North Dakota provides everything you need to thrive. Living in the Peace Garden State is desirable not only because of its beautiful national parks, healthy surroundings, and community-oriented culture, it’s also fairly affordable, ranking below the national average on Sperling’s Cost of Living Index.
Since the 2008 financial crisis, North Dakota’s GDP per capita has increased at the fastest rate in the country, at 3% per year. Productivity in the state has also increased at a rate of 2.4% per year, while the national average has remained flat. Although North Dakota’s recent prosperity has been fueled in part by an aggressive push into oil exploration, the state’s expanding economy provides a welcoming environment for small business owners.
Here are a few statistics that shed a light on North Dakota’s small business ecosystem.
Quick North Dakota Small Business Statistics for Entrepreneurs
- Approximately 98.8% of all enterprises in North Dakota are small businesses.
- Small businesses employ 56.7% of the state’s entire workforce.
- Racial minorities make up 11.9% of workers and own 4% of businesses.
- Close to 9% of small businesses in North Dakota are veteran owned.
- In 2019, small businesses exported goods worth $3.3 billion.
- The per capita disposable income in North Dakota is $55,452.
- In 2019, small business expansion created 21,549 new jobs, while small business contraction lost 23,500.
- The per capita consumption expenditure in North Dakota is $48,499.
- In their 2021 “Top States for Business” report, CNBC ranks North Dakota 18th out of 50 states.
- According to the Sperling’s Cost of Living Index, the state ranks fifth in the country for its use of renewable energy, internet access, and road and bridge quality.
North Dakota Small Business Statistics
1. What is considered a small business in North Dakota?
Depending on the Small Business Administration (SBA), a small business could be defined as one with fewer than 250 employees or one with fewer than 1,500 employees. They are privately held corporations, partnerships, or sole proprietorships with lower revenue than larger corporations. In general, the revenue cap is $7.5 million. There are currently 75,427 small businesses in North Dakota that represent 98.8% of all businesses in the state.
North Dakota offers grants, educational resources, and mentoring services to assist entrepreneurs in successfully launching new businesses. As a result, the state is attracting plenty of young people eager to take advantage of its assistance programs and renewable energy.
As an entrepreneur, you should consider seeking the services of an LLC (limited liability company) formation service when establishing your business. They’ll deal with the paperwork on your behalf, leaving you with more time to concentrate on business issues. Read my review of the best LLC Services in North Dakota to find out more.
2. How many people are employed by small businesses in North Dakota?
There are 196,368 South Dakotans currently working for small businesses statewide. They account for 56.7% of all employees in the state. North Dakota’s minimum wage is $7.25, which is the same as the federal minimum wage. Most employees in North Dakota are subject to the minimum wage, but there are some exceptions, such as tipped employees, who are paid a cash minimum of $2.13 per hour. Employers can deduct up to $5.12 in tips earned per hour from employee wages as a “tip credit.”
Employers can pay student workers 85% of the minimum wage provided they have a license from the North Dakota Department of Labor. They can also pay workers under the age of 20 a minimum wage of $4.25 per hour for the first 90 days of employment.
3. North Dakota small business statistics by industry
The real estate, rental, and leasing sectors cumulatively represent the largest industry in the state in terms of small business investment, with a total of 8,839 firms invested in it. Approximately 7,943 of these firms are nonemployer businesses, 838 have 1–19 employees, and 58 have 20–499 employees.
The management of companies and enterprises industry is the smallest in the state, with only 58 firms invested in it.
4. North Dakota small business ownership by ethnicity
North Dakota has a population of 774,948 residents and an annual population growth rate of 0.7% over the five years to 2019, ranking it 18th out of the 50 states. White/Caucasian Americans are the major ethnic group, representing 86.9% of the population. They are followed by American Indians and Alaska Natives (5.6%), Hispanic/Latino Americans (4.1%), Black or African Americans (3.4%), Asians (1.7%), and Native Hawaiians and Other Pacific Islanders (0.1%).
Below is a numeric representation of how small business ownership is distributed among these groups:
- White/Caucasian — 69,599
- Black/African American — 1,137
- Hispanic — 1,050
- Asian — 650
- American Indian and Alaska Native — 563
5. North Dakota small business ownership by gender
Women own approximately 22,000 small businesses in North Dakota. All these businesses are nonemployer entities. Men own 41,208 small businesses, 30,000 of which are nonemployer businesses, and another 11,208 have employees on payroll.
There are, however, 5,845 small businesses owned equally by both men and women.
6. Business taxes in North Dakota
In North Dakota, standard LLCs are considered pass-through tax entities, which means they are not required to pay income tax to either the federal government or the state. Instead, the LLC members receive income from the business, and each individual member is subject to federal and state taxes on his or her share of the company’s income.
However, you can choose to have your LLC classified as a corporation. The LLC would then be subject to North Dakota’s corporation income tax. The highest corporate income tax rate for the 2022 tax year is 4.3%.
Filing your taxes on time is very important if you want to maintain a good standing with the
Secretary of State. Failure to report your taxes on time can attract hefty penalties, including suspension of your business license. However, you can mitigate this risk by hiring a registered agent service.
They not only send constant reminders to apprise you of impending deadlines, but they also assist with the tax filing process. Read my full review of the best registered agents in North Dakota to find out more.
7. How COVID-19 affected small businesses in North Dakota
North Dakota has the 18th highest economic exposure to COVID-19 of any state in the US, based on the percentage of employees working in industries with a high or medium-high level of exposure to COVID-19.
In North Dakota, 51% of all employees, or 249,244 people, work in industries with a high or medium-high level of economic exposure to COVID-19. Also, 38% of all employees, or 183,915 people, work in industries with a low or medium-low level of economic exposure to COVID-19.
8. Small business financing in North Dakota
The Community Reinvestment Act (CRA) is a federal banking law passed by Congress in 1977 that encourages commercial banks and savings associations to assist borrowers in all segments of their communities, including low- and moderate-income areas.
Large banks are required by the Community Reinvestment Act to report new small business loans. In 2019, reporting banks paid out a total of $335.5 million in loans to North Dakota businesses with $1 million or less in revenue. Total reported new lending to businesses with loans of $100,000 or less was $238.5 million, and total reported new lending to businesses with loans of $1 million or less was $916.8 million.
9. North Dakota small business export statistics
North Dakota exported goods worth $6.3 billion from 1,742 identified firms in 2019. Approximately 1,480 (or 85%) of those exporters were small businesses that exported goods worth, in total, $3.3 billion, accounting for 52.5% of all exports by identified businesses.
The Final Word
If you own a small business or have a great idea for a new venture, North Dakota has everything you need to succeed. Even better, you may find inspiration among the many like-minded entrepreneurs who have flocked to the state.
North Dakota ranks among the top 10 states in the country for opportunity in economics, education, health, and community, according to an annual report produced by Opportunity Nation and Child Trends. Millennials, in particular, are taking advantage of North Dakota’s unparalleled opportunity. In fact, Bismarck, the state capital, is one of the top areas in the country for adjusted median earnings among 25 to 34 year olds.
- The Tax Foundation
- CNBC – Top States for Business
- US Small Business Administration
- US Census Bureau
- The Jamestown Sun
- FORA Financial