How to Form a Professional Corporation in North Dakota (2024 Guide)

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
Last updated: 
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Forming a Professional Corporation in North Dakota

If you would like to start and learn how to form a corporation in North Dakota, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in North Dakota are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in North Dakota or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

What is a Professional Corporation in North Dakota?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the North Dakota. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in North Dakota, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in North Dakota

To form a Professional Corporation in North Dakota 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-

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in North Dakota

After you have decided to form a professional corporation in North Dakota, you must choose a name for your corporation. Here are some pointers to consider when 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)
  • Limit of restricted words that need a license.
  • A unique name is needed with no match
  • No confusion with a government entity name.

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. You must file a name reservation application in the North Dakota Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for North Dakota DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the North Dakota Registered Agent

The next step in forming a professional corporation is hiring a Registered Agent, who accepts legal paperwork for 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 Registered Agent if you have the time. Usually, in North Dakota, a Registered Agent costs is ranging from $50 – $150. To make it easier, you can hire North Dakota Registered Agent Services for your professional corporation.

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Step 4: File the Articles of Incorporation in North Dakota

After you hire a 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. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

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 state. 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 in North Dakota is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

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

The next step is to form the first board of directors for your PC in North Dakota. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the North Dakota Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In North Dakota, you must have Three directors in forming your Professional Corporation.

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.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with North Dakota Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

  • Name and Purpose of the Corporation
  • Registered Office and Agent
  • Shareholders
  • Board of Directors
  • Officers
  • Committees
  • Indemnification and Insurance
  • Conflict of Interest
  • Records and Reports
  • Amendments
  • Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in North Dakota.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in North Dakota. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

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 four 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 several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in North Dakota for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in North Dakota easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in North Dakota

Before your professional corporation operates in North Dakota, you must have North Dakota Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in North Dakota ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in North Dakota

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the North Dakota tax classification for the taxes that an LLC in North Dakota must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in North Dakota.

  • Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
  • North Dakota Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
  • Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
  • Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
  • Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
  • Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in North Dakota

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in North Dakota

In North Dakota, you must submit a report. 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 the report every 1 year (15th November every year) in the North Dakota Secretary of State.

