Sole Proprietorship in North Dakota: How to Start One

A sole proprietorship is the simplest way to start a business in North Dakota. There's no state filing to create the business itself, no annual report, and no separate entity tax. If you start doing business under your own name tomorrow, you're already a sole proprietor under North Dakota law. That simplicity is the whole appeal, but it also means the few steps that are required (trade name registration, tax permits, local licensing) are easy to overlook because nothing forces you through a formation process first.

This guide walks through exactly what a North Dakota sole proprietor needs to do, in order, with the real costs and where to file.

What a Sole Proprietorship Is (and Isn't)

A sole proprietorship isn't a legal entity separate from you. You and the business are the same taxpayer and the same legally liable party, which means your personal assets (your house, your savings, your car) aren't shielded from business debts or lawsuits the way they would be in an LLC. That tradeoff, simplicity now versus liability exposure later, is the central decision every North Dakota sole proprietor should understand before going further. If your business carries real risk (you're doing physical work on other people's property, handling other people's money, or selling a product that could injure someone), it's worth at least comparing the cost of forming an LLC ($135 filing fee through the North Dakota Secretary of State) against the liability you'd be carrying as a sole proprietor.

Because North Dakota doesn't treat a sole proprietorship as a registered entity, there is no Articles of Organization or Articles of Incorporation to file, no registered agent requirement, and no annual report due each year. The state's involvement starts only when you (1) operate under a name other than your own legal name, or (2) trigger a tax or licensing requirement by what you sell or do.

What You'll Need Before You Start

Your legal name, or a trade name (also called a "doing business as" or DBA name) if you want to operate under something other than your own name
A North Dakota business address where you'll operate or receive mail
A Social Security Number or federal Employer Identification Number (EIN) for tax filings
A completed trade name registration, if applicable, filed through the Secretary of State's FirstStop portal
A sales and use tax permit from the Office of State Tax Commissioner, if you'll sell taxable goods or services
Any occupational or activity-specific license your work requires (contractor's license, professional license, etc.)
A separate business bank account (not legally required, but strongly recommended)

How to Start a Sole Proprietorship in North Dakota: Step by Step

Step 1: Decide on your business name

If you plan to operate under your own legal name (for example, "Jane Torgerson, Bookkeeping Services"), you can skip trade name registration entirely. If you want a name like "Prairie Rose Bookkeeping," that's a trade name, and North Dakota requires you to register it.

A trade name is defined as any name a sole proprietor or other business uses that isn't its own legal name. Before you commit to one, search the Secretary of State's business database at firststop.sos.nd.gov/search/business to check whether another business is already using it. North Dakota won't stop you from registering a name that's confusingly similar to an existing trade name in every case, but a search now saves you a rebrand later.

Step 2: Register your trade name (if using one)

File your trade name registration through the FirstStop portal at firststop.sos.nd.gov. The fee is $25 to register. Registration must be renewed every 5 years, and renewal also costs $25. Amending a registered trade name (say, a spelling correction) is another $25.

Registering the name grants you the exclusive right to use it within North Dakota, but only within the state. It doesn't create trademark protection nationally, and it doesn't create a separate legal entity: you're still personally on the hook for everything the business does.

Step 3: Get an EIN if you need one

If you have no employees and don't plan to hire any, you can generally use your Social Security Number for tax purposes and skip the EIN. But most sole proprietors get one anyway, since a lot of banks require an EIN to open a business checking account, and it keeps your SSN off invoices and vendor forms. An EIN is free and comes from the IRS, not the state of North Dakota.

Step 4: Register for a sales and use tax permit, if applicable

If you'll be selling taxable goods or services in North Dakota, you need a sales and use tax permit from the Office of State Tax Commissioner. Apply through North Dakota's ND TAP portal at tap.tax.nd.gov. The state recommends applying about 30 days before you open so the permit is active when you start selling. North Dakota's state sales tax rate is 5%, and you'll be responsible for collecting and remitting it (on top of any applicable local sales tax) once you're registered.

Step 5: Check whether your specific work requires a license

North Dakota has no general statewide business license that applies to sole proprietors across the board. Instead, licensing is activity-specific. The one that catches the most new business owners is the contractor's license: if the cost, value, or price of a construction job exceeds $4,000, the person doing that work must hold a North Dakota contractor license. Fees range from $100 for Class D (jobs up to $100,000) to $450 for Class A (jobs over $500,000), and licenses renew annually by March 1.

