Five Basic Steps to Start an LLC in District Of Columbia
Choosing a company name is the first and most important step in starting your LLC. Be sure to choose a name that complies with District of Columbia naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines:
- Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.
2. Is the name available in District of Columbia? Make sure the name you want isn't already taken by doing a name search on the District of Columbia website.
3. Is the URL available? We recommend that you check to see if your business name is available as a web domain. Even if you don't plan to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
FAQ: Naming an LLC
What is an LLC?
LLC is short for Limited Liability Company. It is a simple business structure that offers more flexibility than a traditional corporation while providing many of the same benefits. Learn more here.
Watch our 2 minute video: What is an LLC?
Do I need to get a DBA or Trade Name for my business?
Most LLCs do not need a DBA. The name of the LLC can serve as your company’s brand name and you can accept checks and other payments under that name as well. However, you may wish to register a DBA if you would like to conduct business under another name. Learn more here.
You are required to nominate a Registered Agent for your District of Columbia LLC.
What is a Registered Agent? A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business' point of contact with the state.
Who can be a Registered Agent? a Registered Agent must be a resident of District of Columbia or a corporation authorized to transact business in District of Columbia. You may elect an individual within the company including yourself.
Learn more about the role of a registered agent and why you should consider hiring a professional service.
TIP
Recommended: Incfile provides the first year of registered agent service free with LLC formation ($49 + State Fees)
FAQ: Nominating a Registered Agent
Can I be my own Registered Agent?
Yes. You or anyone else in your company can serve as the registered agent for your LLC. Learn more here.
Is a Registered Agent service worth it?
Using a professional Registered Agent service is an affordable way to manage government filings for your LLC. For most businesses, the advantages of using a professional service significantly outweigh the annual costs. Learn more here.
To register your LLC, you will need to file the Articles of Organization with the Department of Consumer and Regulatory Affairs. This can be done online, by mail, or in-person.
When filing the Articles of Organization you will need to decide if your LLC will be member managed or manager managed. Read our article on the topic to learn more.
File the Articles of Organization
OPTION 1: File Online with the District of Columbia
OR
OPTION 2: File by Mail or In-Person
State Filing Cost: $220 Payable to the Department of Consumer and Regulatory Affairs (Nonrefundable)
Mail to:
Department of Consumer and Regulatory Affairs
Corporations Division
PO Box 92300
Washington, DC 20090
Submit In-Person:
Department of Consumer & Regulatory Affairs
1100 4th Street SW
Washington, DC 20024
Walk-in customers will be charged an additional $100.
If you’re expanding your existing LLC to the District of Columbia, you will need to form a Foreign LLC.
FAQ: Filing LLC Documents
What is the processing time to form my DC LLC?
5 to 7 business days online, up to 3 weeks by mail, but may be expedited for an additional fee.
What is the difference between a domestic DC LLC and foreign LLC?
An LLC is referred to as a "domestic LLC" when it conducts business in the state where it was formed. Normally when we refer to an LLC we are actually referring to a domestic LLC. A foreign LLC must be formed when an existing LLC wishes to expand its business to another state. If you are filing as a Foreign DC LLC learn more here.
An operating agreement is not required in the District of Columbia, but it's a good practice to have one.
What is an operating agreement? An operating agreement is a legal document outlining the ownership and operating procedures of an LLC.
Why are operating agreements important? A comprehensive operating agreement ensures that all business owners are on the same page and reduces the risk of future conflict.
For more information on operating agreements, read our District of Columbia LLC operating agreement guide.
Recommended: Use our free Operating Agreement Tool to draft a customized operating agreement for your LLC.
FAQ: Creating an Operating Agreement
Do I need to file my operating agreement with the state?
No. The operating agreement is an internal document that you should keep on file for future reference. However, many states do legally require LLCs to have an operating agreement in place.
What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. It is essentially a social security number for the company.
Why do I need an EIN? An EIN is required for the following:
- To open a business bank account for the company
- For Federal and State tax purposes
- To hire employees for the company
Where do I get an EIN? An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done online or by mail.
NOTEFOR INTERNATIONAL APPLICANTS: you do not need an SSN to obtain an EIN. Learn more here.
Get an EIN
Option 1: Request an EIN from the IRS
OR
Option 2: Apply for an EIN by Mail or Fax
Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
Fee: Free
FAQ: Getting an EIN
How do I get an EIN if I don’t have a social security number?
An SSN is not required to get an EIN. You can simply fill out IRS Form SS-4 and leave section 7b blank. Then call the IRS at 267-941-1099 to complete your application. Learn more here.
