How To Form an LLC in Washington D.C.
When starting a new business, one of the first things you should decide is which business structure best suits your company. LLCs are a popular choice for small businesses of they provide personal liability protection, pass-through taxation, and simple filing requirements.
You can create a Washington D.C. LLC yourself by following the steps below.
Steps to Form an LLC in the District of Columbia
Name Your LLC
To make your business stand out from the competition, you should choose a memorable and unique LLC name. Under the law of the District of Columbia (D.C.), your new LLC name must:
- Be unique (different from all other District of Columbia business entity names)
- Make it clear that your company is an LLC (your LLC name must contain the words "Limited liability company", "Limited Company", “L.L.C.", “LLC", “L.C.", or “LC")
- Not include restricted language (like words that would confuse it with a government agency or financial institution)
You can conduct a business name search on CorpOnline, the District of Columbia's website for businesses, to see if your LLC's name is available. If you have a name in mind but aren't quite ready to register your LLC, you can file a Name Reservation Registration & Transfer Form with the Department of Consumer and Regulatory Affairs, Corporations Division to reserve your business name for 120 days. The filing fee is $50.
Get a Registered Agent
In the District of Columbia, all LLCs must have a registered agent. A registered agent is an individual or entity that agrees to accept legal documents on behalf of your business. This includes service of process if someone sues your business.
Your registered agent needs to be a person or entity with a physical street address (not a P.O. Box) within Washington D.C. They should be available at this address during standard business hours. You can also consider using a registered agent service to ensure you receive legal notices and critical mail.
File Articles of Organization
To formally create your District of Columbia LLC, you need to file articles of organization with the Superintendent of Corporations in the Corporations Division of Department of Licensing and Consumer Protection, Corporations Division (DLCP). Your LLC articles of organization require the following:
- Name of LLC
- Business address of LLC's principal office
- Registered agent's name and address
- Statement that LLC has at least one member
- Effective date of articles
- Members' names and ownership percentages
- Organizer's name, address, signature, and date
- $99 state fee
You can file online or use Form DLC-1 to file by mail or in person as a walk-in customer. Online filings must be paid by credit card. There's an additional $100 expedited fee for one business day service and a $50 expedited fee for three business days.
Draft an Operating Agreement
Although it's not legally required in the District of Columbia, having an LLC operating agreement creates a contract between you and your LLC members regarding important business operations and provides clarity in the event there is an issue. company issues. It can include:
- Member rights and responsibilities
- Ownership percentages
- Voting procedures
- Management style
- Procedures for adding or removing members
- Any other agreements among members
An LLC operating agreement promotes more organized operations in your company. It establishes clear expectations for LLC members, preventing confusion down the line.
Get an EIN
Applying for an Employer Identification Number (EIN) is quick and easy. to do. You can get an EIN through the Internal Revenue Service (IRS) by fax, mail, or online at no cost. It's like a Social Security Number but assigned to businesses for federal tax purposes. You can learn more about your federal business tax obligations by visiting the IRS Small Business and Self-Employed Tax Center.
Set Up Business and Tax Accounts
Depending on the type of business your LLC conducts, you may be subject to certain federal and state tax laws. You should contact the IRS or visit their website to find out what federal taxes apply to your business. You may also need to register your LLC with the Office of Tax and Revenue to file, report, and pay state taxes.
Your LLC is required to obtain a business license according to the kind of business activity it does. You should apply for a basic business license (BBL) with DCRA's Business Licensing Division after you register your LLC with the Corporations Division and the Office of Tax and Revenue. Visit the DCRA's business licenses page to determine which type of licenses you will need for your LLC.
There may be jurisdictional taxes that apply to your LLC. You should familiarize yourself with D.C.'s tax requirements for active businesses.
State Business Tax
Unincorporated businesses in the District of Columbia may be subject to the business franchise tax in some situations. Unless an exemption applies, an LLC could be required to report income separately from the business owner and pay the unincorporated business franchise tax if certain requirements are met. For example, if an LLC's net income on a combined reporting basis has gross receipts totaling more than $12,000. More information about the business franchise tax is on the Office of Tax and Revenue's website.
State Employer Tax
If your LLC has employees, you must withhold the District of Columbia income taxes on wage payments made to Washington, D.C. residents who work in the District of Columbia. If you employ one or more employees for performing services in the District of Columbia, you have to contribute to the unemployment insurance fund by paying the unemployment tax. You also probably need workers' compensation insurance coverage. You can learn more about employer requirements on D.C.'s Department of Labor Services website.
Sales and Use Taxes
If your LLC sells or rents tangible personal property or provides certain services to businesses or individuals in the District of Columbia, it's subject to sales tax. Use tax is imposed at the same rate as the sales tax on purchases delivered outside of the District of Columbia and then brought into the District of Columbia for use, storage, or consumption. The general sales and use tax rate is 6%.
Business Licenses and Permits
LLCs in the District of Columbia are licensed according to the type of business they provide. You should apply for a basic business license to determine what kind of license your LLC requires. If you conduct your business out of your home in the District of Columbia, you should apply for a home occupation permit. If you operate out of an office located in the District of Columbia, you should apply for a certificate of occupancy. If your LLC offers a non-health professional service, you should also submit a license application to the Occupational and Professional Licensing Administration. A list of the applicable categories can be found on their website. License applications for health professionals are available on the D.C. Department of Health's website.
Instead of annual reports, to keep your business in good standing you need to submit biennial reports to the Corporations Division of the DCRA every two years. The fee for this report is $300. You should submit your first report in the calendar year after registering your LLC. It will be due by April 1st of that year. After your first report, you should file biennial reports every two years, before April 1st. To file your biennial report, you submit Form BRA-25 by mail, in person, or online.