How to Start a Business in Washington, DC
How do you start a business in Washington, DC? Easy. Start selling a product or service to Washingtonians. Boom, you have a sole proprietorship in DC. But to take your business to the next level—protect your assets, attract investors, and boost profits—all while staying on the right side of the law, you’ll need to follow a few more steps. In this meticulous guide, we’ll tell you how to start a business in the nation’s capital.
Ready to Start a Business in DC?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get DC Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
File the DC Biennial Report
Build Your Business Website
Apply for Trademarks
1. Pick a Business Structure
Most businesses in DC are sole proprietorships. This is the easiest type of business to form because you can simply start selling your product and don’t need to register with the Department of Licensing and Consumer Protection (DLCP). However, operating as a sole proprietor has some disadvantages—namely that if your business gets sued or goes into debt, there’s no protection for your personal assets. Creditors could go after your personal savings, your car, or your house.
If you want to protect yourself from liability, you’ll need to create a legally separate business entity—which means that in the eyes of the law, your business is separate from you and has separate liability. The most common types of business entities with limited liability protection are LLCs and corporations.
Washington, DC Limited Liability Company (LLC)
LLCs are appealing to small business owners because they have the same liability protection as corporations but require a lot less paperwork. LLCs are flexible in how they can be structured and managed, and they have multiple tax options. To organize an LLC in DC, you’ll need to file Articles of Organization with the DLCP.
Washington, DC Corporation
Corporations have been around a lot longer than LLCs, and their rules and structure are a lot more set in stone. Shareholders need to appoint a board, and the board elects officers who run the corporation. The upside is that because corporations are so rigidly organized, investors and donors are more willing to trust them. To start a DC corporation, you must file Articles of Incorporation with the DLCP.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about an Washington, DC nonprofit?
You can start a nonprofit in Washington, DC if the goal of your organization is to create a social benefit rather than make a profit. To start a nonprofit in DC, you’ll file Articles of Incorporation for a Domestic Nonprofit Corporation with the DLCP.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Choosing a business name is a big decision. You need to make sure your business name is available in DC and meets the legal requirements. If you have a sole proprietorship, you’re stuck using your own name as your business name unless you file a DBA.
- Include the proper identifier, such as “corp.” or “incorporated” for corporations or “LLC” or “limited company” for a limited liability company.
- Be unique among business names in DC.
- Not contain words reserved for financial institutions, such as “bank,” or “insurance,” without the approval of the Mayor.
- Not be overly similar to the name of a government agency.
Have a business name in mind? Create an Access DC Account and find out if it’s available.
Can I reserve a business name in Washington, DC?
Yes. If you want to make sure your business name is available, you can file an Application for Name Reservation with the DLCP to reserve your business name for 60 days. Reserving a business name in DC costs $50.
What is a DBA?
A DBA is a name used by a business that is not the business’s legal name.
If you own an LLC or corporation, your legal business name is the one written on your formation documents. If you’re a sole proprietor, your legal business name is your first and last name. Either way, if you want to call your business something else, you’ll need a DBA. In Washington, DC, a DBA is called a trade name.
To register a trade name in DC, you can submit a Trade Name Registration form to the DLCP by mail or in person, or you can file online via the DLCP website. The filing fee is $55.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
Skip ahead to learn more about trademarks.
3. File Formation Paperwork
Sole proprietors and general partnerships don’t need to file business formation paperwork. (They will, however, need a DC business license.)
If you’re starting an LLC or corporation, you’ll need to file paperwork with the DLCP. This step officially makes your business a separate legal entity.
- To start a Washington, DC LLC, file DC Articles of Organization.
- To form a DC corporation, file DC Articles of Incorporation.
No matter whether you’re starting an LLC or a corporation, you’ll need to appoint a DC registered agent on your formation documents who agrees to accept legal documents on your behalf. Once you’ve completed the form, you can submit it to the DLCP online, by mail, or in person.
Note: The information on these forms becomes part of the public record. This means that if you list your own address on the form, anyone will be able to access it online by searching for your business.
What is a registered agent?
A registered agent is someone appointed by a business to accept service of process and other legal notices on its behalf. According to DC Code § 29–104.02, all business entities that file with the DLCP must maintain a registered agent located in the District of Columbia. This means your registered agent must have a physical address in DC (no P.O. boxes allowed). You can be your own registered agent if you live in DC, but to do so, you’ll need to list your address on the public record and be available during business hours to accept legal mail in person.
How can I keep my information off the public record?
The best way to keep your personal information off the public record is to avoid sharing it on public documents whenever possible. To do this, you’ll need to hire a professional registered agent service that will let you list their business address on forms instead of yours. (What a coincidence—we do that!)
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the DLCP. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Washington, DC LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a DC LLC Operating Agreement template that you can use as a solid foundation.
Washington, DC Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Washington, DC (see DC Code § 29–302.06).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a DC Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about DC nonprofit bylaws.
5. Get DC Business Licenses
Most businesses in DC—including sole proprietors—will need a Basic Business License. Depending on your industry, you may need additional licenses as well. The DLCP Start a Business Wizard can help you find out which licenses and permits your business will need.
DC Basic Business License
Washington, DC issues a Basic Business License (BBL) that many businesses need to operate legally in DC—including restaurants, retail stores, contractors, and rental properties, among others. Businesses that don’t—such as accounting firms, funeral homes, and real estate appraisers—need a more specialized license from the board that regulates their industry.
