Corporate and Foreign Ownership of Agricultural Land in North Dakota: Restrictions and Exemptions

Deeding a quarter-section of Red River Valley cropland into a standard business LLC for asset protection or bringing in an out-of-state investor to help purchase ranchland in western North Dakota can inadvertently trigger a lawsuit by the State Attorney General to confiscate and force the sale of your land. Since the Great Depression era of 1932, North Dakota has enforced one of the strictest anti-corporate and anti-foreign agricultural land ownership regimes in the United States.

Unlike neighboring states that allow passive investment entities to buy up rural acreage, North Dakota strictly polices every deed recorded at the county courthouse. Navigating corporate and foreign ownership of agricultural land in North Dakota requires strict adherence to statutory kinship tests, active-operator rules, industrial land-use carveouts, and mandatory annual Secretary of State disclosures.

The North Dakota Corporate Farming Law: Core Prohibitions and Entities

Under the baseline rule of N.D. Cent. Code § 10-06.1-02, all corporations and limited liability companies (LLCs) are strictly prohibited from owning or leasing land used for farming or ranching, and from engaging in the business of farming or ranching in North Dakota, unless they qualify for a narrow statutory exemption. The constitutionality of North Dakota's ban on corporate farmland ownership was upheld by the United States Supreme Court in Asbury Hospital v. Cass County, 326 U.S. 207 (US Supreme Court 1945) and reinforced by the North Dakota Supreme Court in Coal Harbor Stock Farm, Inc. v. Meier, 191 N.W.2d 583 (ND Supreme Court 1971).

Family Farm Corporations and Family Farm LLCs

To allow North Dakota farm families to obtain limited liability protection and facilitate succession planning without opening the door to Wall Street agribusinesses, N.D. Cent. Code § 10-06.1-12 permits a domestic corporation or LLC to own and operate farmland only if it continuously satisfies all of the following strict criteria:

• The 15-Member Cap: The corporation or LLC may not have more than 15 shareholders or members (with recent statutory allowances for authorized livestock facilities in specific tiers).
• The Kinship Requirement: Every single shareholder or member must be related to every other shareholder or member within specified degrees of kinship: parent, child, grandparent, grandchild, brother, sister, aunt, uncle, niece, nephew, first cousin, or second cousin, or be the spouse or surviving spouse of one of those relatives. Following federal litigation in North Dakota Farm Bureau, Inc. v. Stenehjem, 333 F. Supp. 3d 900 (US District Court 2018), the statute applies equally to qualifying family farm entities formed in other states, provided they register in North Dakota and meet every family kinship requirement.
• Active Resident Operator Rule: At least one shareholder or member must be an individual residing on or actively operating the farm or ranch.
• The 65% Farming Income Test & 20% Passive Cap: At least 65% of the entity's gross income over the previous 5 years (or since formation) must be derived from farming or ranching operations, and less than 20% of gross receipts may come from passive rent, royalties, dividends, interest, and annuities.

Foreign Investors, Non-Resident Aliens, and AFIDA Restrictions

North Dakota imposes an even stricter ban on foreign ownership of agricultural land under N.D. Cent. Code § 47-10.1-02. Under this statute, no individual who is not a citizen of the United States or a lawful permanent resident alien (green card holder), and no foreign government, foreign business entity, or domestic entity controlled directly or indirectly by foreign non-citizens, may acquire any title or leasehold interest in North Dakota agricultural land.

Limited exceptions exist for Canadian citizens and certain treaty investors under strictly regulated conditions, individuals acquiring land by inheritance (who must divest within 3 years if they do not become permanent residents), and foreign entities acquiring up to 160 acres for non-agricultural industrial or research development if converted within 5 years. Furthermore, any foreign person acquiring or transferring an interest in U.S. agricultural land must file Form FSA-153, FED, USDA, Agricultural Foreign Investment Disclosure Act Report within 90 days under the 7 U.S.C. § 3501, alongside state disclosures monitored by the North Dakota Department of Agriculture, Bismarck.

Trusts, Limited Partnerships, and Estate Planning Entities

Investors cannot bypass the Corporate Farming Law simply by placing farmland inside a business trust or limited partnership. Under N.D. Cent. Code § 10-06.1-03, a trust is barred from owning or leasing farmland unless it is a family trust or testamentary trust in which all beneficiaries are natural persons or qualifying family members. Similarly, while general partnerships and limited partnerships composed entirely of natural persons can hold farmland, plugging a non-qualifying LLC in as the general partner of a limited partnership violates N.D. Cent. Code § 10-06.1-02 unless that LLC independently qualifies as a family farm LLC.

Exemptions for Non-Farming Businesses: Energy, Mining, and Lenders

What if an oil company in Williston, a wind developer in Bismarck, or a manufacturing plant in Fargo needs to buy rural acreage for a facility? North Dakota law provides three vital commercial exemptions:

• Industrial or Business Purpose Exemption (N.D. Cent. Code § 10-06.1-09): A non-farming corporation or LLC may acquire agricultural land only to the extent reasonably necessary for its industrial or business purpose (such as constructing a natural gas processing plant, grain terminal, or data center). While held before development, any agricultural surface use must be leased out to a qualifying family farmer or rancher.
• Surface Coal Mining Exemption (N.D. Cent. Code § 10-06.1-10): Corporations or LLCs engaged in surface coal mining may own agricultural land necessary for mining and statutory reclamation.
• Debt Collection and Foreclosure Exemption (N.D. Cent. Code § 10-06.1-11): Banks and corporate lenders may acquire farmland through foreclosure or deed in lieu of foreclosure, but must lease the land to a qualifying farmer during ownership and divest the property within the statutory holding period.

