North Dakota LLC Operating Agreement
The North Dakota LLC operating agreement is a legal document that is recommended for all North Dakota LLCs. This document allows the member(s) and/or owner(s) to effectively file formation articles, outline responsibilities of members, identify voting rights, and perform other ownership responsibilities in single and multi-member LLCs.
From ND 10-32.1-02:
36. “Operating agreement” means the agreement, whether or not referred to as an operating agreement and whether oral, in a record, implied, or in any combination thereof, of all the members of a limited liability company, including a sole member, concerning the matters described in subsection 1 of section 10-32.1-13 and includes the operating agreement as amended or restated.
North Dakota Operating Agreement Law
Per ND 10-32.1-08:
1. Except as otherwise provided in subsections 2 and 3, the operating agreement
a. Relations among the members as members and between the members and the
limited liability company;
b. The rights and duties under this chapter of a person in the capacity of manager or
c. The activities of the company and the conduct of those activities; and
d. The means and conditions for amending the operating agreement.
2. To the extent the operating agreement does not otherwise provide for a matter
described in subsection 1, this chapter governs the matter.
3. An operating agreement may not:
a. Vary the capacity of a limited liability company under section 10-32.1-08 to sue
and be sued in its own name;
b. Vary the law applicable under section 10-32.1-09;
c. Vary the power of the court under section 10-32.1-22;
d. Subject to subsections 4 through 7, eliminate the duty of loyalty, the duty of care, or any other fiduciary duty;
e. Subject to subsections 4 through 7, eliminate the contractual obligation of good faith and fair dealing under subsection 4 of section 10-32.1-41;
f. Unreasonably restrict the duties and rights stated in section 10-32.1-42;
g. Vary the power of a court to decree dissolution in the circumstances specified in subdivisions d and e of subsection 1 of section 10-32.1-50;
h. Vary the requirement to wind up the business of a limited liability company as specified in subsection 1 and subdivision a of subsection 2 of section 10-32.1-51;
i. Unreasonably restrict the right of a member to maintain an action under sections 10-32.1-33 through 10-32.1-38;
j. Restrict the right to approve a merger, conversion, or domestication under section 10-32.1-71 to a member that will have personal liability with respect to a surviving, converted, or domesticated organization; or
k. Except as otherwise provided in subsection 2 of section 10-32.1-15, restrict the rights under this chapter of a person other than a member, manager, or governor.
4. If not manifestly unreasonable, and without limiting the terms that may be included in an operating agreement, the operating agreement may:
a. Restrict or eliminate the duty:
(1) As required in subdivision a of subsection 2 and in subsections 7 and 8 of section 10-32.1-41, to account to the limited liability company and to hold as trustee for it any property, profit, or benefit derived by the member in the conduct or winding up of the company’s business, from a use by the member of the company’s property, or from the appropriation of a limited liability company opportunity;
(2) As required in subdivision b of subsection 2 and in subsections 7 and 8 of section 10-32.1-41, to refrain from dealing with the company in the conduct or winding up of the company’s business as or on behalf of a party having an interest adverse to the company; and
(3) As required by subdivision c of subsection 2 and in subsections 7 and 8 of section 10-32.1-41, to refrain from competing with the company in the conduct of the business of the company before the dissolution of the company;
b. Identify specific types or categories of activities that do not violate the duty of loyalty;
c. Alter the duty of care, except to authorize intentional misconduct or knowing violation of law;
d. Alter any other fiduciary duty, including eliminating particular aspects of that duty;
e. Prescribe the standards by which to measure the performance of the contractual obligation of good faith and fair dealing under subsection 4 of section 10-32.1-41.
5. The operating agreement may specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified by one or more disinterested and independent persons after full disclosure of all material facts.
6. To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of a responsibility that the member would otherwise have under this chapter and imposes the responsibility on one or more other members, the operating agreement may, to the benefit of the member that the operating agreement relieves of the responsibility, also eliminate or limit any fiduciary duty that would have pertained to the responsibility.
7. The operating agreement may alter or eliminate the indemnification for a member, manager, or governor provided by subsection 2 of section 10-32.1-40, and may eliminate or limit the liability of a member, manager, or governor to the limited liability company and members for money damages, except for:
a. Breach of the duty of loyalty;
b. A financial benefit received by the member or manager to which the member or
manager is not entitled;
c. A breach of a duty under section 10-32.1-32;
d. Intentional infliction of harm on the company or a member; or
e. An intentional violation of criminal law.
8. The court shall decide any claim under subsection 4 that a term of an operating agreement is manifestly unreasonable. The court:
a. Shall make its determination as of the time the challenged term became part of the operating agreement and by considering only circumstances existing at that time; and
b. May invalidate the term only if, in light of the purposes and activities of the limited liability company, it is readily apparent that:
(1) The objective of the term is unreasonable; or
(2) The term is an unreasonable means to achieve the objective of the provision.
Forming an LLC in North Dakota
- Conduct a name search
- Choose a registered agent
- File formation articles
- Draft an operating agreement
Step 1: Conduct a Name Search
To qualify as an LLC, all North Dakota LLCs need a legally registered and unique business name, which must include either:
- Limited Liability Company
- Or Std. Liability Co.
This name must be distinguishable and unique from other businesses, including other business types.
The name may not include designators for other formation types (“corp” or “inc”) or any reference to a government agency or their abbreviation.
Professional LLCs can include restricted words that relate to the business type or profession (university, attorney, bank), as long as a licensed practitioner is part of the LLC.
To conduct the name search, use the North Dakota Secretary of State Business Entity Search website.
Step 2: Choose Your Registered Agent
Every North Dakota LLC must appoint a registered agent to act on the LLC’s behalf for receiving service of process. This can be an individual or business.
Individual agents must:
- Be 18 years or older
- Be a resident of the state
When using a registered agent service, the agent must be authorized to do business in North Dakota.
Step 3: File Your Formation Articles
In order to legally establish an LLC in North Dakota, you must first file articles of formation. They can be filed completely online, as the state no longer wants LLC filings submitted by mail.
The type of application you will file depends on whether you’re filing a new business from within the state of North Dakota (domestic) or are expanding a business from out-of-state (foreign).
Online Filing (Domestic):
- $135 filing fee
- Turnaround time: 2-4 weeks
- Create an account and submit online
Online Filing (Foreign):
- $135 filing fee
- Turnaround time: 2-4 weeks
- Create an account and submit online
Step 4: Draft a North Dakota Operating Agreement
A North Dakota operating agreement is not required by law, but it is recommended for all LLC formations in the state. It helps to outline the important information about how a company works and the role of each member. Voting rights, responsibilities, financial breakdowns, and other business responsibilities can be highlighted and then enforced if required. It also helps to separate the legal entity from the individual in the case of a single-member LLC.
This form does not need to be filed with North Dakota, but each director should maintain a signed copy just in case.