If you’re looking for a reliable DIY guide for starting an LLC in Washington, D.C., look no further.
Below you’ll find all the information you need to launch your business and handle any associated costs. Follow each step carefully and your LLC will be established and ready to hit the ground running.
That said, the process can be complex, with various documents to file and fees to pay, so if at any point you need help, you can hire an affordable LLC website.
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Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your Washington, D.C., LLC’s identity. Find a name that sticks in customers’ minds while conveying your brand qualities, and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, there are certain District requirements that it must follow. Specifically, your Washington, D.C., business name must:
- End with “Limited Liability Company,” which may be abbreviated to L.L.C. or LLC
- Not be the same as or deceptively similar to any business names currently on file with the District
- Not include any words or abbreviations that would imply the LLC is a different entity type, such as “corporation,” “Inc.,” “limited partnership,” etc.
- Not use the words “bank,” “banking,” “credit union,” or “insurance” without approval from the mayor’s office
- Not be deceptively similar to or the same as any government agency within the United States
If you follow all of these guidelines, you should be able to create a compliant D.C. business name.
Consider this: your friend Rachel wants to open a flower shop in D.C. The name she is considering, Flowers by Rachel, LLC, is already in use. So, she comes up with a new one: Rachel’s Floral Design, LLC. This name is similar to the original but includes new words and isn’t deceptively similar, properly distinguishing it in the Secretary of State’s records.
Determine the Name Is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Certificate of Formation without first confirming it’s available. Use the D.C. Business Center’s searchable online database to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation or simply forming your LLC.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can reserve that name in Washington, D.C., for a total of two years.
Think about Rachel. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold by sending a Name Reservation Registration and Transfer Form and a $50 payment to:
Department of Consumer and Regulatory Affairs
P.O. Box 92300
Washington, D.C. 20090
Step 2: Choose a Registered Agent
Rachel’s LLC is quickly taking shape, and if it’s going to operate in Washington, D.C., she’ll need a go-between for legal communications, as well as contact with the District government. This is called the registered agent.
A registered agent is a key component of your budding LLC, handling all of its sensitive communication with the District so you don’t have to. But maintaining an agent isn’t just a convenience, it’s required.
LLC taxes, lawsuits, maintenance requirements, and more – the registered agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate.
Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside Washington, D.C. — for example, if you originally formed your LLC in North Carolina and foreign qualified it in D.C.
Now for the practical application, the “how-to.” Once you’ve scoped out and spoken with a good registered agent, include their name and address on your Articles of Organization. The agent will also need to give their consent to make it official. They can do this by filling out the first page (Registered Agent Written Consent) of the District’s Registered Agent Combined Form.
You have two options for who can serve as a registered agent: an individual or a company.
Individual as Registered Agent
You may think that an individual registered agent would need specialized training or experience, but this isn’t the case. Anyone can serve as your registered agent, as long as they have a physical address in the District (P.O. boxes are not allowed).
Third parties like attorneys or accountants are usually good options, but you can also appoint friends or family members. You can even serve as your own LLC’s agent, provided you meet these requirements.
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You can use a registered agent service to cover your agent duties, and we almost always recommend doing so. These companies can take these responsibilities off your hands while charging a reasonable rate.
During the life of your LLC, you may, at some point, need to change your D.C. registered agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing registered agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to extensive financial penalties.
Step 3: File the Formation Documents with the District
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This is where the LLC formation process kicks into high gear. Let’s check back in with Rachel.
She’s reserved her unique business name and designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Rachel to take on the most important LLC document: the Articles of Organization. This filing creates a record for Rachel’s Florals and Design, LLC, with the Washington, D.C., Department of Consumer and Regulatory Affairs, giving it full authorization to commence business in the state.
The District offers both online and hard copy filing options for the Articles of Organization, so choose the one that works best for you.
Navigate to the DCRA’s Corp Online system. This is the online portal where you can complete most of your business filings. First, you must create an account. Then, once you’ve logged in, follow the instructions to complete your form.
Hard Copy Filing
Access the paper application, then complete it and mail or hand-deliver it, along with your payment, to:
Department of Consumer and Regulatory Affairs
P.O. Box 92300
Washington, D.C. 20090
No matter how you choose to file your Articles of Organization, the turnaround time is typically up to 15 business days. However, D.C. does have two expedited options available for walk-in customers: three-day service for an additional $50 or one-day service for an extra $100.
