How to Convert North Dakota Corporation to LLC | The Ultimate Guide

by
Convert North Dakota Corporation to LLC

When it comes to business structures, corporations and limited liability companies (LLCs) are two of the most popular options in North Dakota. Each business structure has advantages and disadvantages, so business owners must choose the best fit for their needs. There may come a time when a corporation realizes that converting to an LLC would be more beneficial. This comprehensive guide will walk you through Converting North Dakota Corporation to an LLC, discussing the reasons for conversion, the steps involved, and any potential challenges you may face.

Webinarcare Editorial Team will help you easily understand the conversion process, so you must be guided by all the factors gathered in this article.

How to Convert North Dakota Corporation to an LLC

Understanding Corporation and LLC in North Dakota

Understanding the differences between corporations and LLCs in North Dakota is essential for aspiring business owners and entrepreneurs. Both business structures offer distinct advantages and disadvantages, and comprehending their characteristics is crucial in making informed decisions.

Corporation

A corporation is a legal entity separate from its owners, known as shareholders or stockholders. It provides limited liability protection to its owners, meaning shareholders’ personal assets are typically shielded from company debts or liabilities. Corporations in North Dakota have the advantage of being able to issue stock to raise capital, making them an attractive choice for businesses seeking significant investment opportunities. However, corporations also come with additional formalities, such as regular shareholder meetings and extensive record-keeping requirements.

Limited Liability Company (LLC)

A limited liability company (LLC) is a flexible business structure that combines the advantages of both corporations and partnerships. LLCs offer limited liability protection to their owners, called members, shielding their personal assets from business debts or lawsuits. Unlike corporations, LLCs do not require as many formalities as regular meetings or extensive record-keeping. This aspect makes LLCs more suitable for small businesses or entrepreneurs who prefer a less burdensome administrative and compliance structure.

Understanding the distinctions between corporations and LLCs is crucial to determine which structure aligns best with your business goals, resources, and needs in North Dakota. By evaluating liability protection, taxation, ownership structure, and operational flexibility, entrepreneurs can make confident decisions when establishing their business entity in North Dakota.

It is suggested that you speak with a legal professional before you begin converting your North Dakota corporation to an LLC. They’ll understand what’s best for you and your company. To safeguard your personal assets from business debts, you can always start an LLC in North Dakota.

– WEBINARCARE EDITORIAL TEAM

How to Convert North Dakota Corporation to an LLC

Converting a corporation to an LLC in North Dakota involves several steps, which may vary depending on North Dakota laws and regulations. Here is an outline of the steps required to convert North Dakota corporation to an LLC:

Step 1: Research and Understand the Conversion Process

Before embarking on the conversion process, it’s crucial to research and understands the specific requirements and steps involved in converting a corporation to an LLC in North Dakota. Familiarizing yourself with the relevant state laws, regulations, and necessary forms or filings will help ensure a smooth transition. 

The North Dakota Secretary of State will often have valuable information about the conversion process, including required forms, fees, and filing procedures. Look for sections related to business entity conversions and corporation dissolution. In converting to an LLC, hiring an LLC Service in North Dakota is best since it provides guidance and assistance.

LLC Service

Rating & Pricing

Top Features

Learn More

#1 Recommendation

$0 + State fee

  • Free LLC Formation

  • Legal Support

  • Highly Reputed Company

Learn More

$299 + State fee

  • Single LLC formation package

  • Flat price for all services

  • Legal consultation

Learn More

Step 2: Obtain Shareholder Approval

The second step in converting North Dakota corporation to an LLC is obtaining approval from the corporation’s shareholders. This typically involves holding a shareholder meeting and voting on a resolution to approve the conversion. Be sure to review the corporation’s bylaws to ensure that the proper procedures are followed.

Step 3: Prepare and File a Plan of Conversion

North Dakota requires that a Plan of Conversion be prepared and filed with the North Dakota Secretary of State. This document outlines the terms and conditions of the conversion, including the name and structure of the new LLC, the conversion’s effective date, and any other relevant information. 

In terms of naming your North Dakota LLC, you must adhere to the following when choosing your LLC’s name:

  • The name must include “Limited Liability Company,” “LLC,” or “L.L.C.“
  • The name cannot include words or phrases that imply the company is engaged in activities it is not authorized to conduct.
  • The name must be distinct from other registered businesses in North Dakota.

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

You can 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 North Dakota DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in two methods, by mail and in person.

However, before filing a DBA, you should know that you need to renew your DBA every five years, which costs $25.

