Step 1: Choose a Name for Your DC Business
Choosing a business name is important, you want to make it easier for your customers to remember it, here are some tips:
- Avoid hard-to-spell names.
- Don’t pick a name that could be limiting as your business grows.
- Conduct a thorough Internet search.
- Get the .com domain name.
- Use a name that conveys some meaning.
- Conduct a trademark search.
After you’ve thought of a few business names, you should search them on the Washington DC Business Name Search page: https://corponline.dcra.dc.gov/Account.aspx/LogOn. You have to create a CorpOnline account in order to search for business names in the District.
How to find a good domain name:
Its hard sometimes to find an available domain name that matches or goes with your business. You can search at http://godaddy.com or other domain name companies, try to find a short domain, two words or three maximum, and make sure its easy to spell.
Step 2: Choose the Right Type of Business Entity
Next, you’ll need to decide the best type of legal structure for your Washington DC business.
The most common business structures are:
Happens when you operate your business as yourself. There is no separate legal entity created; the law treats you and your business as one person. You are responsible and personally liable for all business activities or wrongdoing.
The same thing as a Sole Proprietorship, but just with 2 or more people. Like a Sole Proprietorship, a Partnership doesn’t create a separate legal entity and the partners are responsible and personally liable for any business activity or wrongdoing.
A more complex legal structure that requires a board of directors, corporate officers, and shareholders. Corporations don’t usually work for most small business owners since they face double taxation. Corporations can be beneficial to companies that are looking to raise capital investment, take the company public, or have large healthcare expenses for their employees. The most common types of companies that form Corporations are high-growth technology and startup companies.
Unlike a Sole Proprietorship or a Partnership, a Corporation is a separate legal entity from its owners (called shareholders). It provides them with personal liability protection.
A legal entity that combines the benefits of a Corporation and a Sole Proprietorship/Partnership.
An LLC in Washington DC is a separate legal entity under the law. And like a Corporation, it provides personal liability protection for the owners. If the LLC is sued, the owner’s personal assets – like their home, cars, and bank accounts – are protected. And like a Sole Proprietorship/Partnership, an LLC has pass-through taxation (so there’s no double taxation).
A Washington DC LLC is the most popular option and a good choice for people who want to run a small business for two reasons:
- Personal liability protection (personal assets are kept safe)
- No double taxation
Unlike a Sole Proprietorship (and a Partnership), your Washington DC LLC’s assets are separate and distinct from your personal assets. In the event your LLC gets sued, your personal assets are protected.
And unlike a Corporation, your LLC is not subject to double taxation. Instead, your LLC’s profits will “pass-through” to your personal tax return and federal taxes are paid just once.
Step 3: Register Your Business with the DCRA
You may need to file business formation documents with the Department of Consumer & Regulatory Affairs (DCRA) in order to properly register your business in the District.
Regardless of what type of business structure you choose in DC though, all businesses must obtain a Certificate of Occupancy or a Home Occupation Permit as well as get a Basic Business License (BBL). These are discussed further below on this page.
Washington DC LLC:
The cost to form a Washington DC LLC is $220.
Form: DLC-1 (Articles of Organization)
Biennial Report: In order for a DC LLC to remain in good standing, it must file a Biennial Report every 2 years. The LLC Biennial Report fee is $300.
Washington DC Corporation:
For most people, the cost to form a Washington DC Corporation is $220.
Form: DBU-1 (Articles of Incorporation)
The $220 is the “starting” filing fee amount if your Corporation’s authorized capital is valued at $100,000 or less. Filing fees increase based on the value of the authorized capital:
- authorized capital $100,000 or less = $220 filing fee
- authorized capital $100,001 – $500,000 = $550 filing fee
- authorized capital $500,001 – $1,000,000 = $1,100 filing fee
- authorized capital $1,000,001 or more = $1,650 filing fee
Authorized capital: Authorized capital is simply the total value of all shares that your Corporation issues. To calculate: multiply the total number of shares (all classes) by the par value per share.
Biennial Report: In order for a DC Corporation to remain in good standing, it must file a Biennial Report every 2 years. The Corporation Biennial Report fee is $300.
Washington DC Sole Proprietorship or Partnership:
Unlike a Washington DC LLC and a Washington DC Corporation, if you choose to operate your business as a Sole Proprietorship (1 owner) or a Partnership (2 or more owners), you don’t have to file any “formation” documents with the DCRA.
However, if you would like for your Sole Proprietorship or Partnership to operate and do business under a name besides the first and last name of the owner(s), you’ll need to register a Trade Name in the District, also known as a DBA/”Doing Business As”.
Washington DC Trade Name:
Form: TN-1 (Trade Name Registration Form)
Fee: The cost to register a Trade Name in DC is $55.
Renewal: Trade Names must be renewed every 2 years by April 1st. The form is called TN-2 (Trade Name Renewal Form) and the cost is $55.
