How to Form a Washington D.C. Professional Corporation in 2023

What is a Washington D.C. Professional Corporation?

On the surface, a professional corporation and a regular corporation look very similar. Both businesses can issue stock, both have bylaws, and both are governed by a board of directors and an executive team. Both pay corporate income taxes, too.

And more importantly, both corporation types offer personal asset protection. Simply put, a shareholder or member of the business isn’t liable for the business’s debts. So a member of the corporation can’t be sued; the corporation is sued. However, in a professional corporation, there’s one exception: individual members can be sued for malpractice.

That’s especially important because professional corporations usually offer professional services, such as lawyers, dentists, doctors, chiropractors, and more. All of those trades can be sued for malpractice. But in a PC, only the person responsible for the malpractice can be sued. That makes it a better option for most professionals.

In Washington D.C. a corporation is only allowed to offer professional services if every share of stock is owned by a person licensed for the profession. This somewhat reduces a PC’s ability to raise capital, but the advantage of liability protection remains.

7 Steps to Start a Professional Corporation in Washington D.C.

Now let’s jump into the specific steps you’ll need to take to form a professional corporation in Washington D.C. Later on in this guide, we’ll discuss the steps you need to take in order to maintain your corporation in Washington D.C. But let’s start at the beginning.

1. Select Your Board of Directors

A professional corporation is only as good as its board of directors, so you’ll want to appoint carefully. And while the bulk of people involved in the day-to-day operations of your business will be licensed in your profession, we recommend having your board be a bit more diverse.

For example, a dental PC might want a director with legal experience, one with business growth expertise, a financial expert, and so on. This gives you diverse input to help the business succeed.

Washington D.C. also makes it pretty simple to choose your board because there isn’t a long list of rules for your board. The only explicit rule for your board of directors is that you must have at least three directors at all times, and every director must be licensed in the PC’s profession. As long as you meet those requirements, you can set out all the remaining terms for your board in your company’s bylaws.

2. Designate a Registered Agent

Every Washington D.C. professional corporation—and even other entity types—must appoint a registered agent. This individual accepts “service of process” from the District on your behalf. Basically, if the District ever needs to notify you regarding a lawsuit or an upcoming annual report due date, they’ll contact your registered agent. Your agent forwards that notice to you.

Washington D.C. has a few legal requirements for your registered agent, though:

• Every entity that files with the District of Columbia must appoint a commercial registered agent or a noncommercial registered agent
• A commercial registered agent is one that has registered with the District to be included on the district’s list of agents, usually as a business venture
• If appointing a noncommercial registered agent, the entity may appoint an individual resident of the district, another business entity with authority to operate in the district, or an officer of the entity itself
• An agent must be continuously maintained

You can find a full rundown of the state laws in the Code of the District of Columbia.

Technically, you can serve as your own registered agent, but we don’t recommend that. First, you’ll be busy running the day-to-day affairs of your corporation. It’s also important to note that the registered agent’s address goes on the public record; some entrepreneurs are uncomfortable with that idea. Because of that, it’s a good idea to appoint a third party, like an individual that you trust, or one of our top registered agent services.

3. Choose a Name for Your Corporation

Technically, you can complete this step at any point during the process, but we’ve put it here—depending on how involved your board of directors or fellow incorporators are, they may want to be involved in the naming process.

Choosing a name can be one of the most fun—and challenging—parts of starting a PC. There are a few things to keep in mind when picking a name.

Meet Washington D.C.’s Legal Requirements

The trickiest part of naming a business is adhering to the district’s legal requirements for naming a business. Thankfully, Washington D.C. keeps its laws relatively simple:

• Your name must include one of the following phrases: professional corporation, professional association, or their abbreviations
• Your name cannot imply affiliation or identify as a government agency
• Your name cannot include words like “bank” or “insurance” unless you have the Mayor’s approval to do so
• Your name “shall be distinguishable on the records,” or distinct from the names of other entities in the District

You can find more details about business names in the district’s naming statutes or get started by doing a name search.

Pick a Descriptive Name That You Like

As long as you meet legal requirements, you have a lot of leeway to pick the perfect name for your professional corporation. In general, you should choose a name that’s memorable, describes what your business does, and is easy to say and remember. More importantly, you should pick a name that you and your team likes. You should feel good when you tell other people about your business, and your name is a big part of that.

You can also reserve your name with the Application for Name Reservation form. This procedure costs $50, but it protects your name for 60 days. That buys you time for other business start-up steps. After all the work to create a name, you don’t want to lose it to another business.

4. File your Articles of Incorporation

Now that you have your board, agent, and name all lined up, you’re all set to file your Articles of Incorporation. This online document is what officially forms your business in Washington D.C., and it requires some foundational data about your business. This is the information you’ll need to provide:

• Name of your PC
• Number of shares you’ll issue and their par value
• Name and address of your registered agent
• Statement of purpose for the PC, including the services you’ll offer
• Name and address of each original shareholder
• Statement that each original shareholder and director is licensed for the PC’s profession
• Miscellaneous provisions you wish to include
• Name, residence, and business address of each shareholder, director, or officer with decision-making power in the business
• Name, address, and signature of each incorporator

All told, this form is very simple to complete; once you’ve filled in all the requested information, you’ll largely be set to go. Washington D.C. only offers online filing for this form, which keeps the process streamlined. Be sure to have a credit or debit card on hand to pay the filing fee, which starts at $99 for corporations starting out at $100,000 or less in authorized capital. You can find the full filing fee schedule here.

