Get a Tax ID / EIN Number and Form Your New Business in North Dakota
If you’re going to start a business in North Dakota, you need to be prepared for the requirements that await you. Thanks to online resources, it’s easier to start a business than ever before, but you’ll still need a tax ID, a formal structure, and possibly a license or permit if you want to be successful. If you live in North Dakota already, you’ll be pleased to know that the state offers a strong economic environment in which small businesses can thrive. According to recent SBA statistics, there are more than 77,000 small businesses in the state already. That may not seem like a high number, but remember, similar to South Dakota, North Dakota has a relatively small population. Small businesses make up 98.8 percent of all businesses in the state, and together, they employ 210,948 employees or more than 57 percent of the state’s working population.
Steps to Forming your Business and Getting a Tax ID / EIN Number in North Dakota:
- Forming a Business in North Dakota
- Federal Tax ID (EIN) Number Obtainment
- North Dakota State Tax ID Number
- Localized Licenses and Permits in North Dakota
1. Forming a Business in North Dakota
One of the most important decisions you’ll make for your company is how to structure it. You’ll have several options, including forming a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation.
There are several factors you could use to form your decision. For example, you could choose a business based on its natural perks. Corporations, for example, are the only business type able to publicly issue shares, which is important both for fundraising and for future expansion. However, corporations tend to be very complex to start and manage, since they’re subject to so many restrictions and laws. By contrast, LLCs are simpler and easier to manage, and sole proprietorships and partnerships are almost painfully simple by comparison.
You also need to consider your liability exposure. If you start a sole proprietorship or a partnership, you (and your partner) are going to be exposed to every liability you might encounter. You’ll take on all business debts as an individual, and may be held legally responsible for any business-related actions you take. LLCs, as you might imagine, provide some degree of legal protection; they’re treated as separate legal entities, which means they can take on debts and legal responsibilities of their own.
As you might expect, you also need to think about how taxes are handled. For sole proprietorships and partnerships, taxes are straightforward; you’ll be taxed as an individual on any money you make. LLCs are considered pass-through entities, which means they don’t pay taxes on revenue they generate directly. However, you’ll be responsible for paying individual taxes on any money you make from the company (including salary and profits). In North Dakota, LLCs must file an annual report, with a $50 annual fee. Corporations are a bit more complex; they must pay taxes on all eligible revenue, and you must pay individual taxes on money you make from the business, resulting in a kind of double taxation. In North Dakota, you’ll pay 1.41 percent on corporate income up to $25,000, then 3.55 percent on income between $25,000 and $50,000, up to 4.31 percent on any income above $50,000 per year.
2. Federal Tax ID (EIN) Number Obtainment
The majority of North Dakota businesses will be required to get a federal tax ID number. Sometimes referred to as an employer identification number, or EIN, this is a 9-digit, unique number assigned to your business upon registry with the federal government. It’s a requirement if you’re hiring any employees (as suggested by its alternative name), or if your business has multiple members. You’ll also need one for many business applications, including applications for permits and licenses, loan applications, and applications to open a business bank account. Even if you don’t strictly need one, it’s good to have one for filling out paperwork.
To make things easier on yourself, make use of our federal tax ID number obtainment services. All you’ll have to do is answer a few questions about your business using our online application, and you’ll receive your federal tax ID via email in less than an hour.
3. North Dakota State Tax ID Number
Your North Dakota state tax ID number is similar to your federal tax ID number, but it’s a distinct number, used for different purposes. You’ll get one when you register with the state government of North Dakota. It’s a requirement if you’re going to sell taxable goods and services in the state, if you’re hiring employees in North Dakota, or if you’re going to owe excise taxes on regulated goods like alcohol, tobacco, or gasoline.
You can get a North Dakota state tax ID number through our state tax ID number obtainment services. Once you have a federal tax ID number in place, you’ll need to answer a few questions about your business, then you’ll receive your North Dakota state tax ID number in just 4 to 6 weeks.
4. Localized Licenses and Permits in North Dakota
Many businesses in North Dakota are required to have a license, permit, or other form of certification to operate legally. However, there isn’t a single department controlling these licenses, nor is there a general "business license" you need to operate. Instead, there are several departments controlling which licenses are required, and each local area has its own rules and regulations. Because there are thousands of potential licenses, and because the rules can get complicated, you’ll need to speak with your local Chamber of Commerce to determine whether your specific business needs some kind of certification. Make sure you have a federal tax ID number before you go through this process, because you’ll need one for most business license applications.
North Dakota’s economy is growing at a rate of 1.7 percent. This is slightly lower than the national average, but it represents a strong recovery from the state’s negative growth rate just 2 years ago. Small businesses in North Dakota are also a powerful source of economic growth, as they added a cumulative 5,571 net new jobs in the state last year.
Use our federal tax ID number and North Dakota state tax ID number obtainment services to get your tax IDs as quickly as possible. With just a couple of online applications, you can get registered with both the federal and North Dakota state governments, so you can begin operations.