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How to Form An LLC in the District of Columbia: Forming A DC LLC

So you’ve decided to go into business in Washington DC. You’ve got a product or service, a proven business model, and the start-up money to start doing business in the District of Columbia… now what?

The first thing you’re going to need to do when starting a business is to make sure your assets are protected. If your business isn’t recognized as a separate legal entity from yourself, you could wind up being personally liable should your business be taken to court. You could end up losing your home, your vehicle, your savings, and more. Luckily, if you open up an LLC in the District of Columbia, your personal assets will remain safe in the case of debts or lawsuits against your DC LLC.

How to Form an LLC Online

What is an LLC?

A limited liability company (LLC) is a business structure that protects an owner’s personal property in the event of a lawsuit or debts. 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:

  • Complete a name search
  • Appoint a registered agent
  • File the Articles of Organization
  • Create an Operating Agreement
  • Get an EIN
  • Tax Registration
  • C of O or HOP
  • Basic business license
  • Biennial report
  • LLC taxes

A one-time District of Colombia LLC formation fee of $220 is required, as is a biannual fee of $300. Because the Washington DC LLC formation process can be a daunting task, especially to a first-time business owner, many people prefer to hire a professional service to help them start their business in Washington DC.

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.

Choosing A Name for Your Washington DC LLC

Before filing the paperwork for your Washington DC LLC, it will be necessary to perform a search of the District’s database to ensure that your ideal LLC name is available. An LLC name search will also help you to make sure that the name you choose is distinguishable from all other registered LLCs, as is required by District regulations.

When you form an LLC, it’s important to choose a unique LLC name that best represents your Washington DC LLC. You want to choose a name that represents your products or the service you offer so customers can understand what your business is all about. Smart business owners will also check that the domain is available when forming an LLC so they can make a website for their business under the same LLC name.

If you need help with choosing a unique LLC name for your District of Columbia LLC, contact the professionals at LLC Formations so we can help you with this important step.

What Are the Naming Requirements for A DC LLC?

The first legal step in forming an LLC in the 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. Washington DC Code Section 29-103.02 requires that the name of your limited liability company ends in one of the following allowable suffixes:

1.  LC

2. L.C.

3. LLC

4. L.L.C.

5. Ltd. Co.

6. Limited Co.

7. Limited Company

8. Limited Liability Company

Among these, “LLC” is the most commonly used for a business entity. While it is possible to change the name of your LLC after having filed your Articles of Organization, the process can be a hassle. First, you’ll need to file an amendment to your Articles of Organization, and then the change must be updated with the IRS, the bank, and the Washington DC Office of Tax and Revenue. It’s better to choose the best business name from the beginning so you can focus on growing your DC LLC.

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Appoint a Registered Agent for Your DC LLC

According to the Department of Consumer and Regulatory Affairs (DCRA) regulations, an registered agent must be listed in your LLC’s Articles of Organization. This is one of the major requirements of your registered agent as it is a crucial part of your LLC formation process.

While the term “registered agent” may sound pretty fancy, it simply refers to a person or commercial registered agent service that has agreed to be the recipient of court and other legal documents. A physical address in Washington DC is required of whoever is named LLC registered agent. P.O. Boxes are not acceptable, even if they are in Washington DC.

It’s important that the registered agent of your Washington DC LLC is reliable and responsible. The person or the registered agent service will be responsible for all legal mail regarding your DC LLC, so you need to be confident that they will be available during working business hours.

Who Can Be A Registered Agent?

When naming a registered agent for your LLC, there are three options from which to choose:

  • You can act as your own registered agent for your DC LLC
  • A willing friend or family member may be listed as your registered agent
  • You can hire a commercial registered agent service for your LLC in Washington DC

Option three is desirable if you have no physical address in Washington DC, or if you wish to keep your address private. The legal address of your Washington DC LLC will be public record once you form an LLC, so many business owners prefer to hire a registered agent who can list their address instead.

If you need help choosing a registered agent for your District of Columbia LLC, contact the professionals at LLC Formations so we can help you get started.

File the Articles of Organization for Your DC LLC

District of Columbia LLC

Next, you’ll need to file your LLC Articles of Organization with the DCRA. In order to do this, use form DLC-1. You may file the articles either online or by mail. There is a one-time filing fee of $220 dollars for the articles. 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 the articles are filed online. It takes fifteen days for approval if you file the articles by mail. Upon approval, you will be emailed two copies of the approval documents. The articles 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.