What tax structure should I choose for my LLC?
When you get an EIN, you will be informed of the different tax classification options that are available. Most LLCs elect the default tax status.
However, some LLCs can reduce their federal tax obligation by choosing S corporation status. We recommend consulting with a local accountant to find out which option is best for you.
Considering Using an LLC Formation Service?
We reviewed and ranked the top 5 LLC formation services.
Find out which is best for you.
Business Banking for Personal Asset Protection
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
You can protect your business with these two steps:
1. Opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Get $200 when you open a business checking account with Chase. Learn more.
2. Getting a business credit card:
- Helps you separate personal and business expenses.
- Builds your company's credit history, which can be useful to raise capital later on.
Get Insurance
Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance are:
- General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
- Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers against claims of malpractice and other business errors.
- Workers' Compensation Insurance: A type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths. In Washington D.C., businesses with one or more employees are required by law to have workers' compensation insurance. Get a free quote with ADP.
How much will the right insurance cost you? Click here to find out.
Properly Sign Legal Documents
Improperly signing a document as yourself and not as a representative of the business can leave you open to personal liability. When signing legal documents on behalf of your company, you could follow this formula to avoid problems:
- Formal name of your business
- Your signature
- Your name
- Your position in the business as its authorized representative
See the image below for an example.
This ensures that you are signing on behalf of your LLC and not as yourself.
Learn more on how to protect your business & personal assets by reading our article - How to Maintain your LLC Corporate Veil.
District of Columbia Permits & Licenses
Do I need business licenses and permits?
To operate your LLC you must comply with federal, state, and local government regulations. For example, restaurants likely need health permits, building permits, signage permits, etc.
The details of business licenses and permits vary from state to state. Make sure you read carefully. Don't be surprised if there are short classes required as well.
Fees for business licenses and permits will vary depending on what sort of license you are seeking to obtain.
Find out how to obtain necessary licenses and permits for your business or have a professional service do it for you:
- Federal: Use the U.S. Small Business Administration (SBA) guide.
- State: Apply for and learn more about Basic Business Licenses and registration with My DC Business Center on the DC Business Center website.
- Local: Contact your local county clerk and ask about local licenses and permits.
Recommended: If you are a first-time entrepreneur, consider having a professional service research your business’ licensing requirements. Our friends at Startup Savant have reviewed and ranked the top five license research services.
District of Columbia LLC Tax Requirements
Depending on the nature of your business, you may be required to register for one or more forms of state tax.
Sales Tax
If you are selling a physical product, you’ll typically need to register for a seller's permit through the District of Columbia Office of Tax and Revenue website.
This certificate allows a business to collect sales tax on taxable sales.
Sales tax, also called "Sales and Use Tax," is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.
Read our sales tax guide to find out more.
Employer Taxes
If you have employees in Washington D.C., you will have to register for Unemployment Insurance Tax through the Department of Employment Services. You will also need to sign up for Withholding Tax through the Office of Tax and Revenue.
Register for District of Columbia State Taxes
FAQ: Additional Taxes
What is the District of Columbia Franchise Tax?
There is a Franchise Tax for each LLC formed in the District of Columbia which varies depending upon your LLC’s income, learn more here.
Federal LLC Tax Requirements
Most LLCs will need to report their income to the IRS each year using:
- Form 1065 Partnership Return (most multi-member LLCs use this form)
- Form 1040 Schedule C (most single-member LLCs use this form)
Read our LLC Tax Guide to learn more about federal income taxes for LLCs.
District of Columbia LLCs are required to pay an annual Franchise Tax.
File the Annual Franchise Tax with the State of District of Columbia
OPTION 1: File Form D-30 (for all LLCs with gross income more than $12,000)
OR
OPTION 2: File Form D-65 (only for multi-member LLCs with gross income of $12,000 or less)
State Filing Cost: Free to file. Franchise tax payments should be made payable to the DC Treasurer.
Due Date: Due on April 15th for calendar-year filers, otherwise on the 15th day of the fourth month following the close of the tax year for fiscal filers
Late Filings: For all late payments, the D.C. Office of Tax and Revenue will charge:
- a penalty of 5% per month, up to 25% of the total tax due,
- an interest penalty of 10% per year, compounded daily, and
- a collection fee of 10% the tax balance due after 90 days.
FAQ: District of Columbia Franchise Tax
What are the rates DC LLCs pay for franchise tax?
