Having an LLC in DC is a better and cheaper option than having other business structures. A limited liability company (LLC) reduces the owners’ personal liability and protects their personal assets. One can start an LLC in two ways, domestic LLCs or foreign LLCs (LLCs in more than one state). By following some basic steps, you can easily form an LLC in the District of Columbia.
On this page, you’ll learn about the following:
- How to Start an LLC in District Of Columbia
- After Starting your District of Columbia LLC
- District of Columbia Foreign LLC
- Why an LLC in the District of Columbia
- Best Businesses in the District of Columbia
- District of Columbia LLC Formation Review
How to Start an LLC in District Of Columbia
An LLC or a Limited Liability Company is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. This section gives you a step-by-step guide on how to start an LLC in DC.
Step 1: Decide a Name for Your LLC
Deciding on a business name is the first step to start an LLC. In the District of Columbia, before you name your LLC, it is important to note a few things. Firstly, make sure the name is available to use. If the name is available, then check if the name complies with all the District of Columbia business naming requirements. Once you pass through them, you can successfully name your business.
Why do you need a proper business name?
If you want your LLC to have special identification, your company name is essential. However, many people face many issues by avoiding focus on choosing a business name for their LLC business formation filings.
Here are some of the major benefits of choosing the best LLC names.
- Helps establish a company’s presence in the market;
- Creates a new identity that will resemble your LLC;
- Allows ease in finishing your LLC registration process;
- You can get the EIN once you have your name registration certificate
Requirements when deciding a name for your LLC
LLC Name Search: A business name search is required to check if the desired name is available or not. If the name is available then the business owner has to fill up a name reservation form and send it to the Secretary of State, District of Columbia. To do the name search, one has to visit the Business Entity Search page on the official Secretary of State website. Send the name reservation form to the below address by mail to reserve your LLC name in DC. The cost of a name reservation is $50.
Important Quick Links:
Department of Consumer and Regulatory Affairs
P.O. Box 92300
Washington D.C. 20090
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Step 2: Assign a Registered Agent in the District of Columbia
A registered agent for service is your authorized person or business entity that will act or work on your behalf. This person or business will receive significant tax forms, legal documents, a notice of lawsuits, and other official government correspondence in Washington DC. Choosing a Washington DC registered agent for your LLC is required.
Make sure your registered agents are residents of Washington DC. It could also be a business. Here are the recommended agents:
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Note that availing of the services of professional registered agents would be your best option since you are guaranteed that whoever is handling your legal affairs knows their stuff well. You will enjoy peace of mind and focus only on running your business, as the ‘professionals’ take care of all legal matters.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in Washington DC. Compare them to check the best yet cheapest option for you. Besides, they can guarantee you professional service because they have been in the business for years.
Step 3: File Articles of Organization in the District of Columbia
A Certificate of Name Reservation is needed to file your DC formation certificate or what is also called Articles of Organization. You need to make reports of this certificate with the Washington DC Secretary of State for a $220 filing fee, which makes up the majority of the LLC cost in DC. That is topped with other expenses, of course.
This Certificate of Formation is a legal document among the list of legal forms needed to form your business officially. It will indicate details about your LLC in Washington DC, like if it is a member-managed or managers-managed.
Before you start filing your forms, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your Washington DC LLC will offer.
How to File Online
Go to the Secretary of State Online Service. Create a profile so you can file your Articles of organization. Once you have an account, then search for the Articles of Organization online form and fill it out. To know more about online filing, visit the DC Certificate of Formation.
How to File by Mail
If you prefer filing tangible forms for your Washington DC LLC registration, then you can download the Washington DC Limited Company Certificate of Formation. Read the form thoroughly and fill it out. It will have to fill, among others, your name, city, state, zip code, and signature. You may also file in person by visiting the office on business days.
Department of Consumer and Regulatory Affairs
P.O. Box 92300
Washington, DC 20090
Department of Consumer & Regulatory Affairs
1100 4th St. SW
Washington, DC 20024
Step 4: Create Your District of Columbia LLC Operating Agreement
An operating agreement is an internal document that legally outlines the proprietorship and operating procedures of your LLC. This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
You are not required to have a comprehensive LLC operating agreement in DC when starting an LLC, but it is ideal to have one that contains all the details of your business operation. This document would be useful if you decide to dissolve DC LLC later.
Step 5: Filing a District of Columbia LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes and taxes in general. It is like a Social Security number dedicated to a business’ taxes. The EIN is necessary for any active business or any form of business for that matter.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Before sending the form, ask for EIN Assistant. Enter details of your LLC, and finally complete the form and send it to the address given.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
And that’s all! Congratulation, you are now done with all the necessary steps to form your Washington DC LLC. If you still haven’t used a professional service from here, I strongly recommend having one to handle the remaining tasks.
