District of Columbia LLC Registration
So you’ve decided to go into business in Washington D.C. You’ve got a product or service, a proven business model, and the start-up money…now what?
The first thing you’re going to need to do is to make sure you’re covered personally. If your business isn’t recognized as a separate legal entity from yourself you could wind up personally liable should your business be taken to court. You could end up losing your home, your vehicle, your savings, and more.
A limited liability corporation (or LLC) is a business structure that protects an owner’s personal property in the event of a lawsuit. A Washington DC LLC may be used to run a business or to purchase assets such as real-estate or vehicles. In order to establish and register an LLC in Washington DC, the following steps must be followed:
A onetime District of Colombia LLC formation fee of $220 is required, as is a biannual fee of $300.
Because Washington DC LLC formation can be a daunting task, and especially to a first-time business owner, many people opt to hire a professional service to jump through the following legal hoops for them.
Washington DC LLC Name
The first step in forming an LLC District of Columbia is to file Articles of Organization with the DC Department of Consumer and Regulatory Affairs. In order to do this, your business must have a name. Before filing, it will be necessary to perform a search of the District’s database of registered Limited Liability Companies in order to ensure the name you want is available. A Washington DC LLC search will also help you to make sure that the name you choose is distinguishable from all other registered LLC’s, as is required by District regulations.
Washington DC Code Section 29-103.02 requires that the name of your Limited Liability Company end in one of the following allowable suffixes:
5. Ltd. Co.
6. Limited Co.
7. Limited Company
8. Limited Liability Company
Among these, “LLC” is the most commonly used.
While it is possible to change the name of your LLC after having filed your Articles of Organization, the process can be something of a hassle. First, you’ll need to file an amendment to your Articles. Then, the change must be updated with the IRS, the bank, and the Washington DC Office of Tax and Revenue.
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Appoint a Registered LLC Agent
By Department of Consumer and Regulatory Affairs (DCRA) regulations, a registered LLC Agent must be listed in your LLC’s Articles of Organization. While this term may sound pretty fancy, it simply refers to a person (or company) that has agreed to be the recipient of court and other legal documents (also called legal process) should your LLC become involved in a lawsuit. A physical address in the District is required of whoever is named LLC agent. P.O. Boxes are not acceptable.
When naming a Registered Agent for your LLC, there are three options from which to choose:
- You can act as your own Registered Agent
- A willing friend or family member may be listed as your Agent
- You can hire a commercial Registered Agent
Option three is desirable if you have no physical address in the district, or if you wish to keep your address private.
Articles of Organization
Next, you’ll need to file your Articles of Organization with the DCRA. In order to do this, use form
DLC-1. You may file either online or by mail. There is a one-time filing fee of $220 dollars.
In order to file your Articles of Organization with the DCRA online, you’ll need to create an account at CoprOnline.
The approval process takes five days if filed online. It takes fifteen days for approval if you file by mail.
Upon approval, you will be emailed two copies of the approval documents. These may be downloaded by clicking on the “Approved Services” tab. You will also receive a notice of official approval by mail stamped with the seal of the District.
District of Columbia LLC Operating Agreement
Think of your LLC’s Operating Agreement as a written contract between the members of your business. How ownership and profits are divided will be established, as will how taxes are to be paid.
An LLC Operating Agreement is what is known as an “internal document. This means you need not file your business’ Operating Agreement with the DCRA or the Internal Revenue Service. All the same, an Operating Agreement is a legally binding document. Should the need arise, this document can help distinguish an LLC as a separate legal entity from its owner. For this reason, it is suggested that even single-member LLC’s draw up an Operating Agreement.
In a multi-member LLC, every member should be furnished a copy of the Operating Agreement.
Employee Identification Number (EIN)
Once your Articles of Organization have been approved by the DCRA, you must apply to the IRS for a unique Employee Identification Number. This is the number you must register with the Office of Tax and Revenue. Once assigned, a District of Columbia EIN can be used to open a bank account for your LLC. Your LLC’s Employee Identification number is also necessary to process any payroll.
Your business’s EIN may also be referred to as a Federal Employee Tax Number, or a Federal Tax ID Number.
There is no fee to apply for your EIN, but you will need to assign a member of your LLC to act as your company’s “Responsible Party.” This person will liaison with the IRS during this short process. Any LLC member may act as Responsible Party.
You may apply for an EIN either online Monday through Friday between the hours of 7:00 AM and 10:00 PM or by mail using form SS-4.
