How to Form an LLC in the District of Columbia | LLC Filing DC | Swyft Filings
Follow our free guide to form an LLC in the District of Columbia
- Pros and Cons of Forming an LLC in the District of Columbia
- Starting Your District of Columbia LLC
- Maintaining Your District of Columbia LLC
- Additional District of Columbia Resources
Starting an LLC in the District of Columbia involves a series of steps, but our comprehensive guide leads aspiring business owners through every part of the LLC formation journey.
Pros and Cons of Forming an LLC in the District of Columbia
Aside from being the nation’s capital, the District of Columbia is located near major water ports (Baltimore and Delaware) and the main interstate (I-95) for the East Coast. The city is within 225 miles of Baltimore, Philadelphia, and New York City. To the south, Richmond and Norfolk are only a few hours away, and Atlanta is still within driving distance.
Privacy for Owners
The District of Columbia does not require full disclosure of an LLC’s members in the incorporation paperwork. An organizer who is neither a member or manager is allowed to file the necessary documents.
Low LLC Taxes
The District of Columbia’s franchise tax for LLCs is relatively low, with a minimum fee of $250 annually for businesses with less than $1,000,000 in gross receipts.
High Start-Up Costs
The District of Columbia is one of the more expensive places in the US to start a business — its filing fee ($220) and biennial report fee ($300) are at least double the cost of most states. By comparison, Next door neighbor Virginia only charges $100 filing fee and $50 annual report fee.
High Corporate Taxes
At 8.25%, the District of Columbia has one of the higher corporate tax rates in the nation, especially given its size. Neighboring states Maryland and Delaware are also on the high end with 8.25% and 8.7% corporate tax rates respectively.
High Crime Rate
The District of Columbia has long been known as one of the most dangerous places in the United States. Even though measures have been taken to make the city safer, the numbers are still high — DC’s reported murder rate is almost three times the national average (16.7 vs 5.3).
Cost of Doing Business
- $220 filing fee
- $300 biennial report
- $250/$1,000 franchise tax
Phase One: Starting Your District of Columbia LLC
The first part of starting an LLC in the District of Columbia focuses on the steps that will legally form your business and set up your LLC’s foundation. Begin with the following steps:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Decide on a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: Create your Operating Agreement
- Step 6: Register for an EIN
Step 1: Name Your District of Columbia LLC
The first step in forming your LLC in the District of Columbia is to name your business. Please keep in mind that there are specific guidelines concerning the use of certain words in business names.
Tip: Use a free business name search tool to ensure your company’s desired name is available.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
You should also create an online presence for your new LLC by building a website. You can easily check domain name availability at a number of online web services sites.
Step 2: Establish Ownership
LLC owners are actually known as members and managers. Every LLC will have members, but only some will have managers — the difference depends on the management structure of the business.
LLC Management Structures:
- Member-managed: All members participate in operating and making decisions for the LLC
- Manager-managed: An appointed manager oversees the daily operations of the LLC and the members are not actively involved.
The District of Columbia LLC Member Guidelines
Required Number of Members
There must be at least one member or manager to form an LLC in the District of Columbia.
Member Disclosure Requirements
An organizer/authorized representative may sign and file the Articles of Organization in place of the LLC members.
LLC members in the District of Columbia may be of any age.
There are no residency restrictions imposed on LLC members in the District of Columbia.
Step 3: Find a Registered Agent in the District of Columbia
Choosing a registered agent is a necessary step for all LLCs formed in the District of Columbia. Your business cannot be official without filling this position.
What is a registered agent?
The registered agent can be either a person or business who is authorized to accept official mail and legal notices on behalf of the LLC.
Why do you need a registered agent?
The District of Columbia requires you to appoint a registered agent so that the government has a consistent contact person for your LLC.
What are the main requirements for a registered agent?
- The registered agent must have a physical address — not a P.O. Box
- The registered agent must be available during business hours
Who can be a registered agent in the District of Columbia?
- Any resident with a physical address in the District of Columbia
- An LLC or corporation that is licensed to conduct business in the District of Columbia
Is the registered agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own registered agent for my business?
You are legally allowed to be your own registered agent as long as you have a physical address in the District of Columbia.
Is being my own registered agent discouraged?
LLC business owners who choose to be their own registered agent risk compromising their personal information.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in the District of Columbia. Find more information here.
Step 4: File the Articles of Organization
The most important step in creating your District of Columbia LLC is filing the Articles of Organization with the Secretary of the District of Columbia.
What is the Articles of Organization?
The Articles of Organization is a legally binding document that is filed with the state government to officially and legally form your LLC.
Why do I need the Articles of Organization?
Your District of Columbia LLC will not be legally recognized by the Secretary of the District of Columbia without filing this document. Consider this document as part of your LLC’s foundation.
What is the cost of filing the Articles of Organization?
The filing fee for the District of Columbia is $220.
What information is included in the Articles of Organization?
- The name and address of the LLC
- The name of the organizer filing the paperwork
- The name and location of the registered agent
- The statement of purpose (optional)
- The list of professional service information (if applicable)
Additional the District of Columbia Filing Information — Professional LLCs
Professional service businesses can also form LLCs in the District of Columbia. This specific type of LLC is known as a Professional Limited Liability Company (PLLC).
