How to File an LLC in Washington D.C.

The District of Columbia is a rich and inspiring place to build a new business. Do you know what type of business you want to start and the filing required? 

This article will show entrepreneurs how to start a Washington, D.C., LLC. While your small business is still small, the tried-and-true LLC business structure offers the limited liability of a C Corp combined with the tax advantages of an S Corp, with unrivaled flexibility in how you run your business. 

Key Takeaways

• Limited liability companies enjoy pass-through taxation and limited liability, a powerful combination that fits most new businesses perfectly.

• LLC owners must choose a unique name in the District of Columbia.

• It costs $99 to start an LLC in Washington D.C.

• Once incorporated, LLCs must file a two-year report and pay relevant state tax. The filing fee for the report is $300, with a late fee of $100.

What Is an LLC Formation?

The limited liability company (LLC) is a hybrid business structure. It’s great for small businesses because it allows them to benefit from certain advantages of a giant corporation without surrendering the freedoms and efficiencies of a smaller one.

LLCs have the following attributes:

• Liability protection: This is what you don’t get as a sole proprietorship, and it’s the main reason many businesses incorporate for the first time. 

  • As a sole proprietor, there’s no separation between your personal assets and your business’s. In the event of a lawsuit against your company, this can be highly risky—you could lose your house, savings, or other assets to settle a legal dispute.

  • With an LLC, there’s a legal separation between your personal finances and your business’s. As long as you operate within the law, the most you put at risk is your initial investment in the LLC.

  • Before you created your LLC, the only way to have liability protection was through a C corporation, which is much more expensive and time-consuming to maintain.

• Pass-through taxation: For tax purposes, LLCs are considered “pass-through” entities, meaning that its members pay Federal income tax for the corporation on their personal tax returns.

  • This provides a significant tax advantage in many situations over a C corp, which is hit with “double taxation.” First, it pays its own income tax at the entity level; then, the shareholders pay income taxes on their earnings.

  • Members of an LLC bypass this corporate tax and take all of their LLC earnings as self-employment income, similar to a sole proprietorship.

  • C corps can sometimes form an S corp to benefit from pass-through taxation, but this comes with significant limitations, and most often, an LLC does the job better.

  • Keep in mind: not all taxes pass through. Entities must pay relevant state-level taxes, such as sales tax, to the District of Columbia.

• Flexible management: Unlike a C corp, which requires you to maintain a board of directors, hold annual meetings, and follow more strict compliance and governance regulations, an LLC can run itself in whatever way it chooses. 

Next, we’ll show you the entire LLC formation process with the Washington D.C. Secretary of State, complete with details on filing fees and other state fees and requirements.

Step-By-Step Guide to Starting Your District of Columbia LLC

Here we go through the steps in starting your LLC, reviewing the process step-by-step. The cost of rejection is high—you won’t get your $99 filing fee back if you make a mistake. So you’ll want to be ready to get your filing right the first time. 

Step 1: Choose a Business Name for Your Washington DC LLC

The business name for your LLC needs to satisfy legal requirements in the District of Columbia and serve as a compelling name for your enterprise. Let’s go over what to consider in each department:

Selecting an Approved Name for Your Washington D.C. LLC

To be approved, you must choose a unique LLC name with one of the following designations or abbreviations:[1]

• Limited liability company

• Limited company

• L.L.C.

• LLC

• L.C.

• LC

There are a few other rules to follow:[2]

• The business name should differ substantially from any other registered or reserved name in the District of Columbia. The corporate signifier (e.g., LLC, incorporated, LLP) does not count in determining whether a name is different.

• “Bank,” “credit union,” “insurance,” and similar words are prohibited.

• It is illegal to impersonate a government agency with your name and to “mislead the public or cause confusion.”

As you brainstorm names, search the CorpOnline database to see if there’s any conflict with existing businesses. Swyft Filings has a name search tool you can also use without creating a CorpOnline account. 

Finding the Best LLC Name For Your Business

There are a few more things you will want to keep in mind when choosing your LLC name—beyond whether or not the District of Columbia will approve it.

• Check for domain names. Can you build a website and social media following from your business name? Every entrepreneur has to think about marketing, and no conclusive marketing plan leaves out the internet. 

• Consider trade names. Also called a “doing business as” or DBA, a trade name lets you operate under a separate name from your official name. This allows you to drop the “LLC” or other signifiers from your name or let you run multiple brands under one company.

• Register a trademark if you want to be the only one that uses your name. Your business name does not provide you with legal protection from copycats and imitators. The only way to protect yourself from that is to register trademarks.

If your perfect LLC name is available and you want to lock it down before you file, send a name reservation form to the District of Columbia Corporations Division with a filing fee of $50.

Step 2: Fill Out District of Columbia Articles of Organization

This step is the most important. Your Articles of Organization is the official filing document you submit to the District of Columbia Corporations Division that makes you a real company. You’ll want to nail this one—the non-refundable filing fee is $99.

Which Agency Handles My Articles of Organization?

Here’s what you’ll need to do to file articles of organization for your Washington DC LLC:[4] You can file online with CorpOnline. You’ll have to make an account with Access DC. You can fill out this form, complete the document, mail it, or present it in person.

1. State the name of your business entity. Remember the LLC designation you’ve chosen.

2. State the principal office address of your business. This should be a street address.

3. List the name and DC address of your registered agent. We cover it next if you’re unsure what a registered agent is. In short, it’s where legal documents intended for your business will be sent.

4. State that the LLC has at least one member.

5. Choose the effective date of the LLC Articles of Organization. You can’t go further than 90 days in the future, and your company can’t exist retroactively.

