North Dakota Sole Proprietorship

How to Become a North Dakota Sole Proprietor

Starting a sole proprietorship in North Dakota is simple. There’s no formal setup process or fees involved. To operate one, just start working.

However, even though it’s easy to start, there are some extra steps you might want to consider. While not strictly necessary, many sole proprietors find them helpful.

DBA Acquisition

A doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.

That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.

In North Carolina, sole proprietorship DBAs are generally referred to as “Trade Names”. In order to operate in the state using a trade name, you’ll first need to determine the name’s availability status by doing a quick search on North Dakota’s Business Database.

If you find the desired name is available, you may claim it by filing the Trade Name Registration form. If the name was registered previously by another business entity and is on file but is not currently in use, the sole proprietor may claim it by filing a Trade Name Assignment document.

Determine Taxation Requirements

Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.

Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.

North Dakota business entities that buy or sell goods or products will likely need to register and pay sales and use tax as well as local taxes which vary depending on the jurisdiction in which your business operates. For more information on sales and use tax, visit North Dakota’s Tax website. To determine which local taxes you’re liable to pay, you’ll need to consult North Dakota’s guide to local taxes by location.

Obtain Business Licenses and Permits

There isn’t a requirement in North Dakota for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other licenses and/or permits to operate in a compliant fashion.

Which North Dakota licenses and permits you need will depend largely on the type of business you run. Most North Dakota licenses are issued either by the Secretary of State or the Attorney General.

Those seeking more information will find the Licensing Information section of the North Dakota website helpful.

In addition, you should check to see if your business needs any licenses or permits on the local level.

Doing so will require that you visit the government website of the municipality in which your business is located or reaching out to a town official. For example, Fargo has its own specific licensing requirements that must be met in addition to state licensing.

What Is a North Dakota Sole Proprietor?

As opposed to a corporation or limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.

Here are the three main things you need to know:

Tax Responsibilities

Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.