North Dakota LLC governance: a uniform-act floor, plus ownership limits on any LLC that holds farmland

North Dakota governs LLCs under the modern uniform act, so its baseline rules look like the other floor states: the duties of loyalty and care and the obligation of good faith are a floor the operating agreement cannot eliminate, and distributions default to equal shares. For most LLCs that is the whole governance story. But an LLC that owns North Dakota agricultural land carries a second layer of rules that no other kind of company faces, coming from the state’s anti-corporate-farming law. That law dictates who can be a member and what the company can do, and it turns the operating agreement of a farmland LLC into a document that has to actively police its own membership. Start with the ordinary floor, then the farmland overlay, alongside the general mechanics on the site’s default rules and freedom of contract guides.

The ordinary floor

Start with the rules every North Dakota LLC follows.

In North Dakota, the operating agreement cannot eliminate the duties of loyalty and care or the obligation of good faith, and distributions default to equal shares.

Under North Dakota’s uniform act, members and managers owe the duties of loyalty and care and an obligation of good faith, and the operating agreement may not eliminate them, so North Dakota is a floor state. Distributions default to equal shares among the members rather than by contribution, so an LLC with unequal contributions needs an explicit distribution provision, and management defaults to the members unless the agreement provides for managers. That is the standard pattern, and for a residential or commercial LLC it is the end of the analysis. For a farmland LLC, the agreement has more work to do.

The farmland overlay

Here is what makes a North Dakota farming or ranching LLC different from any other.

An LLC that owns North Dakota farmland must qualify as a farming or ranching LLC, capped at 15 members who are individuals and citizens or residents, with most income from farming.

North Dakota’s anti-corporate-farming law requires that an LLC owning or operating agricultural land qualify as a farming or ranching LLC, and that classification imposes hard limits: no more than 15 members, all of whom must be individuals who are United States citizens or permanent residents, with 100% of the membership so held, and an average of at least 65% of the company’s gross income over five years must come from farming or ranching. The company also cannot acquire land simply to rent it out to others. These are not default rules the agreement can waive; they are conditions of the LLC’s legal right to hold the farmland, so an operating agreement for a North Dakota farmland LLC has to be built to keep the company inside them. In practice that means the agreement must restrict transfers, because a transfer to a non-qualifying person, or one that pushes the company past 15 members, can break the classification and jeopardize the LLC’s right to own the land. The seam here is that a standard LLC operating agreement, which typically allows fairly free transfers subject to a buy-sell, is actively dangerous for a North Dakota farmland LLC, because the transfer freedom it grants is exactly what can disqualify the company.

The bottom line

North Dakota uses the modern uniform act, so the duties of loyalty and care and good faith are a floor, and distributions default to equal shares.

For a residential or commercial LLC, that ordinary floor is the whole governance story.

An LLC that owns North Dakota farmland must qualify as a farming or ranching LLC, capped at 15 individual members who are citizens or residents, with most income from farming.

Those conditions are not waivable defaults; they are conditions of the LLC’s right to hold the land, so the operating agreement must restrict transfers to preserve them.

A standard transfer-friendly agreement is dangerous for a farmland LLC, because free transfers can break the classification and jeopardize the land.

What this page does not cover

This page is about the rules that run your company from the inside. How creditors reach a member’s interest, the homestead, and the farmland-protection collision are on the protection page. North Dakota’s very low income tax, the absence of a transfer tax, and the farmland restriction are on the structure and cost page. The $135 formation fee and the annual report, with its different deadline for farming LLCs, are on the filing page.

Last verified August 2026.