Be sure to review North Dakota’s specific requirements for a Plan of Conversion, Or you can hire the Best North Dakota Registered Agent Services for easier processing. 

Recommended: Professional services will ensure your business gets legal notices and critical mail. With LegalZoom’s Registered Agent Services, they offer peace of mind and expert support for businesses, ensuring compliance and seamless communication with state authorities. That’s why we recommend using –

LegalZoom – $249/year

Step 4: File Articles of Organization for the New North Dakota LLC

Along with the Plan of Conversion, you must file the Articles of Organization in North Dakota for your new LLC. This document establishes the new LLC that includes information such as the LLC’s name, Registered Agent, and management structure. 

For your LLC name, you must check the availability of your desired LLC name by searching the North Dakota Secretary of State Business Records Search‘s website.

Regarding your Registered Agent, he must receive and forward legal and tax documents on behalf of your LLC, such as service of process, state tax notification, and filing Annual Report. Your Registered Agent must have a physical address in North Dakota and be available during regular business hours. The cost of Registered Agent in North Dakota ranges from $50 – $150.

With all of the information included in the Articles of Organization, you must pay the filing fee of $135, which you can pay with the North Dakota Secretary of State.

Recommended: Filing Articles of Organization is easy and hassle-free if you hire a professional service. We recommend using –

LegalZoom – ($0 + State Fee)

Step 5: Prepare the Operating Agreement

While not always required by state law, it’s a good idea to draft an operating agreement for the new North Dakota LLC. This document outlines the LLC members’ roles, responsibilities, ownership percentages, and other important operational details.

The operating agreement should include the following:

  • The roles and responsibilities of members and managers
  • The process for admitting or removing members
  • The allocation of profits and losses among members
  • The procedure for making major decisions
  • The process for dissolving the LLC

Step 6: Notify Creditors and Other Interested Parties

Inform creditors, vendors, and other interested parties of the North Dakota corporation’s conversion to an LLC. This can help ensure a smooth transition and maintain good relationships with those involved in your business.

Step 7: Update Tax Information

After converting to an LLC, you must update your tax information with the Internal Revenue Service (IRS) and the North Dakota Office of State Tax Commissioner. This includes obtaining a new Employer Identification Number (EIN) for the LLC and updating any tax accounts or registrations.

To obtain an EIN for your North Dakota LLC, you can apply online on the IRS website, by mail, or by fax. The online application process is the fastest and most convenient method, as you will receive your EIN immediately upon completing the application. There is no fee to obtain an EIN.

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.

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

LegalZoom – ($0 + State Fee for LLC formation)

As an LLC in North Dakota, your business may be subject to various state taxes and licenses, depending on the nature of your operations. Common taxes and licenses include:

  • Sales Tax: If your LLC sells taxable goods or services, register for North Dakota sales tax permit and collect sales tax from your customers.
  • Employer Taxes: If your LLC has employees, you may be required to register for North Dakota unemployment insurance and workers’ compensation coverage.

To ensure you comply with all applicable North Dakota tax and licensing requirements, you can check out the North Dakota Office of State Tax Commissioner and North Dakota Small Business Taxes for more information.

Step 8: Update Licenses and Permits

Depending on the nature of your North Dakota business, you may need to update or obtain new licenses and permits for your LLC. Check with the appropriate local, state, and federal agencies to ensure your LLC complies with all necessary regulations.

Reasons for Converting North Dakota Corporation to an LLC

When considering the conversion of a corporation to a limited liability company (LLC) in North Dakota, it is essential to understand the potential advantages that this change in business structure may provide. Here are some common reasons for converting North Dakota corporation to an LLC:

  • Tax Flexibility: One of the primary reasons North Dakota business owners opt to convert their corporation to an LLC is the tax benefits. While corporations are subject to double taxation, where the company’s income and the shareholder’s dividends are taxed, LLCs are considered pass-through entities. This means the business’s income passes through to the owners’ personal tax returns, avoiding double taxation.
  • Simplified Management Structure: Another advantage of an LLC over a corporation is its simplified management structure. North Dakota Corporations have a more complex structure with shareholders, Three directors, and officers, while an LLC is managed by its members or designated managers. This can make decision-making and operations more straightforward for small businesses.
  • Reduced Administrative Requirements: North Dakota LLCs generally have fewer administrative requirements than corporations, such as lower Annual Report fees and less stringent record-keeping rules. This can save North Dakota business owners time and money, allowing them to focus more on growing their businesses.
  • Personal Asset Protection: Both corporations and LLCs offer limited liability protection, meaning the business’s debts and liabilities are separate from the owner’s personal assets. However, some business owners may prefer an LLC’s specific liability protections over a corporation.

