Starting LLC in Washington DC: Peculiarities & Detailed Manual
Want to start an LLC in Washington DC? It is a profitable decision for a business, as the state has waived corporate tax in favor of gross corporate income tax. So you’ve decided to start an LLC? Not sure how to initiate the process? To start an LLC in Washington DC, you need to get ready for several stages.
We’ve prepared a guide for you with just six steps to form your LLC and to get success! You can also refer to the virtual LLC formation service.
Note: ZenBusiness is the best service to file the LLC. You’ll surely appreciate reasonable prices, company values, and other peculiarities.
An Washington DC LLC: The Notion & Essence
Many Washington DC business owners choose to start an LLC. So, unlike a corporation, they can take advantage of flexible management. We’re talking about the protection of personal assets that sole proprietorships and general partnerships lack.
The state of Washington DC puts forward simplified requirements for registration and maintenance of LLC and invites business owners to choose the type of taxation. Do you still have doubts about the LLC?
6 Stages to Form an LLC Correctly
Stage №1: Choose Your LLC Name
The LLC name is a significant aspect, as it is the name of your company that makes the first and strongest impression on the audience of your potential customers! The name must be different from existing company names and must meet Washington DC’s regulatory requirements. Now get started with the following aspects.
LLC name in terms of jurisdiction
The State of Washington DC obliges business owners to include the abbreviation DDS or the phrase – limited liability company in the name. Please note that the terms corporation or registered are prohibited. In addition, you cannot use the designations of other forms of business: banks or law firms.
Take care of the explanations
You must include in the title an explanation of the nature of your business. For example, if you are engaged in the computers’ repairing, write in the LLC title – computer wizard. If you have any values or principles, also indicate this. For example, if you are farming, use the term natural, nitrate-free, etc.
So, you need to get a little creative and fully comply with Washington DC’s legal requirements.
Stage №2: Hire a Registered Agent
A registered agent is called a statutory agent in Washington DC and will help you to start an LLC. The agent can be an Washington DC resident, natural or legal attorney responsible for sending and receiving legal documentation on behalf of the future company. A company representative can also be an employee of the company or its owner. The State of Washington DC notifies:
The registered agent acts as a representative of an LLC. Their duties are to handle all notices and lawsuits and send correspondence to the company’s registered address.
A registered agent guarantees an excellent reputation for your Washington DC LLC. Also, if your business gets worse, Washington DC can take legal action against it without notifying you. The registered agent will always receive appropriate notification and will be able to take timely measures to protect your interests as an attorney.
You should apply to the online service to get started a business in compliance with all regulations and requirements. So, you will have the opportunity to filter spam and protect your personal and contact information. If you use the ZenBusiness and Northwest Registered Agent to form an LLC, you will receive the free services of a registered agent.
Stage №3: Applying for Registration
To register a business in Washington DC, you must file the Articles of Association with the Washington DC State Secretariat. If you are anxious about your LLC formation, you can submit your documents for pre-processing, which will allow the Secretary of State’s office to advise you of the eligibility. It can be a good option if you get started for the first time in an LLC without consulting an attorney. Be sure to provide:
- The desired name of your business.
- Personal and contact details of the registered agent.
- Business management form.
- Personal and contact details of the manager of your company.
- Signature of the applicant and registered agent.
- Date of application submission.
If you are willing to submit forms online, the function is available here. If you prefer sending them per post, print off the pdf.
The fee to ground LLC: Washington DC upholds a $220 fee for an LLC establishment.
Processing Time: The district may need over 15 days to handle your mailed paperwork and send it back. With online filings, you’ll receive finalized papers within 15 days. It’s possible to accelerate the procession by paying an expediting fee. With a $30 payment, you’ll receive finalized forms in 3 days. And with $1,000, the documents will be processed and forwarded in one day. Keep in mind that the procession won’t begin until all your forms have been duly filled.
