How to start an LLC in District of Columbia
Setting up your business in the District of Columbia? We know that you must be really excited about your new venture and slightly nervous about all the new responsibilities as well. Want to get that load off your back for a bit? You should form an LLC in the District of Columbia! Don’t know what to do? Don’t worry – we are here for you! From filing the articles of the organization to getting the necessary business licenses and permits, we will take you through all the steps in this comprehensive District of Columbia LLC guide.
Recommended LLC Services
Want to know more about an LLC and what are the advantages of forming one? Let’s take a quick look at this before we move on to forming an LLC in the District of Columbia. An LLC is an unincorporated entity, with foreign or domestic members,
The owners of the LLC only put their investment at risk and not their personal assets. LLCs combine the ease of a sole proprietorship with the protection of a corporation. In short, you get the best of both worlds!
You can focus on growing your business instead of worrying about potential legal issues. With an LLC, you don’t have to worry about anything other than running your business!
To form an LLC in the District of Columbia, you need to do three main things – choosing the name of your LLC, appointing a registered agent, and filing the Articles of Organization with the District of Columbia Department of Consumer & Regulatory Affairs.
The documents can be filed online, via traditional mail, or in person. The filing fee is $220. Let’s take a look at the necessary steps for forming your LLC in detail.
Name the LLC
The first step is to choose a name for your LLC. The name of your LLC is your identity – it is the first thing that your clients see when they come in contact with your business. It needs to reflect your company’s core values and message.
You can change your LLC name even after you have selected it by filing a name amendment request. However, the whole process will be a real pain – from changing your LLC’s name to getting your name on EIN changed, it will take a long time.
Moreover, you will have to pay an additional filing fee as well. Therefore, we recommend that you put a lot of effort into selecting the name in the first place.
Name availability search
Select a name that is perfect for your business in every respect. Once you have done that, you need to search for the availability of the name. It is highly possible that the name you selected is not available for use.
Before you file the Articles of Organization with the DCRA (Department of Consumer & Regulatory Affairs), you have to search the District’s LLC database to ensure that your chosen name is available for use.
LLC name rules
There are a few rules and regulations that you have to follow while naming your LLC. You have to add a proper designator at the end of your LLC’s name. Abbreviations such as LC, L.C., LLC, L.L.C., etc. can be used.
If you are unsure about which designator is allowed or not, you should go through naming guidelines on the District of Columbia’s website, or simply go with “LLC”. You can’t use a designator that will make your LLC sound like some other legal entity such as Inc., Corp., Corporation, etc.
Furthermore, you can’t use words or terms that are vulgar or derogatory in nature. Names that will confuse your business with a government entity are also not allowed.
Name reservation fee
Selected a name but are not ready to use it yet? Well, there is no need to worry! You can reserve your name for 120 days. Just submit an online application or send it in via mail, pay the $50 name reservation fee, and you will be good to go! Want a quick tip? While searching for your LLC’s name, you should search for its availability as a web domain as well. We live in a digital world, after all, and you will definitely set up a website for your business in the future. This will be helpful for you at that time!
Fictitious LLC name
If you don’t want to do business using your LLC’s registered name, you can do so as well. Simply select a DBA – doing business as – name and use it anywhere you want! To do this in the District of Columbia, you have to register your DBA. You have the choice to do so online or via traditional mail. Your name will be registered for two years.
Select a registered agent
The District of Columbia requires you to choose a registered agent for your LLC. You have to provide the details in your Articles of Organization. Don’t know what a registered agent is? Let us tell you.
A registered agent is the point of contact between your business and the government. It can be a person or a business entity. They have to agree to receive legal mail, notices, etc. in case your LLC gets involved in a legal case.
Registered agent requirements
There are a few standards for a registered agent. A registered agent needs to have a physical street address in the District of Columbia. A simple PO Box will not do.
Moreover, the registered agent needs to be available during regular working hours in case the government needs to make contact with your LLC.
Registered agent options
When it comes to choosing your resident agent, you have three options.
