Setting Up a Business Partnership in North Dakota

In North Dakota, you can form several types of partnerships: 1) General Partnership (GP), where all partners share equally in management and liability; 2) Limited Partnership (LP), which has both general partners who manage the business and limited partners who are primarily investors; 3) Limited Liability Partnership (LLP), which provides some liability protection for all partners; and 4) Limited Liability Limited Partnership (LLLP), which combines features of LPs and LLPs. Each structure has different formation requirements, liability protections, and tax implications.

Unlike other business entities, a general partnership in North Dakota can be formed without filing any documents with the state. It's created automatically when two or more people agree to operate a business together for profit. However, while not legally required, it's highly recommended to create a written partnership agreement that outlines the rights and responsibilities of each partner. Additionally, you may need to file a trade name registration if you're operating under a name other than the partners' surnames, and obtain necessary business licenses and permits.

A comprehensive North Dakota partnership agreement should include: 1) Names and contact information of all partners; 2) Capital contributions of each partner; 3) Profit and loss allocation percentages; 4) Partner authority and decision-making processes; 5) Management responsibilities; 6) Procedures for admitting new partners; 7) Procedures for partner withdrawal, death, or disability; 8) Dispute resolution methods; 9) Partnership dissolution terms; 10) Non-compete and confidentiality provisions; and 11) Amendment procedures. While not legally required for general partnerships, a written agreement helps prevent misunderstandings and provides clear guidance for handling various business situations.

Partnerships in North Dakota are generally considered 'pass-through' entities for tax purposes. This means the partnership itself doesn't pay income taxes. Instead, profits and losses 'pass through' to the individual partners, who report their share on their personal tax returns. Partners must pay self-employment taxes (Medicare and Social Security) on their partnership income. In North Dakota, partnerships must file an information return with the state (Form 58) and with the federal government (Form 1065), along with Schedule K-1 forms for each partner. Additionally, partnerships may be subject to other state taxes depending on their activities, such as sales tax if selling goods.

Liability varies significantly across partnership types in North Dakota: 1) In a General Partnership, all partners have unlimited personal liability for partnership debts and obligations; 2) In a Limited Partnership, general partners have unlimited liability while limited partners' liability is restricted to their investment; 3) In a Limited Liability Partnership (LLP), partners are protected from personal liability for the negligence of other partners, but remain liable for their own negligence and partnership debts; 4) In a Limited Liability Limited Partnership (LLLP), general partners gain liability protection similar to that in an LLP. Understanding these liability differences is crucial when selecting the appropriate partnership structure for your business.

To register an LP in North Dakota, file a Certificate of Limited Partnership with the Secretary of State. For an LLP, existing partnerships must file a Statement of Qualification, while new LLPs can file a Statement of Qualification with their registration. Both entity types require filing fees (currently $135 for LPs and $125 for LLPs). You'll need to provide information such as the partnership name, principal address, registered agent details, names of partners (general partners for LPs), and the purpose of the business. Annual reports must be filed to maintain good standing, with fees of $30 for LPs and $25 for LLPs. Forms are available on the North Dakota Secretary of State website.

Yes, you can convert your North Dakota partnership to another business entity through a process called entity conversion. North Dakota law allows partnerships to convert to corporations, LLCs, or other entity types by filing the appropriate conversion documents with the Secretary of State. The process typically requires: 1) A written plan of conversion approved by the partners according to your partnership agreement; 2) Filing Articles of Conversion with the Secretary of State; 3) Filing formation documents for the new entity type; and 4) Paying the required filing fees. This conversion may have significant tax implications, so consulting with both a business attorney and tax professional before proceeding is strongly recommended.

North Dakota partnerships have several ongoing compliance requirements: 1) Annual reports must be filed for LPs, LLPs, and LLLPs (but not for general partnerships) with the Secretary of State, along with the applicable filing fee; 2) Business licenses and permits must be maintained and renewed as required; 3) Tax filings include annual information returns at both state (Form 58) and federal (Form 1065) levels; 4) Any changes to the partnership structure, such as adding or removing partners, typically require amendments to registration documents for formal partnerships; 5) Trade name registrations must be renewed every five years if operating under a fictitious name; and 6) Registered agent information must be kept current with the Secretary of State.

To dissolve a partnership in North Dakota, follow these steps: 1) Review your partnership agreement for dissolution procedures; 2) Hold a partner meeting to vote on dissolution according to your agreement terms; 3) For registered partnerships (LPs, LLPs, LLLPs), file Articles of Dissolution with the North Dakota Secretary of State; 4) Notify all creditors, customers, and business contacts of the dissolution; 5) Settle all outstanding debts and obligations; 6) Close business accounts and cancel licenses and permits; 7) File final tax returns marking them as final; 8) Distribute remaining assets according to ownership percentages or partnership agreement terms. Even for general partnerships that didn't file formation documents, it's advisable to publish a notice of dissolution in local newspapers to limit future liability.