Step-by-Step Process to Legally Structure Farm Ownership in North Dakota

To form a compliant farm entity or acquire rural acreage for an industrial project without triggering an enforcement action by the North Dakota Office of Attorney General, Bismarck, follow these mandatory legal steps:

Step 1: Audit Kinship Trees and the 20% Passive Rent Ceiling

Before transferring farmland into a family LLC, verify that every member falls within the kinship table of N.D. Cent. Code § 10-06.1-12. Crucially, if retired parents place farmland into a Family Farm LLC and strictly collect cash rent from a non-member tenant without any member actively farming, the entity will fail the less-than-20% passive rent test and violate the Corporate Farming Law. In passive family rental scenarios, a revocable living trust, life estate, or general partnership of individuals is often used instead of an LLC.

Step 2: File the Farming/Ranching Initial Report Before Acquiring Land

Under N.D. Cent. Code § 10-06.1-15, a qualifying family farm corporation or LLC must file Form SFN 19445, North Dakota, Secretary of State, Initial Report for Corporate or Limited Liability Company Farming or Ranching via the FirstStop portal with the North Dakota Secretary of State, Bismarck before engaging in farming or recording an agricultural deed. The Initial Report requires listing every member's kinship relationship, the legal description (section, township, range, and county) of all farmland, and the name of the active operator.

Step 3: Record the Deed with the County Recorder

Once the Secretary of State approves the Initial Report, record the warranty deed with the County Recorder in the county where the land lies (such as Cass, Burleigh, or Grand Forks County). County Recorders regularly report corporate and foreign deeds to state authorities for compliance verification under N.D. Cent. Code § 47-10.1-05.

Step 4: Submit Mandatory Annual Reports by April 15

Under N.D. Cent. Code § 10-06.1-17, every farming or ranching corporation and LLC must file an annual report electronically via the FirstStop portal with the North Dakota Secretary of State, Bismarck on or before April 15 of each year, certifying ongoing compliance with the 65% farm income and kinship rules.

Step 5: Respond Immediately to Attorney General Compliance Audits

Under N.D. Cent. Code § 10-06.1-24, the North Dakota Office of Attorney General, Bismarck conducts annual random audits of at least 5% of all registered farm corporations and investigates non-compliant deeds. If a violation is discovered, the Attorney General or County State's Attorney files a civil enforcement action in the local District Court-such as the Cass County District Court, Fargo, the Burleigh County District Court, Bismarck, or the Grand Forks County District Court, Grand Forks-seeking up to $100,000 in civil penalties and a court order forcing divestiture of the land within 1 year.

How Much Does It Cost in North Dakota?

Forming and maintaining a compliant North Dakota agricultural entity or industrial land exemption involves specific state filing fees and legal costs:

• Secretary of State Formation & Initial Report Fees: Filing Articles of Organization for a North Dakota Farm LLC along with the mandatory Initial Report on the FirstStop portal costs $135 ($150 for a Farm Corporation).
• Annual Report Filing Fee: Submitting the annual farming/ranching report to the North Dakota Secretary of State, Bismarck by the April 15 deadline costs $50 per year (increasing to $100 to $135 if filed late).
• Legal Structuring and Operating Agreement Fees: Hiring a North Dakota agricultural business or estate planning attorney from our directory to structure a compliant Family Farm LLC-including mandatory buyout restrictions preventing shares from passing to non-relatives-typically costs between $1,500 and $4,000.
• Non-Compliance Penalties: Willfully violating the Corporate Farming Law carries civil fines of up to $100,000 under N.D. Cent. Code § 10-06.1-24, plus court-ordered public auction of the land if not sold within 1 year.

How Long Does the Process Take?

Key statutory timelines and compliance deadlines for North Dakota agricultural land ownership include:

• Entity Formation and FirstStop Approval (3 to 10 Business Days): Online filings with the North Dakota Secretary of State, Bismarck are typically processed within 3 to 10 business days.
• Annual Reporting Deadline (April 15 Annually): Every farm LLC and corporation must file its annual report by April 15 under N.D. Cent. Code § 10-06.1-17.
• Federal AFIDA Foreign Disclosure Window (90 Days): Any foreign acquisition or disposition of agricultural land must be reported within 90 days of the transaction under 7 U.S.C. § 3501.
• Mandatory Divestiture Windows (1 to 3 Years): Entities ordered by a North Dakota District Court to divest illegally held farmland under N.D. Cent. Code § 10-06.1-24 or N.D. Cent. Code § 47-10.1-04 have strictly 1 year from the date the judgment becomes final to sell the land before it is sold at public auction by the county sheriff.

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