Challenges and Considerations

When converting a corporation to an LLC in North Dakota, it is essential to consider the potential challenges and implications of the conversion process. Here are some challenges and considerations to keep in mind:

  • Tax Implications: Although converting North Dakota corporation to an LLC can offer tax benefits, it’s essential to consider the potential tax implications of the conversion. In some cases, the IRS may treat the conversion as a taxable event, which could result in additional taxes being owed. Consult with a tax professional to understand the tax implications of converting your corporation to an LLC in North Dakota.
  • Legal and Financial Advice: Converting North Dakota corporation to an LLC can be a complex process, and it’s essential to seek legal and financial advice to ensure that the conversion is done correctly in the business’s best interests.
  • Timing: Converting North Dakota corporation to an LLC can take time, particularly if there are regulatory approvals or other requirements to be met. Be prepared for the conversion process to take several weeks or even months to complete.

Benefits of Converting North Dakota Corporation to an LLC

Converting a corporation to a limited liability company (LLC) can benefit business owners. These advantages can include:

  • Tax Flexibility: One of the primary benefits of converting North Dakota corporation to an LLC is the potential tax advantages. While corporations are subject to double taxation (the company’s income and the shareholder’s dividends are taxed), LLCs are generally considered pass-through entities for tax purposes. This means the business income passes through to the owners’ personal tax returns, avoiding double taxation.
  • Personal Asset Protection: Both corporations and LLCs offer limited liability protection, meaning the business’s debts and liabilities are separate from the owner’s personal assets. However, some business owners may prefer the specific liability protections provided by an LLC over a corporation, depending on the nature of their business and the potential risks involved.
  • Increased Flexibility in Profit Distribution: Unlike North Dakota corporations, which typically distribute profits according to the percentage of shares owned, LLCs can offer more flexibility in profit distribution among members. This can be particularly advantageous for businesses with multiple owners who contribute differently to the company’s success.
  • Potential for Easier Transfer of Ownership: Depending on the specific rules and regulations in North Dakota, transferring ownership of an LLC may be easier than transferring ownership of a corporation. This is an important consideration for business owners who plan to sell or transfer their business.

While the benefits of converting North Dakota corporation to an LLC can be significant, it’s essential to carefully consider the potential challenges and implications of the conversion process.