After Starting your District of Columbia LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business bank account
- File District of Columbia business permits & licenses
- Get liability for business and professional liability insurance with coverage for employees
- File a District of Columbia LLC annual report or biennial report
- Already existing LLCs that wish to operate in Washington DC must register as DC foreign LLC.
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
District of Columbia Foreign LLC
To register a DC foreign LLC, one has to file the foreign LLC formation certificate with the Secretary of State, District of Columbia. Forming a foreign LLC allows you to operate your business in more than one state in the USA as a single business entity. Check DC Foreign LLC to know more about having a foreign LLC.
Why an LLC in the District of Columbia
Starting an LLC or any type of business in the District of Columbia, also known as Washington D.C., will be profitable for small businesses. With a capital investment of $3.36 billion, Washington D.C. has become one of the strongest economies in the United States. Being the capital city of the United States, D.C. offers many benefits to the businesses while they start their LLCs in Washington, D.C.
There are a series of tax benefits provided by the state government to the LLCs and new businesses. Following are the tax incentives one can expect –
- Job and employment opportunity benefit of $15,000 per year
- Tax benefits up to 10-years for using personal property to operate your LLCs in the state.
- First 5-years no corporate franchise tax to be paid. From the 6th year, it would be a 6% annual rate.
- No tax on the real property up to 5 years
Main Street Programs
In Washington DC, there are some comprehensive programs which are called Main Street Programs. Under this program, traditional businesses are encouraged to revitalize again. Any new LLC registered in the state can enjoy these programs’ benefits if they are involved in DC’s traditional businesses. Georgetown, Eastern Market, North Capitol are some of the main street programs.
Loans and Grants for Small Businesses
Another reason for starting an LLC in Washington DC is the loans and grants the state government provided to the small businesses. Some of the important loans and grants programs are as follows –
- On the Job Training Program – Under this program, up to 75% of the total wage paid to the trainees can be reimbursed. Up to 1040 hours can be reimbursed under this program. Any new LLC can register under this OJT program if they have a size of a minimum of 100 employees.
- Anacostia Economic Development Corporation Program – The program, initiated by the AEDC, is administered for small businesses. Under this program, if the LLCs are involved in facade improvement projects, they can get up to 75% of the project’s total capital cost.
- The Community Development Financial Institute Program – This program is designed to improve financial institutions and structures in the state. The government has already spent $2.3 billion on this program. They provide loans and grants to small businesses to improve the financial structure of the state.
Best Businesses in the District of Columbia
If you want to form an LLC in the District Of Columbia, then you possibly have a business idea in your mind. If not, then you should look at the best options available below.
If you look around in the District of Columbia’s industries, many people are fond of using showcases and furniture made of old and recycled materials. If you think you have some extra innovative skills, you can enter the recycled materials business and make products out of waste. If people start liking what you are offering, you can charge according to your skillset and maybe more.
Environmental Friendly Product Business
District of Columbia’s residents keep extra care of the environment. Their love for the environment can be easily seen through the products they are using. That is why there is a huge scope of starting the business of environmentally friendly products. All you need to do is find the best products in the market and start the business.
The next business that is rising in the District of Columbia is subscription-related businesses. Every month there is a growth of 1% in subscription-based businesses. That is, there is a never-ending demand for subscription-based businesses. The subscription may be related to anything like food, accessories, etc. You have to select the niche in which you have the maximum interest and earn the maximum profit.
The next business that is gaining massive popularity in the District of Columbia is legal services. It is the capital state of the United Nations of America due to which the legal work in the state is at its peak and also the demand for a reliable legal services business. That is why to enter the business; you need to offer value to your legal clients and see how your business booms.
Here are businesses with some low investment
- Breweries business
- Nursery Farms
- Online advertisement business
District of Columbia LLC Formation Review
Time needed: 5 minutes.
Just to recap, here are the easy steps again when forming a Washington DC LLC. Click on the steps in this list to read the full detail.
- Name your District of Columbia LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a registered agent
In the District of Columbia, it is mandatory to select a registered agent for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
If you are a resident of Washington DC, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $220 (domestic LLC) and $220 (foreign LLC), LLC costs in DC include $300 for Biennial Reports. LLCs are liable to pay sales tax of 6% every year
It takes 5 to 7 business days to get an LLC in DC if you file it online. For the mail filing, it takes 3 weeks to get an LLC. With an additional fee, it can be done sooner.
Every year all the LLC have to submit an Annual Report and pay $300 every 2 years to the Washington DC Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens.
Having an LLC is easier than other forms of business. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. On the other side, the formation of LLCs requires less paperwork and fewer legal complexities. If you have any questions, leave a comment below.