Step 4: Get an EIN Number
An EIN Number is also known as an Employer Identification Number (EIN) or Federal Tax ID Number (FEIN). It is used by the IRS to identify your Washington DC business for tax purposes.
Think of your EIN Number is your tax identification number for your Washington DC business.
The EIN Number for your Washington DC business will be used to open a bank account, file taxes, get financing, and handle employee payroll (if applicable).
Apply for EIN number online:
Note: Make sure your LLC or Corporation is approved before applying for an EIN Number.
Step 5: Open a Business Bank Account
A business bank account (and a business debit/credit card) for your Washington DC business is important because:
- it keeps your personal assets separate from your business assets
- accounting and finances will be easier to manage
Keeping the assets of your Washington DC business separate from your personal assets will make accounting and documenting expenses a lot easier as well.
Step 6: Register with the Office of Tax & Revenue (OTR)
After your Washington DC business is formed, you’re required to register it with the DC Office of Tax & Revenue (OTR).
Filing method:• Done online, via the OTR’s online filing portal called MyTax.DC.gov: https://mytax.dc.gov/_/• Click “Register a New Business: Form FR-500” on the MyTax.DC.gov’s home page, or try this direct link: https://mytax.dc.gov/?link=FR500
Fee: Registering your Washington DC business for tax purposes is free.
By going through the FR-500, you will be answering a number of questions about your DC business. Based on your answers, the online system will register your business for its applicable taxes and let you know when they need to be filed.
Approval: Within about 1 week the OTR will mail you a Notice of Business Tax Registration as verification and approval.
Step 7: Certificate of Occupancy or Home Occupation Permit
All businesses in Washington DC must get either a Certificate of Occupancy or a Home Occupation Permit in order to legally operate. If not, the District imposes fines and penalties.
Certificate of Occupancy (C of O): Used for commercial office space. If you own a commercial building or are developing a new one, you will need to apply for a new Certificate of Occupancy. If you plan to rent office space in DC, you likely don’t need to apply for a new Certificate of Occupancy. Instead, speak with the owner or management company and make sure their Certificate of Occupancy allows for your type of business to operate within its building. You’ll want a copy of their Certificate of Occupancy and/or their Certificate of Occupancy Number.
Home Occupation Permit (HOP): Used for residential space. You will need a Home Occupation Permit if you’re going to run your business from your home.
Walk-in filing: Both a Certificate of Occupancy and Home Occupation Permit can be obtained via a walk-in filing at:
DC Permit Center1100 4th Street SW2nd FloorWashington, DC 20024
Parking: There is a parking garage next to the CVS if you can’t find street parking.
Certificate of Occupancy Application:Certificate of Occupancy (C of O) Application
Certificate of Occupancy Fee: There is an application fee ($36.30) and an issuance fee. Your final issuance fee will depend on the square footage of the building. It usually starts around $40 to $50. You won’t have to pay this fee if you’re renting office/commercial space and the building already has a Certificate of Occupancy.
Home Occupation Permit Application:DCRA: Home Occupation Permit Application
Home Occupation Permit Fee: There is an application fee of $36.30 and an issuance fee of $36.30, for a total of $72.60.
Step 8: Get a Basic Business License
In addition to a Certificate of Occupancy or Home Occupation Permit, all businesses in Washington DC must also apply for a Basic Business License (BBL) in order to legally operate. If not, your business will be illegally operating without a license and the District will impose fines and penalties.
Before you can get a Basic Business License (BBL) for your business, you must:
- have your business entity approval documents from the DCRA (LLCs and Corporations)
- get an EIN Number from the IRS
- register your business with the Office of Tax & Revenue
- receive a Certificate of Occupancy or Home Occupation Permit
Then you can apply for your Basic Business License at the same location where you got your Certificate of Occupancy or Home Occupation Permit:
Business Licensing Center1100 4th Street SW2nd FloorWashington, DC 20024
Basic Business License Application: https://dcra.dc.gov/publication/bbl-application-fillable
You can also apply for a BBL online at My DC Business Center: https://mybusiness.dc.gov/#/register
Clean Hands Self-Certification: You’ll also need to sign a Clean Hands Self-Certification letter stating that you don’t owe the Office of Tax & Revenue more than $100:https://eservices.dcra.dc.gov/DocumentManagementSystem/Home/retrieve?id=BBL%20Clean%20Hands%20Self-Certification%20(Fillable).pdf
Fee: Basic Business License fees start around $200 and go up to $500 (and in some cases up to $1,000). The fees will depend on your business’ Endorsement Category. For example, a BBL for operating a rental property is $190 for 2 years and a BBL for the “general business” category is $325 for 2 years.
BBL Renewals: Your Basic Business License will be good for 2 years before it expires. You must renew your Basic Business License every 2 years and pay the renewal fee.