Complete Guide to North Dakota LLC Taxes in 2025
North Dakota offers one of the most tax-friendly environments for LLC owners in the United States. Following the 2024 tax reform that replaced graduated brackets with a flat 1.95% income tax rate, the Peace Garden State now boasts one of the lowest income tax rates in the nation. Combined with a $50 annual report fee and no entity-level tax on LLCs, North Dakota provides an exceptionally low-cost environment for business.
How North Dakota Taxes LLCs
North Dakota treats LLCs as pass-through entities. The LLC does not pay ND income tax itself. Profits pass through to members who report on Form ND-1. Multi-member LLCs file an information return, and each member receives a Schedule K-1.
ND does not impose a franchise tax, privilege tax, or entity-level tax on LLCs. The simplicity and low rate make ND one of the most attractive states for LLC taxation.
Key Point: At just 1.95%, North Dakota's flat rate means an LLC owner earning $100,000 pays only about $1,666 in state income tax (after the standard deduction). Compare this to California (up to 13.3%) or New York (up to 10.9%).
North Dakota 2024 Tax Reform
In 2024, North Dakota replaced its graduated income tax brackets with a flat 1.95% rate. Previously, the rates ranged from 1.1% to 2.9%. The reform simplified the tax system while maintaining ND's position as one of the lowest-tax states.
| Tax Component | Rate / Amount | Notes |
|---|---|---|
| ND Income Tax | 1.95% flat | All taxable income (2024 reform) |
| Annual Report | $50 | Due November 15 |
| State Sales Tax | 5% | Plus local additions |
| Federal SE Tax | 15.3% | On 92.35% of net earnings |
| Entity-Level Tax | None | No franchise or privilege tax |
Federal Taxes for ND LLC Owners
- Self-Employment Tax (15.3%): Social Security (12.4% up to $176,100) + Medicare (2.9%) + 0.9% surtax above $200K/$250K
- Federal Income Tax: 10% to 37% for 2025
- QBI Deduction: Up to 20% under Section 199A
Tax Tip: Given ND's low 1.95% state rate, the biggest tax savings opportunity for ND LLC owners is at the federal level. S-Corp election can save thousands on self-employment tax for those earning above $50K-$60K. Use our S-Corp Tax Calculator to compare.
ND LLC Filing Deadlines
| Filing Type | Deadline | Extension |
|---|---|---|
| Individual (ND-1) | April 15 | October 15 |
| Partnership Return | March 15 | September 15 |
| Annual Report | November 15 | None |
| Estimated Payments | Apr 15, Jun 15, Sep 15, Jan 15 | None |
ND LLC Formation Costs
- Articles of Organization: $135 filing fee
- Registered Agent: Required; $50-$150/year
- Annual Report: $50/year (due November 15)
- EIN: Free from the IRS
ND vs. Neighboring States
| State | Income Tax | Annual Fee | Entity Tax |
|---|---|---|---|
| North Dakota | 1.95% flat | $50 | None |
| South Dakota | 0% | $50 | None |
| Montana | 1-6.75% | $20 | None |
| Minnesota | 5.35-9.85% | $0 | None |
| Wyoming | 0% | $60 min | None |
Common ND LLC Tax Mistakes
- Missing the November 15 annual report: Unlike most states with spring deadlines, ND's annual report is due in November
- Over-focusing on state tax: At 1.95%, your federal tax bill is the real optimization opportunity
- Ignoring estimated payments: ND requires quarterly estimated payments if you owe $1,000+
- Not claiming all deductions: ND conforms to federal AGI -- make sure all federal deductions flow through
ND Conformity: North Dakota uses federal taxable income as the starting point for state tax, with certain ND-specific modifications. The flat 1.95% rate applies to adjusted taxable income after the state standard deduction.
Why North Dakota's Tax Environment Stands Out
North Dakota's 1.95% flat income tax rate is the result of a deliberate strategy to attract businesses and residents to a state with a relatively small population and cold climate. The 2024 tax reform that simplified the graduated brackets into a single flat rate further demonstrated ND's commitment to maintaining one of the most competitive tax environments in the nation.
To put this in perspective, an LLC owner earning $100,000 in North Dakota pays approximately $1,666 in state income tax. The same owner in California would pay roughly $6,000-$8,000 in state tax. In New York, the state tax alone could exceed $5,500, before adding city taxes. This significant difference makes ND an attractive location for remote workers, freelancers, and business owners who can operate from anywhere.