5. Establish Your Corporate Record & Hold Your First Board Meeting

Now that your professional corporation officially exists, it’s time to establish your corporate record. Your board of directors will help you do this during your first board meeting.

The very first step you’ll take is drafting your bylaws. Washington D.C. doesn’t dictate a lot of legal requirements for the day-to-day operations of your business, so that’s where your bylaws will come in. Your bylaws are basically the operating manual for your business: how the board is appointed and maintained, shareholder policies and distributions, how officers are appointed, and much more. Every PC will have slightly different bylaws, but it’s essential to have them.

In addition to creating bylaws, at your first meeting, you’ll want to appoint someone to take minutes at each meeting. These minutes form another vital part of your corporate record, summarizing all important activities and decisions.

Other important tasks for your first meeting include appointing officers, drafting a conflict of interest policy, establishing committees (if applicable), and more. No two board meetings are exactly alike, but the first one is a crucial (and busy) one.

6. Obtain Business Licenses

As a professional corporation, you won’t be a stranger to the licenses required by your industry. But we’d be remiss not to remind you of them!

In Washington D.C., every shareholder, officer, and director must maintain the appropriate licenses for your industry; employees are also required to be licensed if they’re offering the PC’s service. If any members of your organization need to renew or obtain a license, then the DCRA Permit Wizard is a great tool for getting started.

Washington D.C. also requires a general business license on top of your professional licenses, but there are a few different types. To learn more about which type is right for your business, we recommend consulting the DC Business Center. Another great resource is our guide to DC business licenses.

7. Set up a Business Bank Account

If you don’t already have one, it’s time to get a business bank account. This enables you to ensure that your business funds and personal funds are always separate—an essential distinction to maintain your personal asset protection. Most banks will ask to see your bylaws (and maybe even your formation documents) as part of this process.

You can also look into getting a business credit card if you feel your company is ready for that step.

3 Steps to Maintain Your Washington D.C. Professional Corporation

Now that your business is up and running, it’s time to maintain it compliantly. There are three major areas you’ll want to tackle (or plan ahead for): taxes, insurance, and annual reporting.

1. Prepare for Taxes

Taxes are a fact of life for a corporation. Before you do anything else, we recommend obtaining an EIN, or an Employer Identification Number—even if you don’t have employees. That’s because an EIN acts like a social security number for a business. What’s more, it’s free (and quick) to obtain through the IRS.

After that, if you have employees, you’ll want to anticipate your contributions to unemployment insurance taxes and income withholding taxes on the district and federal levels.

Of course, there are also corporate income taxes to account for (21% for federal ones and 8.25% for district ones). These taxes are arguably the biggest expense a corporation will face in a given year. Income taxes are supplemented by Washington D.C.’s miscellaneous industry taxes: pro baseball and mobile food vendors are just a few of them. You can find more information on miscellaneous taxes with the Office of Tax and Revenue.

Not every tax will apply to your D.C. PC, and this is not an exhaustive list. Taxes are complicated and vary significantly depending on your business. We highly recommend consulting with a tax professional to ensure that you’ve covered all of your responsibilities.

To keep things organized and simple for all things tax, we recommend setting up an accounting software and working with a qualified professional.

2. Obtain Business Insurance

In addition to the malpractice insurance that each practitioner maintains, we highly recommend maintaining a general liability insurance policy for the business as a whole.

Lots of things can go wrong: fallen trees at your physical location, a fall on your property, malfunctioning equipment…it’s a long list. This general policy isn’t required by Washington D.C. law, but we recommend it so you’re protected no matter what. Accidents and natural disasters can be very expensive.

Washington D.C. does require one insurance policy, though: workers’ compensation. Any D.C. business with employees must maintain one of these policies. For more information on this requirement, please consult the Department of Employment Services.

3. Anticipate Your Biennial Report

All businesses in Washington D.C. are required to submit a semi-annual filing called the annual report. This report updates the District regarding any information about your business that might have changed over the course of the year. It’s a very simple online filing.

This report is due by April 1st on the first year after forming your business (and the same date every other year afterwards). The filing fee is $300. This form doesn’t seem like much, but don’t overlook it; delinquent filings can cause a lot of hassle. If you’d prefer to have a service handle this obligation for you, there are a handful of reliable report filing services.

Getting Help With Your Washington D.C. Professional Corporation

Feeling overwhelmed or just need an extra hand? Here are some of our favorite resources for Washington D.C. professional corporations.

Online Incorporation Services

If you would like to hire an affordable business incorporation service to create your professional corporation for you, services like LegalZoom, Rocket Lawyer and Swyft Filings can help you out. These service providers can handle most of the formation process, while still charging much lower rates than a business attorney’s fees.

There isn’t the same level of personalization that a lawyer can provide, but online incorporation services can still be a tremendous help. The only major issue with these service providers is the fact that they can’t provide any actual legal advice, so you need to know what you want ahead of time.

Washington D.C. Business Attorneys

There are some situations where hiring a business lawyer is a preferable route to using an online incorporation service. The professional corporation as a business structure can be highly complicated and specialized, and if you want to have the peace of mind that every single step was taken care of by a true expert, hiring a business attorney to form your Washington D.C. professional corporation is the way to go.

If you would like to pursue this route, there are some convenient services that can help you choose the right lawyer for your business. We like to use Avvo, which has extensive reviews and ratings for hundreds of Washington D.C. business lawyers, which can make it much easier to select an attorney who has your best interests in mind and also has the expertise to get the job done right.