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North Dakota Corporation
Advantages and Disadvantages



North Dakota Corporation and Taxes



North Dakota Corporation - Articles of Incorporation must be drafted and submitted to the North Dakota Secretary of State, Corporations Division. Once articles of incorporation have been successfully filed, your North Dakota Corporation has been formed and this begins its existence as a North Dakota corporate entity.

Should I form a North Dakota Corporation?



A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.


North Dakota Director Information

Minimum Number - One or more.

Residence Requirements - No provision.

Age Requirements - Directors must be a natural person at least 18 years of age.

Directors are required to be listed in the articles of incorporation.

Advantages and Disadvantages North Dakota Corporation

Advantages of a Corporation

  • Shareholders have limited liability for the corporation's debts or judgments against the corporations.
  • Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
  • Corporations can raise additional funds through the sale of stock.
  • A corporation may deduct the cost of benefits it provides to officers and employees.
  • Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
  • A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
  • A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.

Disadvantages of a Corporation

  • The process of incorporation requires more time and money than other forms of organization.
  • Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
  • Incorporating may result in higher overall taxes. Dividends paid to shareholders are non deductible form business income, thus this income can be taxed twice.

Federal Tax Forms for Regular or "C" Corporations

  • Form 1120 or 1120-A: Corporation Income Tax Return
  • Form 1120-W Estimated Tax for Corporation
  • Form 8109-B Deposit Coupon
  • Form 4625 Depreciation

North Dakota’s Business Tax Climate Ranks 39th

North Dakota ranks 39th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Montana (17th), South Dakota (1st) and Minnesota (48th).

North Dakota’s State/Local Tax Burden Below Average

Estimated in 2004 at 9.7% of income, North Dakota’s state/local tax burden percentage is ranked 33rd nationally, just below the national average.

North Dakota’s Individual Income Tax System

North Dakota’s personal income tax system consists of five brackets and a top rate of 5.54% kicking in at an income level of $307,050. North Dakota’s top rate of 5.54% is 9th lowest among states levying personal income taxes. North Dakota's 2002 individual income tax collections were $315 per person (41st highest nationally).

North Dakota’s Corporate Income Tax Rate and Collections among the Lowest Nationally

North Dakota’s corporate tax structure consists of five brackets with a top rate of 7% kicking in at $30,000. In 2003, corporate tax collections reached $88.30 per capita.



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