LLCs comprise majority of new ND business registrations

Changes on horizon for ND LLC structure

Limited liability companies (LLCs) are the most popular structure for businesses filing registrations in North Dakota, according to data compiled by the Secretar y of State’s office In March, more than 400 LLC registrations were filed, compared to about 100 foreign corporations and only about 50 business corporation registrations

Bill Guy, senior member of the trusts and estates group at Fredrickson and Byron’s Fargo law office, helped to create North Dakota’s LLC statute in 1993 and says there are several differences between LLCs and other business structures, such as S-corporations, that may make LLCs the favorable choice, the most significant being that they can be taxed as a partnership without having to navigate some of the “tax traps” associated with Scorps , according to Guy “Many, many advisors will advise an LLC to a client rather than an Scorp for those reasons, ” he says North Dakota’s LLC structure was initially modeled after Minnesota’s structure and typically follows its eastern neighbor’s lead on such matters, Guy says Minnesota recently adopted the Uniform LLC Act, which is modeled after Delaware’s LLC structure and is slowly being adopted throughout the country, and Guy expects North Dakota will eventually follow suit as well

“Minnesota has enormous resources in terms of money and manpower that they put into determining whether they want to follow every aspect of a uniform act,” he says “We found they do a good job of that analysis And, there’s a lot of connection between Minnesota and North Dakota on business matters.”

Guys says the Delaware model differs slightly from North Dakota’s current LLC structure in that it more closely resembles a partnership, with members and managers rather than a board of directors, board of governors and managers The change may be less desirable for the state’s small businesses, but Guy doesn’t expect it to adversely affect those entities “Delaware probably puts more effort into its statutes than anybody,” he says “If you ’ re a corporation and you want the state law that governs your entity to be widely recognized around the country, you go to Delaware ”