File the LLC Operating Agreement for Your DC LLC

Think of your LLC’s Operating Agreement as a written contract between the members of your business. The LLC Operating Agreement describes how ownership and profits are divided or will be established, as well as how taxes are to be paid once you form an LLC.

An LLC Operating Agreement is what is known as an “internal document. This means you don’t need to file your business’ Operating Agreement with the DCRA or the Internal Revenue Service to form an LLC. 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 organize and sign the Operating Agreement when starting an LLC. This keeps all members protected, as well as your business.

Get An 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 (EIN). The EIN is the number you must register with the Office of Tax and Revenue once you start your LLC in Washington DC. It’s very easy to get an EIN from the IRS for your Washington DC LLC.

Once assigned, a District of Columbia EIN can be used to open a business bank account for your LLC. It’s important to open a business bank account so you can grow your LLC. Your LLC’s EIN is also necessary to process any payroll for your Washington DC LLC.

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 of obtaining an EIN. Any LLC member may act as Responsible Party.

You may apply for an EIN either online or by mail, Monday through Friday between the hours of 7:00 AM and 10:00 PM or by mail using form SS-4. There is no fee to obtain an EIN for your District of Columbia LLC.

Obtain Your Certificate of Occupancy or Home Occupation Permit

Before your new District of Columbia LLC can operate, a Certificate of Occupancy or Home Occupation Permit must be obtained if you will be operating out of commercial space. If you’ll be operating out of your home, then the Home Occupation Permit will be required for your District of Columbia LLC.

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 for your LLC in the District of Columbia

Unlike all the previous steps, applying for this permit must be done in person at the Permit and Business Licensing Center, located at 1100 4th Street SW, Washington DC, 20024. The Center’s hours of operation are 8:30-4:30 on Monday, Tuesday, Wednesday, and Friday, and 9:30-4:30 on 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

Applying for a Basic Business License

No District of Columbia LLC 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 filing fee for applying for a Basic Business License varies based on the “Endorsement Category” into which your new DC LLC falls. The costs range from $200 to $500 and are due every two years for your Washington DC LLC.

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 for your DC LLC 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.

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. If you need help with applying for your licenses, contact the professionals at LLC Formations so we can help you with all of the requirements needed in order to obtain the proper business licenses.

File A Biennial Report

In order to stay in legal compliance, the District of Columbia requires you to file an LLC Biennial Report on behalf of your DC LLC every two years. The LLC Biennial report is due on April 1st, and your first payment will be due the year following approval of your new DC LLC.

There is a $100 additional filing fee should your LLC Biennial Report be filed after the first of April. Aside from additional state fees, continued failure to pay will result in the DCRA revoking your business’s LLC status in DC. Courtesy reminders regarding the filing of Biennial Reports will be given to your LLC’s Registered Agent.

You may file a Biennial Report either online or by mail. To file online, use CorpOnline. Reports filed online will be processed immediately as long as all of the requirements are ment. To file your LLC’s Biennial Report by mail, use form BRA-25. Processing for reports sent by mail takes fifteen business days.

District Taxes for Your DC LLC

llc in district of Columbia

The responsibility of paying Federal and District taxes for your LLC falls to you as the owner of the DC LLC. 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.

Having Your LLC Taxed As A C-Corp

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 DC 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.

Franchise Tax for Your DC LLC

While the Federal Government classifies an LLC as a “pass-through” entity this is not the case as regards the District of Columbia. Your DC 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 Franchise 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 DC LLC will owe more than $1,000 to the District in taxes.

Personal Property Tax for Your DC LLC

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 Office of Tax Revenue.

What sort of industry your business is representative of, you LLC’s location, who its owners are, whether or not it has employees are all factors that can affect the amount of taxes your Washington DC LLC will have to pay to the Office of Tax Revenue. 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.

Opening A Business Bank Account for Your DC LLC

Now that your DC 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 activities. Legally speaking, this can be seen as what is known as a “co-mingling of assets.” Such behavior can be used, should your DC 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.

Here are the requirements to open a District of Columbia LLC Bank Account:

1.  Stamped and Approved LLC 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 your DC LLC as a separate legal entity from its owner.

How Can LLC Formations Help You?

If you want to open up a limited liability company (LLC), it’s a very wise business decision. However, the 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.

For this reason, many people forming an LLC in the District of Columbia hire a professional service to handle the stresses of the registration process for them. The professionals at LLC Formations can help you get your DC LLC up and running in no time. Also, be sure to visit our quick start guide about how to start a Florida LLC.

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ADDITIONAL RESOURCES

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)