North Dakota LLC Compliance Requirements
One of the advantages of operating an LLC in North Dakota is the straightforward compliance environment. Beyond tax filings, the main requirements include:
- Annual Report: Due November 15 each year with the Secretary of State ($50 fee). This unique November deadline is different from most states with spring deadlines. File online through the ND Secretary of State's First Stop portal.
- Registered Agent: Must maintain a registered agent with a physical North Dakota address at all times.
- Business Registration: Register with the ND Tax Commissioner's office to obtain a state tax ID number.
- Sales Tax Permit: If selling taxable goods or services, obtain a sales tax permit from the Tax Commissioner.
The November 15 annual report deadline is an important distinction -- many LLC owners accustomed to April or spring deadlines in other states may miss this unusual fall filing date. Set a calendar reminder for October to ensure timely filing.
North Dakota's Pre-Reform vs. Post-Reform Tax System
Understanding the 2024 reform helps LLC owners appreciate the current system. Before the reform, North Dakota used graduated brackets ranging from 1.1% to 2.9%. The reform consolidated these into a single 1.95% flat rate. For most LLC owners, this resulted in a slight tax reduction at higher income levels and a slight increase at the very lowest levels, but the simplification of the tax system was the primary benefit.
| Income Level | Pre-Reform Rate | Post-Reform Rate | Impact |
|---|---|---|---|
| First $44,725 | 1.1% | 1.95% | Slight increase |
| $44,726-$107,225 | 2.04% | 1.95% | Slight decrease |
| $107,226-$232,900 | 2.27% | 1.95% | Decrease |
| Over $232,900 | 2.64% | 1.95% | Significant decrease |
The reform is especially beneficial for higher-income LLC owners who previously faced rates approaching 2.9%. The flat 1.95% rate now applies equally to all income levels, making ND even more competitive for entrepreneurs with substantial business income.
Federal Tax Optimization for ND LLC Owners
With state taxes being almost negligible at 1.95%, the overwhelming majority of an ND LLC owner's tax burden comes from federal taxes. This makes federal tax optimization the primary focus for tax planning. Key strategies include:
- S-Corp Election: For LLC owners earning above $50,000-$60,000, electing S-Corp status can save thousands in federal self-employment tax by splitting income into salary (subject to SE tax) and distributions (exempt from SE tax).
- Retirement Plan Contributions: SEP-IRA (up to $69,000 for 2025) or Solo 401(k) contributions reduce both federal and ND state taxable income. At combined federal+state marginal rates of 25-40%, each dollar contributed saves significantly.
- Health Insurance Deduction: Self-employed LLC owners can deduct 100% of health insurance premiums above the line, reducing AGI for both federal and state purposes.
- Home Office Deduction: If you use a dedicated space in your home exclusively for business, claim the home office deduction (up to $1,500 simplified, or actual expenses).
- Section 179 and Bonus Depreciation: Accelerate equipment and asset purchases to reduce taxable income in high-earning years.
North Dakota Energy and Agriculture Tax Incentives
North Dakota's economy is heavily influenced by energy (oil, gas, renewable) and agriculture sectors. LLC owners in these industries may benefit from state-specific incentives:
- Oil Extraction Tax Credit: Reduced rates for new wells and enhanced recovery operations
- Renewable Energy Tax Credit: Credits for wind, solar, and other renewable energy installations
- Agricultural Property Tax Exemptions: Various exemptions for agricultural equipment and improvements
- Research and Development Credits: State credits for qualifying R&D expenditures
These incentives can further reduce the already low state tax burden for LLCs operating in ND's key industries. Consult with a local CPA or the ND Tax Commissioner's office for eligibility details.
Quarterly Estimated Payment Calculation for ND
North Dakota requires estimated tax payments if you expect to owe $1,000 or more when filing. Given the low 1.95% rate, many LLC owners with moderate income may fall below this threshold and not need to make state estimated payments at all. However, federal estimated payments are almost always required for LLC owners with significant income.
To calculate your quarterly ND estimated payment: take your projected net LLC income, subtract the half of self-employment tax deduction, subtract the ND standard deduction ($14,600 single / $29,200 MFJ for 2025), multiply the result by 1.95%, and divide by four. For an LLC owner earning $100,000 with $30,000 MFJ standard deduction: ($100,000 - ~$7,000 - $29,200) x 1.95% / 4 = approximately $311 per quarter in state estimated tax. Compare this to the federal estimated payment, which could be $6,000-$8,000 per quarter.