Starting a Professional Corporation in North Dakota 2024: Ultimate Guide

How to Start a Professional Corporation in North Dakota

Licensed professional? Level up your business with North Dakota professional corporation! Enjoy unique benefits like North Dakota LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in North Dakota with your professional corporation today!

This guide will review the requirements for starting a professional corporation in North Dakota, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in North Dakota is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in North Dakota.

The primary purpose of North Dakota Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, North Dakota professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in North Dakota.

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Who Can File Under Professional Corporation Laws

Under North Dakota Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in North Dakota, the following professionals can typically form a professional corporation:

  • Physicians and Surgeons
  • Dentists
  • Chiropractors
  • Optometrists
  • Podiatrists
  • Certified Public Accountants
  • Architects
  • Engineers and Land Surveyors
  • Psychologists
  • Marriage and Family Therapists
  • Clinical Social Workers
  • Professional Clinical Counselors
  • Veterinarians
  • Attorneys
  • Speech-Language Pathologists
  • Pharmacists
  • Registered Nurses
  • Physical Therapists
  • Occupational Therapists
  • Acupuncturists

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

  • Shareholders: North Dakota Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
  • Directors: The directors of a professional corporation in North Dakota are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
  • Officers: The officers of North Dakota Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in North Dakota: A Guide

Here is a detailed guide to starting a professional corporation in North Dakota that you should follow.

Step 1: Appointment of Registered Agent

The first step in forming a Professional Corporation is appointing Registered Agent in North Dakota. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in North Dakota and be available during regular business hours.

We compiled the list of the best registered agent services in North Dakota to help you choose the one you can rely on.

Step 2: Choosing the Name of the Corporation

Selecting a name for your North Dakota Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the North Dakota Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming North Dakota Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

North Dakota professional corporations must file an annual report with the North Dakota Secretary of State. This document includes essential information about the corporation, including its name, address, Registered Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the North Dakota Office of State Tax Commissioner, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the North Dakota Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in North Dakota

Here are some of the most common fees when starting a professional corporation in North Dakota.

  • State Laws and Regulations: To form a professional corporation in North Dakota, it is crucial to comply with the state laws and regulations governing professional corporations. The North Dakota Century Code Title 10 and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
  • Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in North Dakota is to draft and file the Articles of Incorporation with the North Dakota Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $100 for most professions. However, it is essential to check with the North Dakota Secretary of State for the specific fee associated with your profession.
  • Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in North Dakota. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the North Dakota Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of $10 online and $10 mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in North Dakota. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the North Dakota Secretary of State, accompanied by the appropriate filing fee.
  • Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in North Dakota may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the North Dakota Secretary of State every August 1st of filing the Articles of Incorporation. The filing fee for this form is $50.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Registered Agent Fee: Hiring of Registered Agent service will likely involve an annual fee of $50 – $150, which can vary depending on the service provider.
    • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

  • Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
  • Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
  • Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
  • Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

  • Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
  • Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
  • Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in North Dakota:

Federal income tax

A professional corporation in North Dakota is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

North Dakota Professional Corporation is also subject to state taxes, such as the North Dakota franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in North Dakota.

Tax deductions and exemptions

A professional corporation in North Dakota can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in North Dakota

