Healthcare organizations operating in North Dakota face a regulatory landscape that demands strict adherence to professional entity requirements, ownership restrictions, and ongoing compliance obligations. Unlike many states that have relaxed corporate practice restrictions, North Dakota maintains a strict Corporate Practice of Medicine doctrine with no exceptions, requiring 100% physician ownership of medical practice entities. For healthcare administrators, practice managers, and compliance professionals, understanding these requirements is essential to maintaining the legal foundation that allows your organization to provide patient care.
North Dakota law recognizes two primary professional entity structures for healthcare organizations: Professional Corporations (PCs) and Professional Limited Liability Companies (PLLCs), each carrying specific governance requirements, licensing prerequisites, and regulatory obligations.
Professional Corporations (PCs)
Professional Corporations represent the traditional structure for medical practices in North Dakota. Governed by NDCC Chapter 10-31 (Professional Organizations Act), PCs must maintain shareholders who are exclusively licensed to provide the same professional services the corporation offers. Section 10-31-01 defines a professional corporation as having "as its shareholders only individuals who themselves are licensed or otherwise legally authorized within this state to render the same professional service as the corporation."
Formation requires filing Articles of Incorporation with the North Dakota Secretary of State along with a certificate from the North Dakota Board of Medicine certifying that all directors and shareholders hold active licenses to practice in the state.
Professional Limited Liability Companies (PLLCs)
PLLCs offer liability protection similar to traditional LLCs while maintaining professional entity status under NDCC Chapter 10-31. The formation process requires Articles of Organization filed with certification from the North Dakota Board of Medicine confirming that all governors and practicing members possess valid licenses.
The PLLC structure provides flexibility in management arrangements while preserving the professional nature of healthcare services. Members retain limited liability protection for business debts, though professional malpractice liability remains personal to each licensed practitioner.
North Dakota enforces one of the strictest Corporate Practice of Medicine doctrines in the United States. NDCC Section 43-17-31 restricts medical practice exclusively to licensed individuals and properly structured professional entities. The North Dakota Attorney General stated in a 1990 opinion that "North Dakota public policy prohibits a corporation, other than a professional corporation, from employing physicians to provide medical care."
What makes North Dakota's position particularly stringent is the complete absence of a nonprofit exception. This means nonprofit hospitals, health systems, and charitable organizations cannot directly employ physicians. Compliant structures include professional corporations with 100% physician ownership, MSO models where non-physician entities provide administrative services while professional corporations retain clinical control, and independent contractor relationships.
The formation process involves coordinated filings with both the Secretary of State and Board of Medicine. You must obtain the Board certification before formation can be completed.
The sequence matters: Healthcare organizations must file Articles with the Secretary of State together with a certificate from the North Dakota Board of Medicine. Both documents must be filed simultaneously to complete formation.
Registered agent maintenance
Every professional entity must maintain a registered agent with a North Dakota address to receive service of process and official correspondence. Discern provides registered agent services across all jurisdictions, ensuring continuous compliance.
Annual report obligations
North Dakota requires all domestic professional entities to file annual reports by August 1 with a $25 fee. Foreign professional entities face a May 15 deadline. Missing this deadline immediately places the entity in "Not Good Standing" status, with continued non-compliance leading to involuntary dissolution after six to twelve months.
Tax requirements
Professional healthcare entities face graduated corporate income tax rates: 1.41% on income up to $25,000, 3.55% on $25,000-$50,000, and 4.31% on income over $50,000. Calendar-year filers must submit Form 40 by April 15. A significant advantage: North Dakota imposes no franchise tax or business privilege tax.
The North Dakota Board of Medicine requires physicians to complete 40 hours of board-approved continuing medical education every two years. This creates an explicit link between licensing status and ownership eligibility. A physician who allows licensure to lapse cannot legally retain ownership in a professional medical corporation or PLLC.
Healthcare organizations expanding into North Dakota from other states must understand that foreign registration requirements include Board of Medicine certification for all physician-owners before operating.
Can a nonprofit hospital directly employ physicians in North Dakota? No. North Dakota's Corporate Practice of Medicine doctrine contains no exception for nonprofit entities. Compliant structures require nonprofit organizations to establish subsidiary professional corporations wholly owned by licensed physicians, utilize MSO arrangements, or engage physicians as independent contractors.
What happens if a physician shareholder allows their license to lapse? License lapse creates immediate compliance issues. Since NDCC Chapter 10-31 requires all shareholders to maintain active licenses, a lapsed license terminates the physician's eligibility for ownership. The entity must facilitate license reinstatement or restructure ownership to remove the unlicensed individual.
What are the annual compliance obligations? Professional healthcare entities must file annual reports by August 1 ($25 fee) and corporate income tax returns by April 15 (1.41%-4.31% graduated rates). North Dakota does not impose franchise tax or business privilege tax, providing a significant advantage compared to other states.
Should I choose a PC or PLLC? Both structures offer similar liability protection. PCs follow traditional corporate governance with more formal requirements. PLLCs offer flexible management structures with fewer formalities. Formation costs differ slightly ($100 for PCs versus $135 for PLLCs). Tax treatment remains identical under North Dakota law.
North Dakota professional healthcare entities face layered compliance obligations: August 1 annual reports, physician licensure monitoring, 40-hour biennial CME verification, and corporate tax filing by April 15. For organizations managing multiple entities, tracking these requirements manually creates operational risk.
Discern eliminates compliance uncertainty by centralizing entity management, deadline tracking, and filing automation. Our platform monitors annual report deadlines, tax filing dates, and registered agent compliance across all jurisdictions, sending proactive alerts before deadlines.
Ready to simplify your healthcare entity compliance? Book a demo with Discern today.
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