FAQs

What is the process for converting a North Dakota corporation to a limited liability company?
The process involves filing Articles of Domestication and Articles of Organization with the North Dakota Secretary of State.
Can any North Dakota corporation be converted to an LLC?
Most North Dakota corporations can be converted to an LLC as long as they are in good standing with the state.
What are the benefits of converting a North Dakota corporation to an LLC?
An LLC provides greater flexibility in management, tax treatment and liability protection to its owners.
Is it necessary to obtain new tax identification numbers after converting a North Dakota corporation to an LLC?
It’s not necessary, but it’s a good practice to obtain new identification numbers to avoid possible confusion.
Does a North Dakota LLC still have to pay taxes?
Yes, but an LLC may choose to be taxed like a partnership, so it’s the owners who are liable for taxes, not the entity itself.
Do North Dakota LLCs require an Operating Agreement?
While an Operating Agreement is not required by North Dakota law, it is recommended to ensure clear understanding about the business operations.
Can shareholders or board members replace management after a conversion to an LLC in North Dakota?
Yes, the LLC operating agreement and member agreements can dictate the specifics of management elections.
Can I convert a North Dakota corporation to an LLC by myself?
It’s possible, but it’s recommended to consult with a business attorney to ensure the paperwork is filed and compliance standards are met.
How long does it typically take to convert a North Dakota corporation to an LLC?
It can take 1-2 weeks to receive confirmation of conversion from the North Dakota Secretary of State.
Are there any fees for converting a North Dakota corporation to an LLC?
Yes, there is a filing fee, a minimum tax, and an additional fee if a lawyer obtains the organization of the LLC on your behalf.
What happens to North Dakota corporation shares once the conversion to LLC is complete?
The shares are treated as interest in the LLC as opposed to securities.
Do changes in North Dakota LLC ownership trigger taxable events?
No, ownership changes don’t cause publicly traded stock values to shift like selling stocks from a corporation. There is instead instance if LLC did a distributor of % ownership payouts.
Will North Dakota understand that my corporation has been converted?
Yes, North Dakota Secretary of State confirms conversion via an official letter.
When should I inform suppliers, clients, service providers successor of the corporation’s conversion to LLC?
As soon as registration process has been completed and the official confirmation document has been received to open an account under a new LLC you created.
Can a North Dakota corporation still do business while a conversion application is submitted?
Yes, incorporating business with document that leads the application, cannot disrupt the operation.
How does conversion of North Dakota corporation to LLC affect existing contracts, leases, and employee agreements?
Its validity and enforceability is not rid importance, but conversions may amend each, nevertheless, and need review.
Could creditors hold the former corporation’s shareholders liable after conversion to an LLC?
Unless limited by agreement, generally debt before LLC was formed isn’t waived, though now they can’t arrive the shareholder track while forming.
Who can form a North Dakota LLC?
Any persons or entities may form an LLC, including solo owners and for profit and nonprofit groups who wish to gain from its benefit.
How can I have things filed to organize my LLC on behalf of shareholders in North Dakota?
An LLC used for proft must have Organizing structure filed in paper by been authorized they officially approve formation from North Dakota Secretary of State.
Does North Dakota law dictate how many shareholders can be members of an LLC?
No, North Dakota only delieates a vague idea how to be formed what addition requirements might pertain.
How is the tax structure of an LLC member managed in North Dakota?
Owners are fiduciary for individual tax, LLC tax, and personal income taxation are distinguished forms of levy passing on profit split with the management agreement.
Does conversion of a North Dakota corporation to an LLC change the employees’ status?
They continue working as usual so long as agreements agree. However, typically this falls under the category of material amendments that are considered in review and modification after the conversion.
Can a North Dakota corporation still obtain banking, mortgage, credit, and other financial institution services followinig a conversion filing?
Yes, traditionally these provider react the same as if there wasn’t ever an altered issued.
How is ownership structured in a North Dakota LLC?
Members run it with sharing a claimed percentage of control through agreement in Exhibit A in the duly drafted and submitted filing.
What is, in addition to the filing fee, North Dakota Articles posting?
Articles posting constitutes a requirement for legal notice to appear to the public denoting inactive outstanding potential debts, fines.
Can a Foreign corporation (LIAP in another state) convert to LLC through process equivalent to ND taxation license combination filing?
Foreign corporations need to also file for qualification with another entity, but there’s also supplemental registration conversion documentation required to be filed to complete authorization of organizational changes in qualification and liability.
Will further conversion filings be required for LLC established prior to Indiana’s first organization documentation?
If company existed prior to year 2019 companies are instructed to utilize a robo. These years this was required in order to legally operate a business after conversion.
What State paperwork refund form if organization conversion results in no taxable event following organization or upon dissolution but prior to year of required true-up following donation?
The State should receive an abandoned record in indicated tax form documenting perceived inaccuracies cases whereby no monetary obligations belonging to the conversion consequence. This fills with conversion documentation enveloping form numbers including past tax files from old records for personal income before maintenance fees.
What is a North Dakota corporation?
A North Dakota corporation is a type of business structure that is registered and recognized by the state of North Dakota.
Why would someone want to convert their North Dakota corporation to an LLC?
There are several reasons why someone may want to convert their North Dakota corporation to an LLC, including personal asset protection and reduced tax liabilities.
How does the conversion process work?
The conversion process involves a number of legal and administrative steps, including filing articles of organization with the North Dakota Secretary of State and transferring assets and liabilities from the corporation to the LLC.
Does North Dakota require the payment of any conversion fees?