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

  • Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
  • Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
  • Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
  • S-corporations: Starting an S Corp in North Dakota avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What is a professional corporation and can I start one in North Dakota?
A professional corporation is a business structure that limits the liabilities of professionals, such as doctors and lawyers. It is possible to start one in North Dakota.
What are the benefits of incorporating as a professional corporation in North Dakota?
The main benefit is liability protection, which shields individual professionals from lawsuits against the corporation.
What professions are eligible to form a professional corporation in North Dakota?
In North Dakota, licensed professionals in fields such as medicine, law, dentistry, engineering and accounting are eligible to form professional corporations.
Do professional corporations have to register with the state of North Dakota?
Yes, professional corporations must register with the North Dakota Secretary of State.
Are there any special tax requirements for professional corporations in North Dakota?
Yes, professional corporations will need to obtain a Federal Tax Identification Number (also known as an EIN) from the IRS. They may also be subject to state taxes.
Can a professional corporation do business outside of North Dakota?
Yes, as long as it meets the requirements for doing business in that state.
Can a professional corporation have only one shareholder in North Dakota?
Yes, North Dakota law allows for a professional corporation to have only one shareholder.
Does a professional corporation have to name a registered agent in North Dakota?
Yes, a professional corporation needs to name a registered agent in North Dakota, who must be available to receive legal correspondence and official documents on behalf of the corporation.
How long does it take to set up a professional corporation in North Dakota?
The timeline varies, but it typically takes a few weeks to set up a professional corporation in North Dakota.
What are the start-up costs for a professional corporation in North Dakota?
Costs vary depending on the type of business and incorporation consultation fees.
Do I need a lawyer to set up a professional corporation in North Dakota?
Although a lawyer is not required, it is recommended to consult with one to ensure all legal implications are understood.
Is there a publication requirement for professional corporations in North Dakota?
No, North Dakota does not require professional corporations to publish notice of incorporation in a local newspaper.
Are there any annual reporting requirements for professional corporations in North Dakota?
Yes, a professional corporation must file an annual report with the Secretary of State and its appropriate governing board.
Can employees become shareholders in a professional corporation in North Dakota?
Yes, employees can become shareholder in a professional corporation in North Dakota, but you still need to consult an attorney to assist on the matter.
What is a professional service corporation in North Dakota?
A professional service corporation (PSC) is another term frequently used in place of professional corporation in North Dakota when referring to licensed professionals with similar protective structures.
Can professional corporations issue stock in North Dakota?
Yes, a professional corporation can issue and sell stock in North Dakota, but there is a limit on the number of share counts per entity.
What is the maximum number of shareholders allowed in a North Dakota professional corporation?
It varies between professions; an engineer or an architect can have up to 3 shareholders, whereas doctors can have up to 50.
What is the procedure to dissolve a professional corporation in North Dakota?
To dissolve a professional corporation, shareholders will need to vote and around half of the shareholders in total will be required to liquidate assets and pay off any debts before filing Articles for dissolution of the company.
Once incorporated as a professional corporation, can professionals still face personal liability for professional errors in North Dakota?
Although liability protection is a significant benefit of incorporating, a professional corporation does not protect business owners from personal liability resulting from their own practice errors or wrongful acts.
Can non-licensed individuals become shareholders in a professional corporation in North Dakota?
No, only licensed professionals may be a shareholder in a corporation since a share of the professional corporations eliminates someone who is not licensed to practice corporate services in their particular sector or profession.
What is the process for filing Articles of Incorporation in North Dakota?
Professional corporations in North Dakota must file Articles of Incorporation with the Secretary of State.
What kinds of insurance do professional corporations in North Dakota need?
Some recommended insurances include general liability (to cover personal damage incurred), network security (cybersecurity liability insurance), workers’ compensation, and malpractice coverage (which is hoped because professional corporations managed primarily by professionals). Policies will vary for different types of corporations.
How much is the Annual Reporting fee for Professional Corporations in North Dakota?
The North Dakota Annual Reports makes mentioning professionals who are planning to file an annual report towards every calendar year by December 1 with an annual fee of $50 per year.
Can Professional Corporations engage in businessoutside ND?
Professionals attempt building bigger than your local community market, and in many if not most instances, attempt to stretch buyers in extra states.
How long does it take to register as a professional corporation in North Dakota?
It can roughly take up to 2-3 weeks to register.
Is title protection only limited to licensed professionals in a Professional Corporation in North Dakota?
Yes, only licensed professionals can enjoy title protection—which in this case means that all shareholders would follow and cooperate with specific professional activities and limitations from their respective professions in terms of licensing offerings and emphasis over the same.
Can a Professional Corporation carry out its activity under a shortened name or one like an inoffensive pseudonym/alias like any standard corporations in North Dakota?
Yes, new corporations may draft alternate names different from their Licenses granted according to permission laws for North Dakota’s Professional Corporations.
Does North Dakota stipulate the number and Qualifications of Directors mandated and the corresponding demands and proprietorship ratios for Professional Corporations within the state’s legal borders?
Not really clear/smooth answering this one but along the way, to cite a possible straightforward output in addressing this will be that
What is a professional corporation?
A professional corporation is a legal structure that allows individuals in certain professions, such as doctors, lawyers, or architects, to form a corporation that offers their professional services.
Is a professional corporation the same as a regular corporation in North Dakota?
No, a professional corporation is specifically designed for licensed professionals and has different legal requirements than a regular corporation.
What professions can form a professional corporation in North Dakota?
Professionals who are licensed and regulated by the State Board of Accountancy, State Board of Architecture, State Board of Chiropractic Examiners, State Board of Dental Examiners, State Board of Medical Examiners, State Board of Nursing, State Board of Optometry, State Board of Pharmacy, State Board of Podiatric Medicine, State Board of Psychology Examiners, State Bar Association, or State Board of Veterinary Medical Examiners can form a professional corporation in North Dakota.
What are the benefits of forming a professional corporation in North Dakota?
Some benefits of forming a professional corporation in North Dakota include protection of personal assets, tax advantages, and increased credibility for the business.
How do I incorporate a professional corporation in North Dakota?
To incorporate a professional corporation in North Dakota, you need to file Articles of Incorporation with the North Dakota Secretary of State and obtain a Certificate of Authority to practice in your profession.
What is required to file Articles of Incorporation for a professional corporation in North Dakota?
The Articles of Incorporation for a professional corporation in North Dakota must include specific language regarding the professional status of the shareholders and employees and comply with all state regulations.
How much does it cost to incorporate a professional corporation in North Dakota?
The filing fee to incorporate a professional corporation in North Dakota is $175.
What is a Certificate of Authority, and why is it necessary for a professional corporation?
A Certificate of Authority is a license issued by the North Dakota Secretary of State that allows a professional corporation to practice their regulated profession in the state.
Can shareholders in a professional corporation be non-professionals?
In North Dakota, all shareholders in a professional corporation must be licensed and regulated professionals in the state.
Can a professional corporation be owned by individuals who are licensed in different professions?
Yes, as long as all shareholders are licensed and regulated professionals, they can practice different professions within the same professional corporation.
Are there restrictions on the type of services a professional corporation can offer?
Yes, professional corporations in North Dakota are typically only permitted to offer services related to the licensed profession.
Does a professional corporation have to have a board of directors?
Yes, professional corporations are required to have a board of directors that oversees the operations of the corporation.
Who can serve on the board of directors for a professional corporation?
The board of directors must include licensed and regulated professionals in the same profession as the corporation.
How many shareholders are required to form a professional corporation in North Dakota?
In North Dakota, you need at least one shareholder to form a professional corporation.
What is the liability protection that a professional corporation offers to shareholders?
A professional corporation can protect shareholders’ personal assets if a lawsuit is filed against the corporation or an employee for malpractice.
How do I obtain a Certificate of Authority in North Dakota?
You can obtain a Certificate of Authority by submitting a Certificate of Authorization application, along with any required documents and the appropriate fee, to the North Dakota Secretary of State.
How long does it take to obtain a Certificate of Authority in North Dakota?
Typically, it takes several weeks to several months to obtain a Certificate of Authority for a professional corporation in North Dakota.
Can I form a professional corporation in North Dakota if I am not a resident of the state?
Yes, you can incorporate a professional corporation in North Dakota even if you are not a resident of the state.
Can a professional corporation operate in multiple states?
Yes, a professional corporation can obtain a Certificate of Authority to operate in multiple states, but each state regulates the formation and operation of professional corporations differently.
What happens if a shareholder loses their license to practice in North Dakota?
If a shareholder loses their license to practice in North Dakota, they are no longer eligible to be a shareholder in the professional corporation.
Can a professional corporation issue shares of stock?
Yes, a professional corporation can issue shares of stock, but the shares must be owned by licensed and regulated professionals in North Dakota.
Can employees of a professional corporation be non-professionals?
Yes, a professional corporation can employ non-professionals to provide administrative or support services.
What kind of insurance should a professional corporation have?
Professional corporations should have insurance policies that provide malpractice, general liability, and employee protection insurance.
Is the personal liability of shareholders in a professional corporation limited?
Yes, the personal liability of shareholders in a professional corporation is generally limited to the amount of their investment in the corporation.
How can I change the name of my professional corporation in North Dakota?
To change the name of a professional corporation in North Dakota, you must file Articles of Amendment with the North Dakota Secretary of State and obtain a new Certificate of Authority.
How do I dissolve a professional corporation in North Dakota?
To dissolve a professional corporation in North Dakota, you must file Articles of Dissolution with the North Dakota Secretary of State and comply with all state regulations concerning the dissolution of a professional corporation.
Can a professional corporation be converted to another type of business entity?
Yes, a professional corporation can be converted to another type of business entity, but the conversion process must comply with all state regulations in North Dakota.

