a professional corporation can provide doctors and other healthcare professionals with the liability protections they need to focus on delivering quality care to their patients without the constant fear of lawsuits looming over their heads.

Professional corporations also foster innovation and collaboration among professionals in various fields. By working together in a structured and regulated environment, professionals can exchange ideas, share best practices, and develop new solutions to common problems. This type of synergy is critical for driving progress and advancing industries, especially in a state like North Dakota, where the entrepreneurial spirit is strong, and there is a constant need for new and innovative approaches to solving pressing challenges.

Moreover, professional corporations help promote job creation and economic growth in North Dakota. By encouraging professionals to come together and form collaborative partnerships, P.C.s create opportunities for new businesses to emerge, expand, and thrive. This, in turn, fuels economic development, generates tax revenue for the state, and creates new job opportunities for North Dakotans.

Finally, professional corporations in North Dakota provide professionals with a sense of security and stability in an increasingly competitive and volatile market. By forming a P.C., professionals can protect their personal assets, minimize their individual risks, and ensure that their business interests are safeguarded against market fluctuations or unforeseen circumstances. This sense of stability not only benefits the professionals themselves but also instills confidence in their clients and customers, who can trust that they are dealing with a reputable and reliable business entity.

In conclusion, professional corporations are a cornerstone of the business landscape in North Dakota. They provide professionals with a platform to collaborate, innovate, and thrive in various fields, driving economic growth, job creation, and industry advancement. As North Dakota continues to grow and evolve, professional corporations will remain a vital and essential component of the state’s business community.

Conclusion

In forming a professional corporation in North Dakota, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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