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North Dakota Single-Member LLC Operating Agreement

Create a North Dakota single-member LLC operating agreement with state-specific guidance on default rules, the annual report requirement, and liability protection.

Introduction

A single-member LLC operating agreement is the internal document where you, as the sole owner of a North Dakota LLC, set the rules for how your business runs, how profits are handled, and what happens if you close the business later. North Dakota does not require the agreement to be in writing, oral or implied agreements are valid, and state law lets you eliminate specific parts of the fiduciary duties you would otherwise owe the LLC if doing so is not manifestly unreasonable. Writing your intentions down is still the clearest evidence, if a court or the IRS ever asks, that you are running a real business.

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Key Things to Know

  1. 1

    North Dakota does not require an operating agreement to be in writing. State law defines it as the members' agreement, whether oral, in a record, implied, or in any combination, and expressly includes a single-member LLC's agreement (N.D.C.C. Section 10-32.1-02(36)).

  2. 2

    For an LLC formed on or after August 1, 2017, which covers virtually every LLC formed today, North Dakota's default allocates profits and losses in proportion to each member's capital contribution, not split evenly (N.D.C.C. Section 10-32.1-30.1). LLCs formed earlier default to equal shares instead.

  3. 3

    A charging order is the exclusive remedy for a member's personal creditors against that member's LLC interest, and North Dakota's statute says so expressly for single-member LLCs (N.D.C.C. Section 10-32.1-45(7)).

  4. 4

    North Dakota has no annual franchise tax. LLCs instead file a $50 annual report with the Secretary of State, due by November 15 each year, or face involuntary termination after six months.

  5. 5

    North Dakota lets an operating agreement restrict or eliminate specific parts of the duty of loyalty and alter the duty of care if the change is not manifestly unreasonable, though the implied covenant of good faith and fair dealing can never be eliminated (N.D.C.C. Section 10-32.1-13).

  6. 6

    The operating agreement itself is not filed with the state. You form the LLC by filing Articles of Organization ($135 fee) with the North Dakota Secretary of State.

  7. 7

    North Dakota's LLC Act offers a third management option beyond member-managed and manager-managed: a board-managed structure, run by an elected board of governors, that resembles corporate governance.

Key decisions before you file

Before you file a LLC Operating Agreement in North Dakota, a few decisions shape the document: which option to choose and what each one means. The LLC Operating Agreement guide walks through them.

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North Dakota-Specific Provisions

Use this together with the complete LLC operating agreement template, which covers the standard provisions your agreement also needs: capital contributions, management structure, meetings, transfers, withdrawal, and dissolution. The sections below cover only what is specific to North Dakota law.

1. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of North Dakota, including the North Dakota Uniform Limited Liability Company Act, North Dakota Century Code Chapter 10-32.1.

2. Allocation of Profits, Losses, and Distributions

Unless otherwise stated elsewhere in this Agreement, the profits and losses of the Company, and any distribution made before dissolution and winding up, shall be allocated among the Members in proportion to the value of each Member's contributions, as provided by North Dakota Century Code Sections 10-32.1-30.1 and 10-32.1-30(5) for a company created on or after August 1, 2017. A Member's dissociation does not by itself entitle that Member to a distribution.

3. Fiduciary Duties

If not manifestly unreasonable, this Agreement may restrict or eliminate particular aspects of the duty of loyalty a Member or Manager would otherwise owe the Company, and may alter the duty of care, except to authorize intentional misconduct or a knowing violation of law, as permitted by North Dakota Century Code Section 10-32.1-13. This Agreement may not eliminate the implied covenant of good faith and fair dealing, which remains in force regardless of any other provision of this Agreement.

4. Indemnification

The Company shall indemnify a Member, Manager, or Governor made a party to a proceeding by reason of that role, to the extent required by North Dakota Century Code Section 10-32.1-40, except that this Agreement may not alter or eliminate indemnification for: (a) a breach of the duty of loyalty, (b) receipt of an improper financial benefit to which the person is not entitled, (c) a breach of the improper-distribution rules of Section 10-32.1-32, (d) intentional infliction of harm on the Company or a Member, or (e) an intentional violation of criminal law, as provided by Section 10-32.1-13(7).

5. Execution

This Agreement is effective as of the date signed below. North Dakota law does not require an LLC operating agreement to be notarized or witnessed to be valid. The provisions above are effective only because they are set forth in this signed Agreement.

