A Washington DC LLC is a legal way to structure your business. A limited liability company (LLC) offers liability protection similar to corporations, but it also includes the lack of formalities, which is usually associated with sole proprietorships.
Forming an LLC in DC involves completing a few formalities. These include handling some functional elements and performing due diligence before you submit the Articles of Organization for approval.
In this guide, we’ll discuss the necessary steps in forming your LLC in Washington District of Columbia. We’ll also consider a few tips that can help your business to continue running smoothly.
1. Choosing A Name For The DC LLC
Got a name in mind for your LLC? Awesome. But can you use the name for the business? Well, that’s an entirely different question! The name of the LLC should be unique and distinguishable as compared to entities already registered with the Department of Consumer & Regulatory Affairs (DCRA).
Not only must the LLC have a unique name, that name must be clearly distinguishable from other entities. Similar names that are liable to be confused aren’t accepted.
To check name availability, you can search through the District of Columbia Business Name Search Page. Searching requires the creation of a free account with the DC government website.
Additionally, the DCRA may not accept names that could be confusing or mislead the general public. For example, LLC names shouldn’t include words like Inc, Bank, or similar. These services are beyond the scope of LLCs and thus their use is discouraged. There may also be words and phrases that are restricted or otherwise deemed vulgar or incorrect for use.
Designators For Your LLC In Washington DC
Limited liability companies in the District of Columbia must end their names with a proper designator. The most commonly used designator is LLC, but all of the following are permissible:
- Limited Liability Company
- Limited Company
- Ltd. Co.
- Ltd. Company
- Limited Co.
Name Reservation For DC LLC (Optional)
You can reserve a name for your LLC in Washington DC for 120 days by filing a Name Reservation Request.
For filing via mail, you’ll need to fill Form GN-3 Name Reservation Registration & Transfer Form. Foreign LLCs looking to reserve a name in DC should use Form GN-4 Name Registration & Renewal Form. The filing fee for name reservation of domestic LLCs is $50. These forms are available on the DCRA Document Management System.
It’s also possible to complete the process online.
2. Appoint A Registered Agent
Every LLC in DC must maintain a registered agent. This is a person or business entity that agrees to receive legal documents like lawsuits, summons, and more on behalf of your LLC (this is called service of process). If your LLC ever gets sued, this person will be the one receiving the related documents from the court.
As such, it is usually recommended that registered agents maintain normal business hours so they can be reached by process servers. For the same reason, registered agents in the District of Columbia must have a physical street address in the district where they can be reached (PO Box addresses aren’t accepted).
Any adult who is a resident of DC or a business entity that legally maintains an office in DC can function as the registered agent. This also includes commercial registered agents, who are often hired for the convenience and professional services they render.
3. Filing Washington DC Articles Of Organization
Your Washington DC LLC comes into existence once its Articles of Organization are approved. The articles can be filed online or via mail.
To file the Articles of Organization online, you’ll have to create an account on DC’s Corponline Portal. The process is fairly straightforward after that. Another advantage of filing online is the quicker processing. Online filings usually get processed within five business days.
To file via mail, you’ll need to download and fill Articles of Organization (Form DLC-1) available on the Document Management System. Once the form is complete, mail it along with the check or money order for the filing fee to:
Department of Consumer and Regulatory Affairs
PO Box 92300
Washington, DC 20090
The processing time for Articles of Organization received by mail is usually 15 business days.
Filing fee for Articles of Organization in DC (LLC cost or LLC Filing Fee) is $220. This amount is applicable whether you choose to file online or via mail.
4. Create An Operating Agreement
The District of Columbia doesn’t require LLCs to have an Operating Agreement. That said, putting an agreement in place remains highly recommended for both single-member and multi-member LLCs.
Having an Operating Agreement in place is useful in proving that your DC LLC is a separate entity. This can help maintain liability protection if your company ever finds itself in court. Besides, the agreement can also be used to lay out the policies, aims, processes, and other details of the company. This can help with better operational structure and easier management of the LLC.
Your LLC’s Operating Agreement is an internal document and doesn’t need to be filed with any government agency or department. However, all members should have a copy of the agreement with them.