Yes, North Dakota requires the payment of a fee for converting a corporation to an LLC. The amount of the fee may vary depending on the specifics of the situation.
Will I need to obtain any new permits or licenses after converting to an LLC?
It’s possible that you may need to obtain new permits or licenses after converting to an LLC, depending on the specifics of your business and the industry in which you operate.
Can I convert my North Dakota corporation to an LLC myself?
While it is possible to convert a North Dakota corporation to an LLC yourself, it’s generally recommended to work with an experienced attorney or business consultant who can help navigate the legal and administrative requirements of the process.
How long does the conversion process take?
The length of the conversion process can vary depending on a number of factors, including the complexity of your business and any administrative hurdles that need to be addressed.
What is the difference between a North Dakota corporation and an LLC?
The main differences between a North Dakota corporation and an LLC relate to liability and taxation. While a corporation provides limited liability for business owners, an LLC typically provides greater flexibility in terms of taxes and management.
Can I convert my North Dakota corporation to a multi-member LLC?
Yes, you can convert your North Dakota corporation to a multi-member LLC. This will generally require several additional legal steps and administrative paperwork.
What happens to my corporation’s assets and liabilities after conversion to an LLC?
The assets and liabilities of your North Dakota corporation will generally be transferred to the new LLC entity as part of the conversion process.
Are there any tax implications I need to be aware of when converting to an LLC?
Yes, there may be tax implications associated with converting a North Dakota corporation to an LLC. It’s important to work with a tax professional who can help you anticipate and navigate potential tax issues.
Do I need to re-register my business after converting to an LLC?
Yes, you will need to re-register your business after converting to an LLC. This generally involves filing articles of organization and obtaining a new tax ID number.
Can I keep my corporation’s name when converting to an LLC?
In some cases, you may be able to keep your North Dakota corporation’s name when converting to an LLC. However, this will generally require some additional legal steps and paperwork.
How much does it cost to convert a North Dakota corporation to an LLC?
The cost of converting a North Dakota corporation to an LLC can vary depending on a number of factors, including legal and administrative fees.
Do I need to notify my customers or clients after converting to an LLC?
Generally speaking, you do not need to notify your customers or clients after converting to an LLC. However, it’s always a good idea to communicate any significant changes to your business operations.
Will my company lose any legal protections after converting to an LLC?
While there may be some specific legal protections associated with a North Dakota corporation that are not available for an LLC, converting to an LLC can still provide significant liability protection for business owners.
Can I convert my North Dakota corporation to an LLC if I have outstanding debts?
Yes, you can generally convert a North Dakota corporation to an LLC even if you have outstanding debts. However, it’s important to talk to a bankruptcy attorney if you’re concerned about your ability to pay off your debts.
What is the difference between a single-member LLC and a multi-member LLC?
The main difference between a single-member LLC and a multi-member LLC is the number of owners required for each type of entity. Single-member LLCs have only one owner, while multi-member LLCs have two or more owners.
Will I need new business insurance after converting to an LLC?
It’s possible that you may need new or updated business insurance after converting to an LLC, depending on the specifics of your operations.
Can I dissolve my North Dakota corporation after converting to an LLC?
Yes, you can dissolve your North Dakota corporation after converting to an LLC. This will generally require filing paperwork with the state and addressing any remaining business debts or obligations.
Is there a limit to the number of members who can join my North Dakota LLC?
No, there is generally no limit to the number of members who can join a North Dakota LLC.
Are there any annual reporting requirements for North Dakota LLCs?
Yes, North Dakota LLCs are generally required to file an annual report with the Secretary of State. This report generally includes information about the company’s ownership and business activities.
Will I be able to make changes to my North Dakota LLC’s operating agreement after conversion?
Yes, you can generally make changes to your North Dakota LLC’s operating agreement after conversion. However, changes to the agreement may require additional legal steps and coordination with other members.
Can I convert my North Dakota corporation to an LLC if I have multiple outstanding lawsuits?
Yes, you may be able to convert your North Dakota corporation to an LLC even if you have multiple outstanding lawsuits. However, it’s important to work with an attorney to ensure that the conversion is legally valid and that any potential liabilities are addressed.
Will the taxation of my LLC be the same as my corporation?
No, the taxation of your North Dakota LLC may differ depending on several factors, including the structure and ownership of the business, and the industry in which you operate.
Can I switch my LLC from single-member to multi-member ownership after conversion?
Yes, it may be possible to switch your North Dakota LLC from single-member to multi-member ownership after conversion. Consult an experienced attorney about the particulars of the process.
Do I need to file any other paperwork after converting to a North Dakota LLC?
Depending on the specifics of your situation, you may need to file additional legal or administrative paperwork after converting to a North Dakota LLC. It’s important to work with an experienced professional who can help you navigate these requirements.
Can I convert to an LLC if my North Dakota corporation is currently suspended or inactive?
Yes, you may be able to convert your North Dakota corporation to an LLC even if it is currently suspended or inactive. However, it’s important to work with an attorney or business consultant to coordinate any necessary steps to restore your corporation to good standing.

Also Read

Conclusion

Converting North Dakota corporation to an LLC can offer significant benefits for your business, including tax flexibility, simplified management, and reduced administrative requirements. However, it’s essential to carefully consider the potential challenges and implications of the conversion process. Following the steps outlined in this guide and seeking professional advice, you can successfully convert your corporation to an LLC and position your business for continued success.

Leave a Comment