[MEMBER] Signature: _____________________ Date: _____________

Printed Name: _____________________

North Dakota Requirements for LLC Operating Agreement

Operating Agreement Authority (N.D.C.C. § 10-32.1-13)

The Operating Agreement governs relations among the Members and between the Members and the LLC. It may not, however: vary the LLC's capacity to sue and be sued in its own name; vary the choice of North Dakota law; vary a court's power to decree dissolution or to enforce a charging order; unreasonably restrict a Member's right to bring an action on the LLC's behalf; or restrict the statutory rights of a person who is not a Member, manager, or governor (N.D.C.C. Section 10-32.1-13(3)). If not manifestly unreasonable, the Operating Agreement may restrict or eliminate particular aspects of the duty of loyalty and may alter the duty of care, but it may never eliminate the implied covenant of good faith and fair dealing (N.D.C.C. Section 10-32.1-13(4)-(5)).

Member-Managed vs. Manager-Managed Structure (N.D.C.C. § 10-32.1-39)

An LLC is member-managed by default unless the Operating Agreement expressly states the LLC is "manager-managed" or "board-managed" (N.D.C.C. Section 10-32.1-39(1)). North Dakota is one of the few states offering a third structure alongside the usual member-managed/manager-managed choice: a board-managed LLC, run by an elected board of governors that appoints officers, resembling a corporation's governance more than a typical member-managed LLC.

Capital Contributions (N.D.C.C. §§ 10-32.1-28, 10-32.1-29)

A Member's contribution may consist of tangible or intangible property or any other benefit to the LLC, including money, services performed, promissory notes, or other agreements to contribute money or property (N.D.C.C. Section 10-32.1-28). A Member's obligation to make a contribution is not excused by that Member's death, disability, or other inability to perform personally; if the contribution is not made, the Member or their estate owes the LLC money equal to its value (N.D.C.C. Section 10-32.1-29).

Allocation of Profits and Losses (N.D.C.C. § 10-32.1-30.1)

Unless the Operating Agreement or articles of organization provide otherwise, the profits and losses of an LLC created on or after August 1, 2017 must be allocated among the Members in proportion to the value of each Member's contributions to the LLC (N.D.C.C. Section 10-32.1-30.1). This applies to virtually every LLC formed today. An LLC formed before August 1, 2017 that has not opted out remains subject to North Dakota's older, equal-shares default instead.

Distributions (N.D.C.C. § 10-32.1-30)

For an LLC created on or after August 1, 2017, any distribution made before dissolution must be in proportion to the value of each Member's contributions, unless the Operating Agreement or articles of organization provide otherwise (N.D.C.C. Section 10-32.1-30(5)). For an LLC created before August 1, 2017, the older default instead requires equal shares among Members regardless of contribution size (N.D.C.C. Section 10-32.1-30(1)). A Member's dissociation does not by itself entitle that Member to a distribution.

Limitation on Distributions (N.D.C.C. § 10-32.1-31)

The LLC may not make a distribution if, after giving it effect, the LLC could not pay its debts as they become due in the ordinary course of business, or the LLC's total assets would be less than its total liabilities (N.D.C.C. Section 10-32.1-31). A Member who knowingly receives an improper distribution must repay the excess; an action to recover an improper distribution is barred if not commenced within two years of the distribution (N.D.C.C. Section 10-32.1-32).

Voting Rights and Decision-Making (N.D.C.C. § 10-32.1-39)

In a member-managed LLC, ordinary-course decisions may be made by a majority of the Members, and any act outside the ordinary course, including amending the Operating Agreement, requires the consent of all Members (N.D.C.C. Section 10-32.1-39(2)). For an LLC created before August 1, 2017, each Member's vote counts equally. For an LLC created on or after August 1, 2017, voting power is instead proportional to each Member's interest in distributions, unless the articles of organization or Operating Agreement provide otherwise.

Fiduciary Duties (N.D.C.C. § 10-32.1-41)

Members in a member-managed LLC (or managers/governors in a manager-managed or board-managed LLC) owe duties of loyalty and care (N.D.C.C. Section 10-32.1-41). If not manifestly unreasonable, the Operating Agreement may restrict or eliminate particular aspects of the duty of loyalty and may alter the duty of care, but never to authorize intentional misconduct or a knowing violation of law (N.D.C.C. Section 10-32.1-13(4)). The implied covenant of good faith and fair dealing can never be eliminated under any circumstances.