FAQs

What is a professional corporation in North Dakota?
A professional corporation is a legal entity formed by licensed professionals, such as doctors, lawyers, accountants, and engineers, who wish to limit their personal liability for business debts and obligations.
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 Secretary of State, pay the filing fee, and comply with state laws and regulations governing your profession.
Can I form a professional corporation with just one shareholder in North Dakota?
Yes, North Dakota allows single-shareholder professional corporations.
What are the taxes for a professional corporation in North Dakota?
The taxes for a professional corporation in North Dakota depend on factors such as its income, type of business, and location.
Are there any exemptions for a professional corporation in North Dakota?
North Dakota does not offer any specific exemptions for professional corporations beyond those available to general business corporations.
Do I need a specific professional license to form a professional corporation in North Dakota?
Yes, to form a professional corporation in North Dakota, you need to have a professional license issued by the relevant state board or agency.
Can I have a non-professional shareholder in my professional corporation in North Dakota?
No, all shareholders in a professional corporation in North Dakota must be licensed professionals in the same profession as the corporation’s business.
What happens to my professional license when I form a professional corporation in North Dakota?
Your professional license does not change when you form a professional corporation in North Dakota, but you need to ensure that you comply with state rules and regulations for licensed professionals.
Are there any restrictions on the liability of a professional corporation in North Dakota?
North Dakota limits the liability of shareholders in a professional corporation to the amount contributed to the company’s capital, and requires them to comply with professional rules and standards.
What are the benefits of forming a professional corporation in North Dakota?
The benefits of forming a professional corporation in North Dakota include greater personal liability protection, tax advantages, and opportunities to grow your business.
Can I convert my existing business into a professional corporation in North Dakota?
Yes, you can convert your existing business into a professional corporation in North Dakota by complying with state requirements and obtaining any necessary approvals from your profession’s licensing authority.
What are the disadvantages of forming a professional corporation in North Dakota?
The disadvantages of forming a professional corporation in North Dakota include higher levels of regulation, administrative burden, and professional liability concerns.
What is a professional shareholder in North Dakota?
A professional shareholder in North Dakota refers to a shareholder who is also a licensed professional in the same profession as the business of the corporation.
Do I need to obtain any specific certifications to form a professional corporation in North Dakota?
You do not need any additional certifications to form a professional corporation in North Dakota, but you should ensure that you meet all licensing requirements for your profession.
Can I dissolve my professional corporation in North Dakota if I retire or leave my profession?
Yes, you can dissolve your professional corporation in North Dakota by obtaining the approval of your professional licensing board and complying with state rules on dissolution.
Can a professional corporation only operate in North Dakota, or can it do business in other states as well?
A professional corporation registered in North Dakota can do business in other states, but it must first comply with each state’s rules and licensing requirements for professional corporations.
Do I need to hire a lawyer to form a professional corporation in North Dakota?
You do not need to hire a lawyer to form a professional corporation in North Dakota, but you should consider seeking legal advice to ensure all state and professional requirements are met.
How do I choose a name for my professional corporation in North Dakota?
The name of your professional corporation in North Dakota must comply with state rules on professional naming conventions, and be different from other corporate or professional names.
How much does it cost to form a professional corporation in North Dakota?
The cost of forming a professional corporation in North Dakota depends on several factors, such as the filing fee, legal fees, and other administrative costs.
Can my professional corporation own real estate in North Dakota?
Yes, a professional corporation in North Dakota can own real estate, subject to state laws and regulations governing professional ownership of assets.
What are the annual reporting requirements for a professional corporation in North Dakota?
A professional corporation in North Dakota must file an annual report with the Secretary of State and pay any fees required by law.
Can a professional corporation in North Dakota offer shares to the public?
No, North Dakota law does not allow shares of professional corporations to be bought and sold on public stock exchanges.
Can the profits of a professional corporation in North Dakota be distributed to non-professional family members?
No, profits earned by a professional corporation in North Dakota can only be distributed among licensed professional shareholders of the same corporation.
How long does it take to form a professional corporation in North Dakota?
The time it takes to form a professional corporation in North Dakota depends on several factors, but usually takes at least several weeks to process all necessary paperwork and requirements.
Can I include a non-compete clause in my professional corporation agreement in North Dakota?
Yes, you can include a non-compete clause in your professional corporation agreement in North Dakota, but you should ensure that it complies with all state and professional rules and regulations.
Can my professional corporation provide liability insurance for its shareholders in North Dakota?
Yes, a professional corporation in North Dakota can provide liability insurance for its shareholders, subject to state and professional standards.
Can I merge my professional corporation with another business in North Dakota?
Yes, you can merge your professional corporation with another business in North Dakota, but you must comply with state and professional requirements for merger and consolidation.
What types of professionals can form professional corporations in North Dakota?
Professionals that are allowed to form professional corporations in North Dakota include doctors, lawyers, architects, engineers, accountants, and others.
Can a professional corporation in North Dakota limit or avoid liability for malpractice?
No, a professional corporation in North Dakota cannot limit or avoid liability for malpractice.
How many shareholders can a professional corporation have in North Dakota?
A professional corporation in North Dakota can have one or more shareholders.
Are there any residency requirements for shareholders of a professional corporation in North Dakota?
No, there are no residency requirements for shareholders of a professional corporation in North Dakota.
How is a professional corporation taxed in North Dakota?
A professional corporation is taxed as a C corporation in North Dakota.
Does a professional corporation in North Dakota need to register with a regulatory agency?
Yes, the professional corporation may need to register with a regulatory agency depending on the profession.
Can a professional corporation in North Dakota provide non-professional services?
No, a professional corporation in North Dakota can only provide professional services.
Do professionals in North Dakota need to be licensed in the state to form a professional corporation?
Yes, professionals in North Dakota need to be licensed in the state to form a professional corporation.
Is a professional corporation in North Dakota required to have officers?
Yes, a professional corporation in North Dakota is required to have officers.
Can a professional corporation in North Dakota be formed by a sole proprietor?
No, a professional corporation in North Dakota need to be formed by at least two people.
Are there any restrictions on the names allowed for a professional corporation in North Dakota?
Yes, the name of a professional corporation needs to include the phrase “Professional Corporation” or an abbreviation such as “PC” or “P.C.”
Can a professional corporation in North Dakota have a different fiscal year than the calendar year?
Yes, a professional corporation in North Dakota can have a different fiscal year than the calendar year.
What is the cost to form a professional corporation in North Dakota?
The cost to form a professional corporation in North Dakota is $100 for filing the Articles of Incorporation.
What happens after filing Articles of Incorporation for a professional corporation in North Dakota?
After filing Articles of Incorporation for a professional corporation in North Dakota, you will receive a certificate of incorporation and need to file for necessary permits with regulatory agencies.
Does a professional corporation in North Dakota need to have meetings or keep minutes?
Yes, a professional corporation in North Dakota is required to have meetings and keep minutes.
Can shareholders of a professional corporation in North Dakota have different classes of stock?
Yes, shareholders of a professional corporation in North Dakota can have different classes of stock.
What documents are needed to form a professional corporation in North Dakota?
The following documents are required
Can the shareholders of a professional corporation in North Dakota be sued personally for malpractice?
Yes, shareholders of a professional corporation in North Dakota can be sued personally for malpractice.
What is the minimum required capitalization for a professional corporation in North Dakota?
There is no minimum required capitalization for a professional corporation in North Dakota.
Can a professional corporation in North Dakota issue stock options to employees?
Yes, a professional corporation in North Dakota can issue stock options to employees.
Does North Dakota offer any tax incentives for forming a professional corporation?
North Dakota does not offer any tax incentives for forming a professional corporation.
Can a professional corporation in North Dakota make charitable donations?
Yes, a professional corporation in North Dakota can make charitable donations.
What is the name of the regulatory agency a professional corporation in North Dakota needs to file with when creating a medical professional corporation?
The North Dakota Board of Medical Examiners approves medical professional corporations and other medical entities.
Can a professional corporation in North Dakota be dissolved and re-formed as a General Corporation – Non Profit paying out bonuses to its licensed physicians?
No, a profit-making professional corporation must remain a professional corporation and is Not allowed to admit non professionals such as Corporate General shareholders or allow for the payment of bonuses.
What is the limitation on liability of shareholders if professional corporation obtained judgment against them?
Each shareholder is severally, but not jointly, liable for the acts of the shareholders; however, the remedies of a debtor shall first be exhaustible against the debtor . A shareholder, if required by the constating documents to surrender his her shares to the corporation and his her liability, is discharged from liability created before surrender.