6. List the names, residential, and business addresses of all the members and managers of the company. These are:

   1. People who own, directly or indirectly, at least 10 percent of the “distributional interest” of the company. This means they have a right to get paid at least 10 percent of the company’s total profits.

   2. People empowered to manage the company’s day-to-day operations should also be listed.

   3. If these designations are unclear, a written operating agreement will help clarify things.

7. Finally, the company organizer will sign the articles with their name and address.

After you file, expect approval or rejection within 15 business days.

Should You File Yourself?

The LLC Articles of Organization is a sensitive document. To make sure things go smoothly, so you only have to spend that $99 filing fee once; it may benefit your business to hire a professional service to take care of the paperwork for you. 

Swyft Filings has an LLC formation service that will take the entire process off your hands, so you can focus on the vital work of growing your business.

After Your LLC Formation is Complete

Now that you’ve filed a business into existence, you have these responsibilities to manage to keep it in good standing:

• Biennial report: Every two years before April 1st, you will owe a biennial report that you can file online. The filing fee is a whopping $300, and the late fee is an extra $100. This report keeps the information you provide in your LLC articles of organization up to date.

• Sales tax and other state taxes and fees: Although DC isn’t a “state,” this is an easy way to think about it. Ensure you’re registered with the D.C. Office of Tax and Revenue and pay franchise tax and other license fees as they arise.

Foreign LLCs

If you already have a business in another state and are expanding into the District of Columbia, don’t file Articles of Organization for a brand-new LLC. Instead, file a foreign LLC registration statement with a filing fee of $220.

Step 3: Hire a Washington D.C. Registered Agent

Your Washington D.C. registered agent receives legal documents on your behalf in the event of a lawsuit, subpoena, or any other correspondence with a court of law in the course of the lifetime of your business. Your registered agent must have a street address in Washington DC—no P.O. boxes allowed—and keep regular business hours.

How to Choose Your Registered Agent

The best way to think about what you need in a registered agent is to ask yourself this question:

• If my company ever gets sued, where and to whom do I want court officials to deliver a service of process?

You are at liberty to be your own registered agent. If you’re like most business owners, you’d want to avoid being served during a business meeting or while your customers are trying to access your service. 

That said, you’ll need a trusted registered agent to let you know ASAP if any legal documents need your attention.

We recommend an affordable registered agent service like ours from Swyft Filings. Our business address in Washington D.C. will be available if the moment should ever come, and you’ll have instant access to documents online, securely.

Step 4: Create an LLC Operating Agreement

An operating agreement lays out the nuts and bolts of how your LLC will run. This is critical because if you have nothing in writing, there will be no accountability or recourse if one of your partnerships goes downhill. In addition, without an explicit LLC operating agreement for your business, your limited liability (“corporate veil”) could be compromised. 

As you set out to form your LLC operating agreement—which Swyft Filings can help you with—consider these templates for an LLC’s organizational structure:

• You would do a single-member LLC to keep your structure as close to a sole proprietorship as possible. You are the sole owner and business member and run the show.

• A member-managed LLC is run by its business owners, called “members” in LLC parlance. An LLC operating agreement for a member-managed multi-member LLC would detail how management responsibilities and ownership (and therefore compensation) are distributed among these members. This is very important for the smooth operation of the business entity.

• A manager-managed LLC is similar to a corporation whose owners do not often operate. Under this structure, members furnish the capital and control the business, but they’ve hired managers to carry out the daily operations. An operating agreement would lay out manager responsibilities and hiring criteria in this case.

Corporations are governed by a document signed by all shareholders called bylaws.

Step 5: File for an Employer Identification Number

You need an Employer Identification Number (EIN) for your new Washington D.C. business like a new baby needs a social security number—that is, immediately and for the rest of its life. 

The Internal Revenue Service (IRS) issues your EIN, but paying Federal tax isn’t the only time you’ll need it. Without an EIN, you can’t register to pay D.C. franchise or other LLC tax or acquire essential business licenses. You will also need an EIN to apply for business bank accounts or credit cards.

Let Us Handle Your LLC Paperwork

The District of Columbia LLC filing process is involved and risky—if entrepreneurs miss a detail during a step in the process, their $99 filing fee could be wasted, not to mention two weeks as an official business they’ll never get back. 

Keep your focus on what really matters—making your small business the best it can be—and let us take care of the forms and government correspondence. Swyft Filings’ LLC formation service is a secure, fast, and affordable way to set up your Washington D.C. LLC.

FAQs:

How much does it cost to set up an LLC in Washington D.C.?

The filing fee for Washington DC LLC Articles of Organization is $99. After that, you’ll owe a biennial report with a $300 filing fee. It costs $220 to register a foreign LLC.

How is an LLC taxed in Washington D.C.?

LLCs are taxed as pass-through entities. This means their corporate income tax passes through to their members’ personal income tax returns. However, DC has a franchise tax that LLCs must pay.

What are the benefits of a District of Columbia LLC?

LLCs allow their members to secure their personal assets with liability protection while maintaining the freedom and flexibility of a sole proprietorship or partnership.

How do you dissolve an LLC in the District of Columbia?

File Articles of Dissolution, pay your outstanding taxes, and follow the dissolution procedure in your operating agreement.

Bibliography:

1. Council of the District of Columbia. “§ 29–103.02. Name requirements for certain types of entities..” Accessed April 18, 2023.

2. Council of the District of Columbia. “§ 29–103.01. Permitted names..” Accessed April 18, 2023.

3. The District’s Newest Agencies. “Transition Timeline.” Accessed April 18, 2023.

4. DC Department of Licensing and Consumer Protection. “Instruction Sheet for Articles of Organization for Domestic Limited Liability Company (LLC).” Accessed April 18, 2023.