Beyond contracting, the Secretary of State licenses a short list of specific activities (home inspectors, lobbyists, athlete agents, professional employer organizations, professional fundraisers, and combative sports), and the Attorney General licenses things like alcoholic beverages, amusement games, tobacco retailers, and transient merchants. If your work touches any of these categories, check the relevant agency before you take your first client or customer.

Step 6: Open a separate business bank account

Nothing in North Dakota law requires a sole proprietor to keep business and personal money in separate accounts, but doing so makes bookkeeping and tax time dramatically simpler, and it gives you a cleaner paper trail if you're ever audited or need to prove business income for a loan application. Most banks will ask for your trade name registration (if you have one) and your EIN or Social Security Number to open the account.

Step 7: Understand your tax filing obligations

As a sole proprietor, your business income and expenses are reported on your personal federal return (typically Schedule C), and that same net income flows through to your North Dakota individual income tax return. North Dakota's individual income tax is graduated with a zero rate at the bottom: for the 2025 tax year, a single filer pays 0% on the first $48,475 of taxable income, 1.95% from there up to $244,825, and 2.50% above that. Married filers filing jointly have a zero bracket that runs to $80,975. There's no separate business or franchise tax on a sole proprietorship itself.

You'll also want to plan for quarterly estimated tax payments at both the federal and state level, since no employer is withholding taxes from your income the way a paycheck would.

Tips for North Dakota Sole Proprietors

Don't confuse a trade name registration with business "formation." Registering a trade name doesn't create an LLC or corporation, and it doesn't protect your personal assets. It only reserves the name.
Get liability insurance if you're exposed. Since a North Dakota sole proprietorship offers no liability shield, a general liability or professional liability policy is often the only real protection you have against a lawsuit or claim.
Renew your trade name on time. The 5-year renewal cycle is easy to lose track of. Set a calendar reminder, because letting the registration lapse means someone else could register the same name.
Check local city or county rules too. State law is only half the picture. Some North Dakota cities (Fargo, Bismarck, Grand Forks, and others) have their own local business licensing or zoning rules, especially for home-based businesses or anything involving food, health, or public safety.
Track every business expense from day one. Without a formal entity separating business and personal finances, it's tempting to let recordkeeping slide. Don't. Clean records make your Schedule C simpler and protect you if the IRS or the state ever has questions.

Common Mistakes to Avoid

Operating under a trade name without registering it. It's a common assumption that you only need to register a business name if you're forming an LLC. Sole proprietors using any name other than their own legal name still need to register that trade name with the Secretary of State.
Skipping the sales tax permit and collecting tax anyway (or not collecting it at all). Both create problems. Confirm whether your goods or services are taxable before you make your first sale.
Assuming a home-based service business needs nothing else. Certain professions and trades, notably construction work over the $4,000 threshold, require a specific license regardless of how small the operation is.
Mixing personal and business funds. It's legal, but it makes taxes harder and weakens any argument that the business is a distinct operation if a creditor or the IRS ever looks closely.
Forgetting quarterly estimated taxes. Waiting until April and owing a large lump sum, plus potential underpayment penalties, is one of the most common surprises for first-year sole proprietors.

What You Can Reasonably Expect

Following these steps generally results in a sole proprietorship that is properly registered (if you're using a trade name), tax-compliant, and licensed for the specific activity you're conducting. Because requirements vary by industry, city, and county, it's reasonable to expect that some businesses will need additional local permits beyond what's outlined here. Processing times for trade name registrations and tax permits through North Dakota's online portals tend to be fast, though the state does not publish a guaranteed turnaround, so it's worth applying with some buffer before your planned opening date rather than assuming same-day approval.

Disclaimer

This article is for general informational purposes only and does not constitute legal or tax advice. North Dakota business requirements can vary based on your industry, location, and specific circumstances, and state fees or rules are subject to change. For guidance specific to your situation, consult a licensed North Dakota attorney or a CPA before making formation, tax, or licensing decisions. The North Dakota Small Business Development Centers (und.edu/ndsbdc) also offer free, one-on-one advising for new business owners in the state.