Penalties for working in North Dakota without a certificate of authority

Section 10-32.1-84 provides a civil penalty payable to the state of not more than $5,000, and not more than $1,000 for each governor (or, with none, each member or agent) who orders, runs or joins in the business. The Attorney General brings suit in Burleigh County district court. On a finding of violation the court must also enjoin further business and the exercise of the LLC's rights in the state until the penalty, interest and court costs have been paid and the LLC complies in other respects.

Under section 10-19.1-142 a foreign corporation cannot pursue a claim, action, suit or proceeding in any North Dakota court before it holds a certificate. Contracts it has signed stay valid and it keeps its right to defend. It names the Secretary of State as its recipient for papers and is liable to the state for the fees that would have been due, which the Attorney General recovers.

Where a foreign entity transacts business without a certificate, the Secretary of State is the agent for service of process. The same holds for an entity whose agent is missing from the file or cannot be reached with reasonable effort. Papers served on the state count, so the entity can be sued before it learns of it.

A separate set of costs hits an entity that is authorized but stops reporting. An LLC pays $50 for a late report, and revocation leads to a $135 reinstatement fee. An LLP pays $20 late and $50 to reinstate. See the annual report page.

The statutes reach people, not only the entity. For an LLC the personal penalty falls on each governor, or if there are none each member or agent, who orders, supervises or joins in the work; for a limited partnership, on each general partner and agent. A manager who signs contracts for the entity in North Dakota is the sort of person the statute has in mind. Registering protects the whole group, including the people who ran the work.

Beyond the court bar, a corporation, nonprofit or limited partnership that worked here with no certificate must pay the state what a certificate holder in good order would have paid, for each year or partial year of unauthorized work. The Attorney General sues to recover it. For an entity that has worked here for years, that sum can exceed the cost of registering many times over.