The District of Columbia levies a franchise tax on all LLCs with more than $12,000 in gross receipts, and which are not otherwise exempt. The tax is 9.0% of all taxable income. Taxable income is derived from your LLC’s net income, minus a $5,000 exemption for unincorporated entities and a 30% salary allowance for the owners of your LLC.
The minimum tax rate is $250 for companies with DC gross receipts under $1 million, and $1,000 for companies with DC gross receipts over $1 million.
File Your LLC Biennial Report
The District of Columbia requires LLCs to file a biennial report with the Superintendent of Corporations of DCRA.
File your Biennial Report
OPTION 1: File Online with the District of Columbia
OR
Fee: $300 Payable to the Department of Consumer and Regulatory Affairs (Nonrefundable)
Submit In-Person:
Business License Center
1100 4th St., SW
2nd Floor
Washington, DC 20024
Due Date: The first report is due on April 1st of the year following LLC formation. Thereafter, a new report must be filed every second year by April 1st.
Late Filings: The District of Columbia charges a $100 penalty for failure to file on time.
Walk-in: submitting the report in person will cost an extra expedited fee $100.
Avoid Automatic Dissolution
LLCs may face fines and even automatic dissolution when they miss one or more state filings. When this happens, LLC owners risk loss of limited liability protection. A quality registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines and by submitting reports on your behalf.
Recommended: Incfile offers a reliable registered agent service and excellent customer support.
Get Help Starting a Business in the District of Columbia
We understand that creating an LLC and getting your business up and running comes with many challenges. To help you succeed, we compiled the best local resources in every major metro area in the District of Columbia. You can get free assistance in the following areas:
After starting a business, two of the most important things you can do are get professional accounting and hire the right employees. Streamlining these processes can save you time and money as your business grows.
Hiring Employees
If you plan to hire employees, stay compliant with the law by following these steps:
- Verify that new employees are able to work in the US
- Report employees as "new hires" to the State
- Provide workers' compensation insurance for employees
- Withhold employee taxes
- Print compliance posters and place them in visible areas of your work space
Find out more information at District of Columbia Directory of New Hires.
Recommended: A payroll service saves you time and makes it easier to follow these requirements.
FAQ: Hiring Employees
What is the minimum wage in the District of Columbia?
The minimum wage in the District of Columbia is $13.25 per hour.
How often do I need to pay employees?
The District of Columbia requires wages to be paid regularly at least twice per month.
Accounting For Your LLC
It’s critical to get your books in order-- even if you haven’t officially opened for business. A well-managed accounting system will help you:
- Track your business finances, including bills, expenses, and income.
- Simplify your annual tax filings.
The right software makes accounting easy. Look for software that:
- Syncs with your bank automatically.
- Matches transactions to invoices, bills and purchase orders.
- Can be accessed from your phone.
Recommended: Consider hiring a reliable service to help simplify your bookkeeping, accounting, and tax filing. We recommend two accounting services:
- Mazuma ($95/month)
- Financepal ($99/month)
Get Help Starting a Business in the District of Columbia
We understand that creating an LLC and getting your business up and running comes with many challenges. To help you succeed, we compiled the best local resources in every major metro area in the District of Columbia. You can get free assistance in the following areas:
Forming a foreign LLC allows your company to operate as one entity in multiple states. If you have an existing LLC and want to do business in District of Columbia, you will need to register as a foreign LLC. This can be done online or by mail.
Register as a Foreign LLC in District of Columbia
OPTION 1: File Online with the District of Colombia
OR
OPTION 2: File by Mail
Fee: $220, payable to the Department of Consumer and Regulatory Affairs (Nonrefundable)
Mail to:
Department of Consumer and Regulatory Affairs
Corporations Division
PO Box 92300
Washington, DC 20090
How to Obtain a Certificate of Good Standing
A Certificate of Good Standing verifies that your LLC was legally formed and has been properly maintained. Several instances where you might need to get one include:
- Seeking funding from banks or other lenders
- Forming your business as a foreign LLC in another state
- Obtaining or renewing specific business licenses or permits
You can order a District of Columbia Certificate of Good Standing online.
Order a Certificate of Good Standing
Fee: $50 (Nonrefundable)
Dissolve Your District of Columbia LLC
If at any point in the future you no longer wish to conduct business with your LLC, it is important to officially dissolve it. Failure to do so in a timely fashion can result in tax liabilities and penalties, or even legal trouble. To dissolve your LLC, there are two broad steps:
- Close your business tax accounts
- File the Articles of Dissolution
When you are ready to dissolve your LLC, follow the steps in our District of Columbia LLC Dissolution Guide.