Once you’ve successfully applied for and received your LLC’s unique Employee Identification Number, you’ll need to register your LLC with the Office of Tax and Revenue. This process can be done online. There is no fee to register. Form FR-500, the online form you’ll fill out, will ask you a series of questions about your new LLC.
Within three to five business days of submission, you will receive a “Notice of Business Tax Registration.” In the upper right-hand corner of this document will be your LLC’s Notice Number. You will need this number when applying for a Basic Business License.
Obtain Certificate of Occupancy or Home Occupation Permit
Before your new LLC can operate, a Certificate of Occupancy or Home Occupation Permit must be obtained. If you will be operating out of commercial space, you’ll need the C of O. If you’ll be operating out of your District of Columbia home, it is the Home Occupation Permit that will be required.
If your LLC will be operating out of a rented space, there is a chance you may be able to use the buildings existing Certificate of Occupancy. The manager or owner of the space you lease will be the person to ask about that.
The permit for a Home Occupation Permit (HOP) is $73. A Certificate of Occupancy starts at $73 but could be more depending on the amount of space in question.
Unlike all the previous steps, applying for a C of O or HOP must be done in person at the Permit Center and Business Licensing Center. Located at 1100 4th Street SW, Washington DC, 20024, the Center’s hours of operation are:
- 8:30-4:30 Monday, Tuesday, Wednesday, and Friday
- 9:30-4:30 Thursday
In order to be helped, you must arrive prior to 3:30. It is suggested that you arrive as early as possible.
There are two cases in which a Certificate of Occupancy or Home Occupation Permit are not necessary:
- If your LLC will not operate out of a physical District of Columbia Location
- If your LLC will not operate out of a home within the District of Columbia
In all other cases, a C of O or HOP will be needed to apply for your LLC’s Basic Business License.
Applying for a Basic Business License
No LLC Washington DC may operate without a Basic Business License. In order to apply for a Basic Business License you’ll need:
- DCRA Approved Articles of Organization
- Your LLC’s Employer Identification Number (EIN)
- Notice of Business Tax Registration
- Certificate of Occupancy or Home Occupation Permit
The price of applying for a Basic Business License varies based on the “Endorsement Category” into which you new LLC falls. The costs range from between $200 to $500 and are due every two years.
If your business isn’t described by any of the available endorsement categories, you may apply under the “General Business License” category. The cost of this permit is $325 biannually (every two years.)
Your LLC’s Basic Business License may be applied for in person, or online. To apply online, use My DC Business Center.
In order to apply in person, you’ll need to fill out a Basic Business License application form and what is known as a “Clean Hands Self-Certification.” Apply in person at the Business Licensing Center, 1100 4th Street SW, 2nd floor, Washington DC, 20024. (Hours noted previously)
All District of Columbia Basic Business Licenses must be renewed every two years. The only exception is if you purchase a four-year license, which is an option also.
In order to stay in legal compliance, the District of Columbia requires you to file a report on behalf of your LLC every two years. The Biennial report is due on April 1st, and your first payment will be due the year following approval of your new LLC.
There is a $100 fee should your Biennial Report be filed after the first of April. Continued failure to pay will result in the DCRA revoking your business’s LLC status.
Courtesy reminders regarding the filing of Biennial Reports will be given to your LLC’s Registered Agent.
You may file your LLC’s Biennial Report either online or by mail. To file online, use CorpOnline. Reports filed online will be processed immediately.
To file your LLC’s Biennial Report by mail, use form BRA-25. Processing for reports sent by mail takes fifteen business days.
The responsibility of paying Federal and District taxes for your LLC falls to you as the owner of the company.
Federal taxes on Limited Liability Companies are based on the company’s number of members. Single-Member LLC’s are taxed in the manner of a sole-proprietorship. Declared profits may be listed on a Schedule C as part of a standard personal 1040 tax form.
Multi-Member LLC’s are taxed as partnerships. The LLC itself files a Form 1065, an informational return. An informational return does not require the LLC to pay any taxes. Instead, the company issues a K-1 to all members, which includes a record of any taxable income they have earned. Each member then files a personal 1040 Tax Form, listing this income.
The Internal Revenue Service classifies a Limited Liability Company as a “Pass-Through” entity. Simply put, it means that income moves through the company and to the owner or owners. The owners must then pay taxes on the LLC’s earnings. The two exceptions to this are if your LLC is registered to be taxed as either a C-Corp or an S-Corp.
While there may be certain advantages to registering your LLC to be taxed as a C-Corp, there are initial disadvantages as well. For one thing, you will be required to pay both individual and corporate taxes on your LLC. A C-Corp must file a corporate tax return using Form 1120. To register to have your LLC taxed as a C-Corp, use Form 8832.