Also Read

How to Save Money While Forming North Dakota Professional Corporation

One of the first steps you can take to save money when forming a North Dakota Professional Corporation is to conduct thorough research on the process. Understanding the requirements and regulations set forth by the state can help you avoid costly mistakes or unnecessary fees. By educating yourself on what is needed to form a professional corporation, you can streamline the process and potentially save money on legal fees or other professional services.

Additionally, you may be able to save money by exploring different business structures. While forming a Professional Corporation offers certain benefits, such as limited liability protection and added credibility, it may not be the most cost-effective option for every business. By considering alternative structures, such as a Limited Liability Company or a sole proprietorship, you could potentially save money on formation and ongoing maintenance costs.

Another way to save money when forming a North Dakota Professional Corporation is to DIY where possible. While seeking legal or professional advice may be necessary for certain aspects of the process, there are many tasks that you can handle on your own to eliminate the need for outside assistance. For example, you may be able to draft your own articles of incorporation or file paperwork with the state yourself, saving you money on legal fees or administrative costs.

It can also be beneficial to shop around for the best deals when it comes to forming your Professional Corporation. Not all service providers are created equal, and their fees can vary significantly. By comparing quotes from different vendors, you may be able to find more affordable options for services such as filing paperwork, obtaining a tax ID number, or securing professional licensing. Saving money on these initial costs can help preserve your financial resources for other essential aspects of your business.

Furthermore, it is essential to be mindful of ongoing expenses associated with maintaining a Professional Corporation in North Dakota. While forming the business is a significant upfront cost, there are also annual fees, taxes, and other expenses that must be paid to keep the corporation in good standing. By budgeting for these recurring costs and seeking out cost-effective solutions, you can ensure that your business remains financially secure without breaking the bank.

In conclusion, forming a North Dakota Professional Corporation doesn’t have to break the bank. By conducting thorough research, exploring different business structures, DIYing where possible, shopping around for the best deals, and being mindful of ongoing expenses, you can save money while still establishing a strong foundation for your business. With a bit of strategic planning and frugality, you can set yourself up for success without draining your financial resources.

Conclusion

North Dakota Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in North Dakota.

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