- Becoming your own registered agent
- Choosing a friend or family member
- Hiring a professional family member
If you become your own registered agent, you will not have to pay any fees or charges. This may sound good, but there are a few caveats. The address of the registered agent is part of the public records.
This means that you will have virtually no privacy. Moreover, you will be legally obligated to be available during working hours. This means you can’t take a break-even if you want.
Choosing a family member or friend as your resident agent is a lucrative choice but again, it comes with its flaws. Their address will be made public as well and they will also have to keep regular working hours.
Moreover, there is a likelihood that they will forget to check their mail, and you can miss an important deadline which will have negative consequences for your business.
Therefore, the best option is to hire a professional Registered Agent such as the Northwest Registered Agent service that will take care of all your needs! They have over 20 years of experience and a highly qualified, one-on-one customer service team that will take care of all your needs.
File Articles of Organization
This is the major step when it comes to forming your LLC in the District of Columbia. You have to prepare the paperwork and then submit it to officially form your LLC. You will need to provide the following things in your Articles of Organization.
- LLC name. The LLC name which you selected above will go on your paperwork along with the address of your principal office. The principal office address needs to be a street address and a PO Box will not suffice. As your articles of organization will be available in the public records, the address you provide will be public as well. If you hire a professional LLC formation service, you can list their address as the principal office and protect your privacy!
- Name and address of registered agent. You will have to provide the name of your registered agent as well. It is better that you hire a professional registered agent not only to take a lot of your back but to protect your privacy as well.
- Effective date of LLC. Do you want your LLC to be formed immediately? Or do you want to wait for some time while you take care of other stuff before your LLC comes into effect? You can mention this is the paperwork. You can wait for 90 days after filing your paperwork.
- Additional provisions. If there are some additional provisions that are applicable to your LLC in DC, you can list them here. For example, if you are forming a PLLC, you will have to mention what kind of services you are offering. Moreover, if your LLC is a series LLC, you have to mention that as well.
- Details about members & managers. The District of Columbia requires you to provide the names and addresses of all the members and managers of the LLC. Anyone with more than 10% controlling interest in the company has to be listed.
- LLC organizer. The name and address of the LLC organizer are to be listed as well. If your organizer is a professional LLC formation service, they will list their name and address here.
You can file these articles online or via postal mail. You will have to pay a filing fee of $200. It is a one-time fee. We suggest that you file online since not only is the process easier, but the turnaround time is faster as well.
Online approval time is approximately 5 business days while filing through traditional mail would take up to 15 business days. Once your LLC is formed, you will receive your Certificate of Organizer along with stamped and approved articles of organization.
Create an LLC operating agreement
The District of Columbia doesn’t legally require a business operating agreement, however, we highly recommend that you form one for your LLC. This internal document will establish how your business will be run.
In the LLC operating agreement, the rights and responsibilities of all the members and managers will be mentioned. Moreover, the document helps in preserving limited liability protection by showing that your LLC is a separate business that runs under certain rules and regulations.
This is a written contract amongst the members spelling out the ownership interests of each member. This document will also dictate how the profits/losses will be distributed, how the taxes will be paid, and a lot more.
Whether you are running a single-member LLC or a multi-member LLC, you should get a business operating agreement. Professional LLC formation companies such as ZenBusiness or IncFile provide customized business operating agreements when you use their services to form an LLC.
Get your EIN
Once your LLC is formed, you need to get an EIN. Don’t know what an EIN is? Well, an EIN is similar to the social security numbers we all have. An SSN is for individuals while EINs are for LLCs.
An EIN helps the IRS identify your LLC for tax filing purposes. Moreover, you can use the EIN to hire your employees, open your business bank account, file your taxes, etc. You shouldn’t apply for EIN before your LLC is formed.
You will get an EIN from the IRS free of cost. You have to select an “EIN Responsible Party”. If your LLC is a single-member LLC, then you will be the EIN responsible party. If your LLC is a multi-member LLC, then you can select any member as the EIN Responsible Party.