5. Getting An EIN For Your LLC In DC
The EIN (Employer Identification Number) is a federal tax ID. Getting this number is obviously useful for federal tax purposes and it also comes in handy for other activities, like opening a separate business bank account.
The EIN is issued by the IRS and there is no filing fee for the registration. Ideally, you should file for the EIN only after your LLC has been approved by the DCRA.
If you want the EIN quickly, the best way is to file for it online. Once the filing is complete, you’ll immediately receive your EIN.
Those who cannot file online will have to download and fill Form SS-4. It’s possible to file this form via mail or fax. Using fax is a better option as the processing time for it is a few business days. Filing via mail can easily take a few weeks for processing.
6. Filing Biennial Reports For The District Of Columbia LLC
All LLCs allowed to do business in DC must file biennial reports with the DCRA. As the name implies, the report is due every two years, before April 1. The first biennial report of a DC LLC will be filed a year after the LLC came into existence. Subsequent reports will be filed every two years after the first filing.
For example, if your LLC is formed on October 12, 2021, you’ll have to file the first biennial report by April 1, 2022. The next report would be filed before April 1, 2024, and so on. DCRA usually mails courtesy reminders for filing the report to the registered agents for LLCs.
The filing fee for DC LLC Biennial Reports is $300. These reports can be filed online, using the CorpOnline filing system. If you prefer to file via mail, you can use Form BRA-25. Reports filed online are processed immediately, while those filed via mail may take 15 business days to process.
Filing the report on time ensures that your LLC stays in good standing with the authorities. A delay in filing the report will attract a penalty of $100.
7. Business Licenses, Permits, And Taxation
When operating your Washington DC LLC, you’ll have to be careful to have all required business licenses and permits. Taxation has to be considered on the federal and the local level. While some specific permits and taxation requirements are dependent on the industry of your LLC and/or the revenue, others can be more specific.
In any case, it’s best to have a good understanding of the requirements before you proceed further. It might also be useful to hire a professional to handle these things, unless you’re sure of your prowess in this specific arena.
Some of the points to consider are:
Registering With The Office Of Tax And Revenue
Once your LLC is approved by the DCRA and you have the EIN, you should look into registering with the Office of Tax and Revenue (OTR). This is done by submitting Form FR-500 with the OTR. If you intend to file online, you can use OTR’s MyTax web portal.
There is no filing fee for registering with the OTR. Once your application is processed, you’ll receive the Notice of Business Tax Registration letter. This letter includes your DC LLC’s notice number.
In most cases, this will also register your business for most DC taxes, and you’ll receive notifications when those taxes are due.
Certificate Of Occupancy Or Home Occupation Permit
Certificate Of Occupancy Or Home Occupation Permit is required for every LLC in DC. Certificate of Occupancy is relevant if you’re using your own commercial or office space for operation. In case you’re renting out a commercial space, you might be able to use the existing Certificate of Occupancy of the building/property.
In case you need to file for the C of O, you’ll need the relevant application from the DCRA eServices website. The cost of this certificate is usually $73, but it can vary depending on the available square footage of the commercial space.
A Home Occupation Permit is required if you’re running your LLC from a residential space. This remains valid whether you own the property or are renting it. If you’re working from home, the HOP is relevant.
The cost of the HOP is $73. The relevant application is available on DCRA eServices website.
DC LLC Basic Business License
While specific licenses depend on the industry of your LLC, most LLCs in DC will require a Basic Business License. The cost of the license will vary depending on the endorsement category of your LLC’s industry.
Apart from these requirements, your LLC might have to pay other taxes like Franchise Tax, Sales Tax, Income Tax, and more. Taxes can also vary depending on how you structure your LLC, its location, if there are employees, and other factors.
For federal taxation, your Washington DC LLC will be treated as a pass-through entity by default. As such, the relevant taxes can be filed as part of your personal returns with the IRS. However, the required forms change depending on whether your LLC is single-member or multi-member.
Similarly, tax requirements may change depending on your preferred tax structuring of the company. For example, the requirements will be different if you choose to have your LLC taxed as a C-corp or S-corp.