Are you about starting a business in DC and want to form an LLC? If YES, here is the legal requirement to start an LLC in Washington DC and how much it cost. A Limited Liability Company (LLC) is a business structure that has a hybrid nature, which protects the personal liability (such as house, vehicles, and bank accounts) of the owner or owners in the event of bankruptcy or a lawsuit.
In the district of Columbia, you can use your LLC to either run a business or purchase assets such as real estate and vehicles. Here is a detailed guide on how you can form an LLC in the district of Columbia.
A Detailed Guide on How to Start an LLC in Washington DC
1. Naming your Columbia LLC: the very first step towards choosing a name for your Columbia LLC would be to first make sure that the name is available. You can do this by checking the District’s database to make sure your desired LLC name is available for use.
The name that your LLC can take must be unique and different from other registered names in the district.
LLC Designator: any name that you would choose for your LLC in the district of Columbia must be with a proper designator (suffix). Here are the only suffixes that are allowed:
- Limited Co.
- Limited Company
- Limited Liability Company
If you are confused on the suffix to go for, you can stick with “ LLC” , which is the most common. It is also the easiest to recognize.
The name you should choose for your LLC may not include a suffix that makes it sound like a different type of legal entity. For instance, Inc., Incorporated, Corp., Corporation, LP, LLP, Non Profit, Non Profit Corporation are not allowed if you intend to choose the Limited Liability structure.
A lot of people rush the LLC formation process and may find out that after the whole process they are unsatisfied with the name they choose and would like to change it. Even though this is possible, (you can file an amendment) however, the process can be quite complicated. You’ll need to change your LLC name with the IRS, the bank, and the Office of Tax & Revenue. As such it is advisable to choose the best name you can at first.
- Choose a registered agent in Columbia:
A district of Columbia registered agent is a person or business entity who will receive notices, legal mail and court documents on your behalf should your LLC be sued or involved in any court case. The district of Columbia mandates that any business that wants to be an LLC must list a Registered Agent in your LLC’s Articles of Organization.
Your registered agent must have a physical address that is in Columbia where the service of process and other documents can be received.
You can be your own LLC’s registered agent, get a friend or family member to serve in this capacity you can hire a commercial registered agent to fill the role. If you would like to keep your address off public records, then you should hire a Commercial Registered Agent.
3. File your articles of Organization: in order to file your articles of organization in the district of Columbia, you will have to pay a onetime fee of $220. You can either file it online or by mail. The online process of filing is however faster and the process is also a lot less complicated.
- Filing your LLC online: you must first create a CorpOnline account in order to file your LLC online with the DCRA. It will take about 5 business days to get approved if you file your business online. However, if you choose to file it via mail, it will take not less than 15 days to get approved.
If your business has been approved, the DCRA will email you two LLC approval documents. You can also download these documents in your CorpOnline account, under the “Approved Services” tab. You’ll receive your Articles of Organization (stamped and approved) as well as a Certificate of Organization, which will have the official District seal on it.
4. Create an operating agreement: an operating agreement is a written contract among the members of a LLC which specifies the ownership of the LLC and what percent is owned by who. The operating agreement also explicitly states how the LLC will be run, how profits will be shared and how the taxes will be paid among other things.
An LLC operating agreement helps to reinforce the fact that the company is a separate legal entity from its owner or owners. This helps maintain the personal asset protection provided by your LLC and is very beneficial to have if you ever end up in court.
An LLC operating agreement is an internal document and as such, it does not have to be sent to your registered agent, the Office of Tax & Revenue, the IRS, or any other government agency. You should just file the operating agreement with your other LLC business records and make sure that all the members of the LLC have a copy.
5. Apply for an EIN: An Employer Identification Number (EIN), also known as an EIN number, FEIN, Federal employer identification number or a deferral tax number can be gotten from the IRS after your District of Columbia LLC is approved by the DCRA. You can see it as your LLC’s social security number. It helps identify your LLC to the IRS for tax and filing purposes
You will need your EIN if you want to open an LLC bank account, register your LLC with the Office of Tax & Revenue, and process employee payroll (if applicable).
Getting an EIN is totally free of charge.
If you want to apply for an EIN you just have to do the following:
- If you have an SSN or ITIN, you can apply for an EIN online
- If you apply for an EIN online and you get an error message, you’ll need to apply for an EIN with Form SS-4 instead
- Tax Registration with the Office of Tax & Revenue: after your LLC has been approved and you have gotten your EIN number from the IRS, you will need to register your LLC for taxes with the office of Tax & Revenue (OTR). Just like the EIN, tax registration is free of charge. To register, you will have to file online through the OTR’s web portal, called MyTax.DC.gov
- Certificate of Occupancy or Home Occupation Permit: in order to operate in Columbia, all LLC’s must have a Certificate of Occupancy (C of O) or Home Occupation Permit (HOP) in order to operate.
You will need a certificate of occupancy if you intend to own or develop an office or commercial space. However, if you intend to rent an office space, then you may not need this because the space would already have a certificate of occupancy.
On the other hand, if you intend to work from home, you will need a Home Occupation Permit. It does not matter if the place you live is rented or bought, you will still need the permit. A home occupation permit and a certificate of occupancy can be obtained for just $73.
However, the cost for a certificate of occupancy may be more depending on the square footage of the building. To get either of these permit, you will have to apply in person at the Permit Center & Business Licensing Center.
8. Basic Business License: in addition to a certificate of occupancy or a home occupation permit, all LLCs in the district of Columbia still need to have a basic business license (BBL) in order to operate.
Before applying, you must have your LLC’s certificate of organization, your LLC’s EIN number, your Notice of Business Tax Registration letter, and your Certificate of Occupancy or Home Occupation Permit. All of the aforementioned will be needed in order to apply for a basic business license.
The cost of a basic business license is not fixed for all businesses, however, the average cost for a basic business license is about $200 to $500 for every 2 years. You can apply for basic business license online or in person.