Also Read

How to Save Money While Forming North Dakota Professional Corporation

One effective way to save money when forming a professional corporation in North Dakota is to carefully review and evaluate all applicable legal requirements and documents needed for the process. It’s essential to understand the state’s regulations and laws regarding the formation of professional corporations. By conducting thorough research and being well-informed, entrepreneurs can avoid unnecessary expenses related to legal complications or errors during the filing process.

Another crucial step towards cost-saving formation is to create a detailed budget plan. By setting an estimate of the expenses involved, business owners can identify areas where they can potentially cut costs. It’s important to avoid overspending on non-essential items and prioritize investments that are critical to the success of the professional corporation. Careful financial planning can ensure that funds are allocated efficiently and effectively, helping to avoid unnecessary expenditures.

Additionally, entrepreneurs should strongly consider leveraging technology and utilizing online resources to save money while forming a professional corporation. Nowadays, there are numerous online platforms and resources available that offer affordable or even free services for legal documentation and company formation. Instead of hiring expensive lawyers or consultants, utilizing these modern tools can help significantly reduce expenses.

Another way to achieve cost savings while forming a professional corporation is to carefully review the corporate structure and assess whether all options have been considered. For instance, forming a corporation may incur higher tax obligations compared to other business structures, such as limited liability companies (LLCs) or partnerships. Examining different structural possibilities and understanding their financial implications can enable entrepreneurs to choose the most cost-effective option suitable for their business needs.

Moreover, networking and seeking professional guidance can be a powerful resource for reducing costs during the formation process. Entrepreneurs should connect with business owners who have completed similar processes and inquire about their experiences and possible money-saving tips. Engaging with experts, attending business seminars, or joining professional associations can provide valuable insights on best practices and cost reduction strategies.

Finally, entrepreneurs should consider utilizing the services of an experienced professional corporation formation service. Collaborating with experts who specialize in establishing professional corporations in North Dakota can be a cost-effective alternative to hiring traditional legal support. These specialized services not only possess in-depth knowledge of the state’s requirements and procedures but often offer tailored packages at significantly reduced rates compared to traditional law firms.

Saving money when forming a professional corporation in North Dakota is essential, especially in today’s competitive business environment. By being diligent, conducting extensive research, utilizing technology, and seeking professional guidance, entrepreneurs can successfully establish their corporations while prioritizing efficient cost management. With strategic planning and informed decision-making, business owners can navigate the formation process while maximizing savings, putting their professional corporations on the path to long-term success and profitability.

Conclusion

In conclusion, forming a professional corporation in North Dakota is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.

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