Example professions that may form PLLCs:
- Physicians and Medical Professionals
- Professional Counselors and Psychologists
- Architects and Engineers
- Social Workers
A few points to consider:
- All members of the PLLC must be licensed in the profession of the business.
- The PLLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the PLLC’s profession.
Step 5: Create an LLC Operating Agreement
An LLC Operating Agreement is necessary for the successful formation and growth of your LLC in the District of Columbia.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legally binding document that defines the rights and responsibilities of each member/manager and lays out the details of the business’s operating procedures.
Why do I need an LLC Operating Agreement?
The LLC Operating Agreement is necessary because it provides structure, protects business assets from creditors, and reduces legal disputes among members.
Do I need to file the LLC Operating Agreement?
You do not need to file the Operating Agreement with the state; it is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
Your LLC Operating Agreement will generally include the following information:
- List of the members/managers and their roles
- Designation of authority in the LLC
- Initial capital contributions of the members
- Voting designations and percentages of the members
- Member transfer/addition rules and restrictions
- Distribution of profits
- Meeting schedule
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Register for an EIN
Most businesses formed in the District of Columbia must register for an EIN. In fact, your LLC cannot conduct business without this ID.
What is an EIN?
The EIN is a nine-digit number that is assigned to your business by the Internal Revenue Service (IRS) for identification purposes much like a personal Social Security number.
What does EIN stand for?
EIN is an acronym for Employer Identification Number. It is also known as a Federal Tax ID.
Are all businesses required to have an EIN?
Federal law dictates that certain types of business entities register for an EIN:
- Any business with employees (even if owned by one person)
- Any business with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.
Why does my LLC business need an EIN?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
In short, if you make money through your business and it has employees, you must have an EIN.
Is the EIN publicly listed?
The EIN for your LLC will be part of public record.
Can I use my Social Security Number as the EIN?
You can elect to use your social security number; however, your EIN is part of public record.
Swyft Filings offers EIN services for small businesses in the District of Columbia. Find more information here.
Phase Two: Maintaining Your District of Columbia LLC
Now that you have finished the initial phase of setting up your LLC in the District of Columbia, the following steps will help put you in good standing with the law and ready you for conducting business.
- Step 1: Register for Taxes in the District of Columbia
- Step 2: Apply for Permits and Licenses
- Step 3: File the Biennial Report
- Step 4: Request a Certificate of Good Standing
Step 1: Register for the District of Columbia State Taxes
Most LLCs in the District of Columbia are required to pay an unincorporated franchise tax. See fees below:
- Less than $1 million in gross receipts = $250
- More than $1 million in gross receipts = $1,000
There are a few exemptions to the franchise tax:
- Any LLC with less than $12,000 in annual gross receipts
- Any LLC where 80% of gross receipts comes from personal services rendered by the member(s) and capital is not a material income-producing factor
- Any trade/business/professional organization that cannot be incorporated by law, ethics, or custom
State Income Taxes
DC’s state income tax rates are listed in the table below:
Corporate Tax Information
You can also choose to have your LLC taxed as a corporation; if so, you will be responsible for paying the 8.25% corporate franchise tax rate on your business’s net income.
Additional Tax Information
Other taxes your LLC may need to pay:
- Sales and Use Tax at 6%
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in the District of Columbia can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File a Biennial Report
All businesses formed in the District of Columbia are required to file a biennial report with the Superintendent of Corporations.
What is a biennial report?
A biennial report, also known as a periodic or annual report, is a legal form that is filed with the Superintendent of Corporations to keep your business’s information current with the city.
What kind of information is in the biennial report?
The information requested in the biennial report is similar to what is in the Articles of Organization:
- The name and address of the business
- The name and address of the registered agent
- The business’s EIN
Is the biennial report part of public record?
The biennial report filed on behalf of your LLC is a matter of public record.
When is the first biennial report due?
The initial biennial report for your LLC is due the following year after official formation on April 1. Subsequent reports will be due every two years.
Fees and Due Date
Due Date: April 1
Frequency: Every two years
Implications of Late Filings: $100 late fee
Swyft Filings helps you stay compliant by providing stress-free solutions. File your biennial report with us today.
Step 4: Request a Certificate of Good Standing
After your the District of Columbia LLC has been formed and ready to go, the last step is securing a Certificate of Good Standing.
What is a Certificate of Good Standing?
The Certificate of Good Standing is an official notification that confirms your business is properly formed and is in compliance with all mandated regulations.
Who issues the Certificate of Good Standing?
The Certificate of Good Standing is issued by the Department of Consumer and Regulatory Affairs (DCRA).
When can I request a Certificate of Good Standing for my business?
You can request a Certificate of Good Standing from the DCRA after your LLC is officially formed.
Why do I need a Certificate of Good Standing?
Having a Certificate of Good Standing adds a measure of credibility to your new LLC for banks, financial institutions, and other businesses.
Does the Certificate of Good Standing have an expiration date?
The Certificate of Good Standing does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Good Standing for your District of Columbia LLC. Click here for more information.