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
You aren’t technically required to adopt an operating agreement in Washington, D.C., before doing business there, but it’s in your LLC’s best interest to do so anyway. Creating an operating agreement will establish procedures that help your business run smoothly and serve as a safety net for your personal assets in legal disputes.
Let’s say our friend Rachel sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decided to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to the tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but our two favorite free templates are from TRUiC and Northwest Registered Agent.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it includes all necessary information.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate, and D.C. does as well. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the District will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation or partnership, hiring employees, or selling merchandise. So, in Rachel’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN in one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
By this point, you’ve filed the Articles of Organization, designated a registered agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing, & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Rachel to keep looking ahead, as there are certain maintenance requirements to keep a Washington, D.C., LLC running smoothly and in good standing with the state.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
District of Columbia Unincorporated Business Franchise Tax
LLCs don’t have to pay taxes directly to the government, but the District of Columbia assesses a tax called the Unincorporated Business Franchise Tax on most LLCs operating within its borders. You can find more info with the D.C. Office of Tax and Revenue but in short, LLCs with at least $12,000 in gross receipts for the year will need to pay the 8.25% tax, with a $250 minimum. That said, there are several exemptions available, such as if 80% or more of the company’s revenue is earned from personal services rendered by LLC members.
On top of that, your LLC may be subject to other circumstantial business taxes. So if your business sells merchandise, you’ll owe Sales and Use Tax. And if you maintain employees, the LLC must pay an Unemployment Tax.
For more information on business taxes in the District of Columbia, we recommend visiting the Business Tax Service Center on the Office of Tax and Revenue website.
The Articles of Organization may have already made your business legitimate in Washington, D.C., but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.
For example, accountants must get a license from the District’s Board of Accountancy and if Rachel wanted to start serving sandwiches in her flower shop, she would need a food service license from the D.C. Department of Health. The DRCA’s Registration and Licensing Services for Businesses page can help you find the info you need about business licensing and professional licensing for your D.C. LLC.
There’s one more item you should add to your list of LLC maintenance to-dos: the D.C. LLC biennial report.
Every two years, you’ll need to submit a report to the District government that updates them regarding your LLC’s name, principal office address, registered agent name and office address, the names of your members and/or managers, etc. The filing fee is $300. The D.C. Business Center has more information.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Washington, D.C., LLC is ready for takeoff. Go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Rachel out there in the business world, selling her beautiful floral creations.
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Frequently Asked Questions
What are the business tax rates in the District of Columbia?
The District of Columbia assesses a business franchise tax that amounts to 8.25%. If your business generates less than $1 million in D.C.-based business, you will instead pay the $250 minimum rate.
How quickly does D.C. process LLC formations?
If you submit your Articles of Organization online or by mail, the district will process your documents within 15 business days. Hand-delivered documents are processed while you wait, although you will need to pay an additional fee. There are also expedited options available if you need to speed things up for your online or mail filing: an additional $100 for one-day processing or $50 for three-day processing.
How many small businesses are there in the District of Columbia today?
Washington, D.C., is home to nearly 40,000 small businesses. Entrepreneurs of all backgrounds and business types find that the District of Columbia is a great place to own and operate a small business.
What are the top small business resources and websites in D.C.?
The District of Columbia chapter of the Small Business Development Center is a great place to start. You will also find many excellent resources with the Small Business Administration’s Washington Metropolitan Area District Office. The district government also has its own Small Business Resource Center with plenty of valuable tools.
Should I form my LLC in D.C., or choose a state like Delaware or Wyoming?
Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.
However, for most people, your best option is to simply form your business in your home jurisdiction. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.
What Is the Total Expected Cost of Operating an LLC in D.C.?
The overall costs of operating a D.C. LLC can vary considerably based on the specifics of your business. However, we created a helpful guide to help you identify and plan for every expense your LLC will face in this jurisdiction.
Do I Need to File a Biennial Report for My LLC in D.C.?
Yes. Whether you operate a domestic or foreign LLC in the District of Columbia, you are required to file a D.C. LLC biennial report.
Should I Use an LLC Service, Hire an Attorney, or Form My D.C. LLC?
The answer to this question lies in your personal preferences, but we can give some general pointers. An attorney will cost the most by a mile, but also provides expertise you won’t find with the other options. The DIY route is free of charge but can require quite a bit of legwork and provides no peace of mind that the process is being completed correctly.
Using an LLC service means your business will be registered by professionals who know what they’re doing, while also costing significantly less than a lawyer. This “best of both worlds” attribute is what makes LLC services our preferred option.
Start an LLC in All 50 States
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