Transfer of Membership Interests (N.D.C.C. §§ 10-32.1-44, 10-32.1-27)

A transfer of a Member's transferable interest does not entitle the transferee to participate in management or access LLC records; the transferee receives only the distributions the transferor would have received (N.D.C.C. Section 10-32.1-44). A transferee becomes a Member only with the consent of all the Members (N.D.C.C. Section 10-32.1-27(4)(c)).

Withdrawal or Dissociation of Members (N.D.C.C. §§ 10-32.1-47 to 10-32.1-49)

A Member may dissociate at any time by express withdrawal (N.D.C.C. Section 10-32.1-47). By default, dissociation does not by itself entitle the departing Member to a distribution; that Member instead retains only a transferee's economic interest (N.D.C.C. Section 10-32.1-49). A Member who dissociates wrongfully, including in breach of the Operating Agreement, is liable to the LLC and other Members for resulting damages (N.D.C.C. Section 10-32.1-47(3)).

Dissolution and Winding Up (N.D.C.C. §§ 10-32.1-50, 10-32.1-51)

The LLC dissolves upon: an event the Operating Agreement states causes dissolution; the consent of all Members; the passage of ninety consecutive days with no Members; or a court order for illegality, impracticability, or oppressive conduct by those in control (N.D.C.C. Section 10-32.1-50). Once dissolved, the LLC continues only to wind up its activities (N.D.C.C. Section 10-32.1-51).

Amendment Procedures (N.D.C.C. § 10-32.1-39)

Unless the Operating Agreement provides a different threshold, amending the Operating Agreement requires the consent of all Members. This default is the same across member-managed, manager-managed, and board-managed LLCs (N.D.C.C. Section 10-32.1-39).

Indemnification and Liability Limitation (N.D.C.C. § 10-32.1-40)

Unlike states where indemnification is merely discretionary, North Dakota's default is mandatory: the LLC shall indemnify a Member, manager, or governor made a party to a proceeding by reason of that role, if the person acted in good faith, received no improper personal benefit, complied with the applicable conduct duties, and (in a criminal proceeding) had no reasonable cause to believe the conduct was unlawful (N.D.C.C. Section 10-32.1-40). The Operating Agreement may alter or eliminate this default, except for: a breach of the duty of loyalty, an improper financial benefit, a breach of the improper-distribution rule, intentional infliction of harm on the LLC or a Member, or an intentional violation of criminal law (N.D.C.C. Section 10-32.1-13(7)).

Frequently Asked Questions

It's the internal document where a North Dakota LLC's sole owner sets the rules for running the business and handling profits. North Dakota doesn't require it to be written, oral or implied agreements are valid, but writing it down is the clearest proof the LLC is a real business, not a personal wallet.

Not by blanket legal requirement. North Dakota defines an operating agreement to include oral or implied agreements, and its definition expressly covers a sole member's agreement (N.D.C.C. Section 10-32.1-02(36)). But without a written one, state default rules fill every gap automatically, including how profits get split.

North Dakota's default rules fill the gap. For an LLC formed on or after August 1, 2017, which covers virtually every LLC formed today, profits and losses are allocated in proportion to each member's contribution rather than however you would choose to split them (N.D.C.C. Section 10-32.1-30.1).

It supports that protection. North Dakota's statute makes a charging order the exclusive remedy for a member's personal creditors against that member's LLC interest, and says so expressly for single-member LLCs (N.D.C.C. Section 10-32.1-45(7)). North Dakota courts still apply general veil-piercing principles in fraud or alter-ego cases.

North Dakota has no annual franchise tax. LLCs instead file an annual report with the Secretary of State for a $50 fee, due by November 15 each year. Missing the deadline for six months results in involuntary termination of the LLC.

No. You file Articles of Organization ($135 fee) with the North Dakota Secretary of State to form the LLC, but the operating agreement itself is an internal document. You keep it with your own business records; it's never submitted to the state.

Broadly yes. If not manifestly unreasonable, North Dakota lets an operating agreement restrict or eliminate specific parts of the duty of loyalty and alter the duty of care. It can never eliminate the implied covenant of good faith and fair dealing (N.D.C.C. Section 10-32.1-13).