A subset of the Basic Business License is the General Business License, which is for businesses that don’t fall under one of DC’s specific licensing categories. Retail businesses, consultants, and tutors, among others, need a General Business License.
Professional Business Licenses
If your profession requires specialized training, you’re likely to need a professional business license. For example, architects, boxing referees, and even tour guides need to obtain a professional license to do business in DC. (Check out the DC Professional Licensing section of the DLCP website for the full list.)
Learn more about How to Get a Business License.
How do I get a DC Basic Business License?
You can apply for a BBL through the DLCP Business Center online, by mail, or in person. Here’s what you’ll need to apply:
- Certificate of Occupancy (if your business has a commercial location)
- or Home Occupation Permit (if you work from home)
- Employer Identification Number (EIN) or Social Security Number (SSN)
- Business contact information
- Registered agent information (for LLCs, corporations, and limited partnerships)
- Clean Hands Statement affirming that you don’t owe $100 or more to the DC Government
How much does it cost to get a DC business license?
The Basic Business License costs $70 plus $25 for each endorsement. The types of endorsements your business needs will depend on your business activity. You can use the DLCP Start a Business Wizard to see what endorsements your business needs. The General Business License costs $324.50 in total fees. If you’re not sure which license and endorsements you need and how much you will owe, you can contact the DC Business Licenses Division.
How do I get a professional license in DC?
You can apply for a professional license from the board that regulates your industry. For example, DC engineers must obtain their business license from the District of Columbia Board of Professional Engineers and Land Surveyors.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
If you plan to hire employees or independent contractors, you’ll need to set up payroll. Here are the steps you’ll need to take:
- get an EIN
- register for DC Employer Tax Account Number
- determine whether you’re hiring employees or independent contractors
- prepare the forms your employees will fill out
- choose a payroll service or software
- decide on a payroll schedule
If you’re not a bookkeeping expert, managing payroll can be overwhelming, so most businesses use a payroll software or a professional payroll service.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I register for a DC Employer Tax Account Number?
To receive an Employer Tax Account Number, you first need to register with DC’s Unemployment Compensation Program by submitting Form FR-500, Combined Business Tax Registration Application, to the Office of Tax and Revenue. You can find this form on the DC Chief Financial Officer website or pick it up in person. After you register, the Department of Employment Services will assign your business a tax account number.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
You might be wondering whether you really need business insurance. Maybe, maybe not. You’ll need to ask yourself what risks your business is likely to face. Is there a chance you might get sued? Does your business own expensive property? Certain types of insurance are required by law in Washington, DC, but most business insurance is optional.
Here are the most common types of business insurance:
Workers’ Compensation Insurance
This one is required by law for DC businesses with employees—even if you only employ a single person. Workers’ comp insurance covers medical costs, lost wages, and other monetary benefits for workers who are injured or become ill on the job. Unlike some US jurisdictions, DC doesn’t have a government-sponsored workers’ comp insurance fund, so you will need to purchase this insurance through a private insurance company. Employers who fail to purchase workers’ compensation insurance can be fined between $1,000 and $10,000, and can even face jail time.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers' compensation insurance in DC?
While businesses with employees are required to purchase workers’ compensation insurance, they’re not required to cover themselves on the plan. However, personal health insurance plans won’t always cover work-related injuries, so it might be a good idea to purchase workers’ compensation insurance for yourself anyway.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
As Ben Franklin once said, “In this world, nothing can be said to be certain, except death and taxes.” And that holds true for DC. The District has a corporate income tax, known as the corporate franchise tax, that businesses taxed as C-corps and S-corps need to pay. But don’t forget you’ll need to pay federal taxes as well.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns and are taxed at the 15.3% federal self-employment tax rate. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable DC corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities at the federal level. However, in Washington, DC, S-Corps need to pay DC corporate franchise tax, just like C-Corps. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes. (In DC, there’s a flat corporate tax rate of 8.25%.) C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Washington, DC Taxes
Washington, DC has an 8.25% corporate net income tax called the corporate franchise tax, which both C-Corporations and S-Corporations must pay. Corporations with gross receipts of $1 million or less pay a minimum tax of $250, and corporations with gross receipts over $1 million pay a minimum tax of $1,000.
DC also has a sales tax of 6%. However, certain products incur a higher sales tax, such as soft drinks (8%), tickets to baseball games (10.25%), and hotels (14.95%).
9. File the District of Columbia Biennial Report
LLCs, corporations, and limited partnerships in DC are all required to file a DC Biennial Report within the first year of registering their business, and then every two years afterward. The deadline is April 1st. So if you formed your business in December 2021, you’d need to file your first report by April 1st 2022 and your next one by April 1st, 2024.
The biennial report asks for basic information about your business, including your registered agent information and the names and addresses of the members/managers or officers/directors/shareholders. The filing fee is $300 for for-profit businesses and $80 for nonprofits. You can file online, by mail, or in person.
Read more about How to File a DC Biennial Report.
What if I don’t file a DC biennial report?
If you don’t file your biennial report on time, you’ll be charged a late fee of $100 ($80 for nonprofits). If you still don’t file, your business will lose its good standing, and the District could eventually stop you from doing business altogether.
10. Build Your Business Website
If you want Washingtonians to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks. You can apply to register your trademark federally with the U.S. Patent and Trademark Office (USPTO).
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
Can I register a trademark in just DC?
No. While all 50 US states allow you to register a trademark at the state level, in Washington, DC you can only register a trademark at the federal level.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.