You may also elect to register your LLC to be taxed by the Federal Government as an S-Corp. While a C-Corp is a District designation, an S-Corp is an IRS classification. You may apply to have your LLC taxed as an S-Corp using Form 2553. One of the main advantages of being taxed as an S-Corp is savings on the Self-Employment tax.
There are advantages to having your LLC taxed as a C-Corp or an S-Corp, but it is strongly recommended you consult a qualified accountant before deciding how your Limited Liability Company will be taxed. Should you realize later that your tax benefits were more favorable when you LLC was taxed as a sole-proprietorship or partnership, reverting to that status may be costly in time and fees.
If your LLC is taxed as either an S-Corp or a C-Corp, a Form D-20 must be filed.
While the Federal Government classifies an LLC as a “pass-through” entity this is not the case as regards the District of Columbia. Your LLC will be levied a “Franchise Tax.” The rate of this tax is currently 8.25% on your LLC’s net income. A minimum Franchise Tax of $250 must be paid regardless of your LLC’s income.
Additionally, an “Unincorporated Business Tax” must be filed also, if your gross receipts exceed $12,000 and if your LLC is taxed as a sole proprietorship or as a partnership. A Form D-30 must be completed in order to file.
Quarterly Estimated Taxes and Payment Vouchers must be filed if it is estimated your LLC will owe more than $1,000 to the District in taxes.
An informational Personal Property Tax Form must also be filed for your LLC. Taxes must only be paid if your company owns property valued at a quarter-of-a-million dollars.
Should your business sell tangible goods (or provide certain services) it is required that you collect Sales-Tax. This tax must be filed with the Department of Tax and Revenue.
What sort of industry your business is representative of, you LLC’s location, who its owners are, whether or not it has employees–all of these factors and more can affect the amount in taxes your Washington DC LLC will have to pay. The taxes listed above may not be a complete list of those you are responsible to pay.
In order to make sure you stay on top of all the taxes due, it is recommended you hire the services of a professional accountant.
Now that your LLC is up and running, you’ll want to open an LLC bank account. The last thing you want to do is use your personal bank or checking account for business purposes. Legally speaking, this can be seen as what is known as a “commingling of assets.” Such behavior can be used, should your LLC ever be sued in court, to argue for personal liability. In other words, the whole reason you registered your company as an LLC (to protect yourself from personal liability and from losing everything) may be compromised.
The following paperwork is required to open a District of Columbia LLC Bank Account:
1. Stamped and Approved Articles of Organization
2. Certificate of Organization
3. EIN Letter From IRS
4. Notice of Business Tax Registration Letter
5. Certificate of Occupancy or Home Occupation Permit
6. Basic Business License
7. Photo Identification
You may also want to bring your Operating Agreement, though you may not need it.
It is a good idea to contact the bank ahead of time and find out what, if any, additional paperwork may be required.
All members who want to be on the account need to be present when the account is opened. Non-U.S. residents who open LLC’s in Washington DC can also open LLC bank accounts.
Getting a business phone line is also something you’ll want to do. For one thing, it keeps your personal number private, and off of the public record. Also, a separate line can help to further distinguish an LLC as a separate legal entity from its owner.
District of Columbia LLC registration can be an involved and even daunting task. As the process is cumulative (completing one step often involves having completed the prior step) making one mistake can result in a great deal of clean-up work. You’ll need to refile amended documents and possibly pay further fees. For this reason, a great many people forming an LLC in District of Columbia hire a professional service to handle the stresses of the registration process for them. Also be sure to visit our Florida LLC guide.
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List of Helpful Links
1. Online DC LLC Name Database Search
3. Employee Identification Number Online Application
4. Online Tax Registration
5. Online Application for Basic Business License
District of Columbia LLC Forms:
Form DLC-1 (Filing Articles of Organization)
Form SS-4 (Employee Identification Number)
Form FR-500 (Tax Registration)
Form BRA-25 (Biennial Report By Mail)
Form D-30 (Unincorporated Business Tax)
Form 1065 (LLC Informational Return)
Form 1040 (Personal Income Tax Form)
Form D-20 (LLC’s Filing as C-Corp or S-Corp)
Form 8832 (C-Corp Application)
Form 2553 (S-Corp Application)
Form 1120 (C-Corp Corporate Tax)
WASHINGTON DC DEPARTMENT OF CONSUMER AND REGULATORY AFFAIRS
Phone Number: 202-442-4432
Phone Number: 202-442-4311
Phone Number: 202-442-4576
Tax and Revenue
Phone Number: 202-727-4829