Register LLC for taxes
Once you get the EIN, you need to register your LLC with the Office of Tax & Revenue for taxes. The tax registration is free and you can file for registration online. You will be asked a series of questions regarding your LLC, and then you will be registered.
After 3 to 5 business days, you will receive a notice of LLC Tax Registration in the traditional mail. To apply for a basic business license, you will need this number.
Get home occupation permit
To operate in the District of Columbia, you should have a home occupation permit. The certificate of occupancy is necessary if you develop commercial/office space or will own office space. If you are renting office space, then you use the building’s current certificate of occupancy.
If you are working from home, you will need a home occupation permit. Whether you own the home or rent a home, you will need a home occupation permit, nevertheless. A home occupation permit costs $73.
The basic price of the certificate of occupancy is $73 but can increase depending on the square footage of the place. You have to apply in person at the Permit Center and Business Licensing Center in DC.
If you have a physical address in DC, you will need this permit. If your business doesn’t have offices in DC, and you are registering a foreign LLC, then you don’t need this permit.
Get basic business license
Apart from the home occupation permit, the District of Columbia requires all the LLCs to get a Basic Business License to do business there. Make sure that you have your stamped & approved paperwork, your EIN, Business Tax registration letter, and the home occupation permit.
There is no flat fee for the BBL. Rather, the BBL costs around $200 to $500 depending on the type of business you run. You have to get the license renewed every 2 years. You can apply for the license both online and in person.
You can purchase a 4-year license as well if you want.
File a biennial report
In most states, you have to file an annual report. However, in DC, you have to submit a report every 2 years. The cost for the biennial report is $300 and the report is due on April 1st. If your report is late, you will have to pay a $100 penalty.
If you don’t submit the report and the penalty, your LLC will be shut down by the DCRA. You will get a reminder for the biennial report at the address of your registered agent. If you file the report online, it will be processed immediately while mail filings usually take 15 business days.
District of Columbia LLC – Final Word
Running a business takes a lot of hard work and effort. However, no matter how hard you work, you can’t stop unforeseen incidents such as workplace accidents from taking place. Would you like to go through all the effort that you have put in to go down the drain due to a legal issue?
What if a customer decides to sue you for late delivery? Or a disgruntled employee files a complaint against your company? If your business is an LLC, your personal assets will be protected no matter what the legal outcome is.
Convinced that you should form an LLC in the District of Columbia? Now comes the million-dollar question: How should you form an LLC? We recommend that you take the help of professional LLC formation companies such as ZenBusiness or IncFile.
- ZenBusiness is a good option for those entrepreneurs who are searching for high-quality, professional services at very affordable rates. They have multi-tiered package plans that make it easy for you to pick the one that suits your needs.
- IncFile is second-to-none when it comes to the best priced-packages in the market. With a free business starter package, you will not find a better offer anywhere else. They not only form your LLC but also act as your registered agent for free for the first year!
Here’s to you having a successful LLC in the District of Columbia!
What taxes do I have to pay as a District of Columbia LLC?
You have to pay income tax to the federal government as well as to the DC office of Tax and revenue. You will have to pay a DC franchise tax return as well. There are several franchise taxes, such as Unincorporated business franchise tax, corporate franchise tax, minimum franchise tax, etc.
Moreover, there are personal property taxes and a few other taxes such as ballpark taxes, payroll taxes, etc. as well.
How will I know if the LLC name I have selected is available?
To know whether the name is available or not, you have to search the District of Columbia’s LLC database. If you have hired a professional formation company, they will take care of this for you.
How much does it cost to form a District of Columbia LLC?
To file the articles of the organization, you will have to pay a $220 fee. Moreover, if you have to reserve the LLC name, you will need $50 more. Furthermore, you will have to get an occupation permit as well as business licenses for your LLC.
Can a foreign LLC do business in the District of Columbia?
Yes, foreign LLCs are allowed to operate in the District of Columbia once they register with the DC regulatory Affairs office. Foreign LLCs will need to follow the same procedure that we have listed above. However, they will not require an occupation permit.
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