For businesses seeking recognition as separate legal entities, North Dakota law allows them to undergo the process of incorporation. As a separate entity from the owners, the business is then considered to be acting on its own when it buys and sells property, assents to contracts and exercises legal rights. To incorporate in North Dakota, a business must file with the Secretary of State in compliance with specific guidelines.

Benefits of Incorporation in North Dakota

Advantages of incorporation are many. The primary benefit is that the liabilities of the business can only be satisfied by the assets specifically invested into the company by the owners. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to pay its liabilities. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Bismarck area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more cumbersome. Finally, ownership of a corporation is divided into equal portions or "shares" of stock, which may be bought and sold much more easily than the ownership of an unincorporated business.

Costs of Incorporation

There are costs associated with incorporation, both short and long term. First, businesses in North Dakota may be charged a fee to incorporate. Also, a corporation is taxed as its own entity. The incomes of owners as individuals are also taxed of course, meaning that income to the corporation may be subject to double taxation. However, this disadvantage can be avoided with proper planning and help from a local Bismarck lawyer.