Stage №4: The Operating Agreement Background
While an operating agreement is not binding in Washington DC, creating one could significantly improve the company’s climate. An operating agreement is a document that describes the structure of a project, the way it works, the rights and obligations of each partner.
This document reflects the consistency of partners and thereby reduces the chance of controversy and disputes. Therefore, it is significant that all members of the future LLC carefully read this document before joining the company.
An attorney can help draw up an operating agreement and determine the way income and liabilities will be distributed among the owners of your LLC. You will find more information about the operating agreement here. Prepare to enter the following information:
- Names of all participants.
- The rights and obligations of each of the listed participants.
- Description of procedures for voting or resolving differences between members.
- Regulations on the financial share of participation of LLC members.
- Description of the way you’re going to manage the LLC.
So, do not neglect this stage of LLC formation. It largely guarantees your safety and the observance of your rights by all members of the business project.
Stage №5: Tax Compliance
To conduct a business that you want to register as an LLC successfully, you need to comply with several tax requirements at various levels.
Requirements of Federal Significance
Does your LLC involve multiple owners? Then you need to take care of the EIN! The EIN, or Employer Identification Number, is a unique nine-digit number assigned by the IRS to US corporations. This number must be obtained by all business owners under whose leadership the hired employees work. A business owner can obtain an EIN from the IRS in person or by mail.
Your state’s cess requirements
Washington DC determines the taxes for LLC in consideration of the legal type of a business entity. If you own a flow-through entity – as an individual proprietor or in partnership – personal tax returns define the income taxes.
When your LLC is taxed as a corporation, you must cover the district’s Corporate Franchise Tax. It ranges around 8.25%. The comprehensive guide regarding the tax in question is available here.
LLCs dealing with retail sales are obliged to cover the district’s sales tax. It currently amounts to 6%. You’ll access extensive information relevant to the tax here.
LLCs with the staff must cover fees related to the labor force. For one, entrepreneurs must arrange withholding taxes. You must net off a portion of your staff income and send the fee to the district. Further details on withholding taxes in Washington DC are offered here.
Additionally, entrepreneurs in Washington DC must fund unemployment insurance. While it’s not a tax per se, yet LLCs must make regular payments, so we mention it here. Further information on the fund is provided by the Department of Employment Services.
Besides general fees, Washington DC obliges some LLC to cover industry-specific taxes. For instance, additional taxes apply to LLCs dealing with street food, sports wagering, and others. Here, you’ll find all necessary information as well as current forms for filing online.
Local Tax Business Demands
The district upholds no local obligations on taxation.
Stage №6: Getting Business Licenses & Permits
The District of Columbia obliges every business entity to obtain a Basic Business License to operate a business there. DC Business Center lists all district requirements and provides means to submit forms online.
Washington DC maintains specific permits demanded by the federal government. These permits apply to LLC operating within federally-regulated industries like maritime transportation, aviation, logistics, and others. The full list of industries upholding specific licenses is provided by the Small Business Association.
Naturally, as the district upholds specific taxation, it requires obtaining specific licensure. Washington DC provides a wide range of permits relevant to LLCs operating in definite industries, so you’ll acquire the one reflecting your business. We advise you to check the database of businesses licensure offered by the district here.
Other Stages for Business Owners After LLC Registration
After completing the six mandatory steps towards starting an LLC, you need to take care of the following.
Opening a business bank account
Separate your personal and LLC accounts. Thus, you will be sure of the safety of your personal and financial data. Besides, you won’t have any hassle when filing your charge returns. Your EIN will help you open a business account quickly, no matter what you choose a bank or credit union.
Business Insurance
All owners of companies/corporations, regardless of their form of management that attracts employees, must go through the compensation insurance procedure. All basic and detailed information is available with the Washington DC Bureau of Workers’ Compensation.
This policy aims to protect the rights of workers who are injured at work and unable to work. It will not be superfluous to get a civil liability insurance policy, as well as pay attention to some other types of insurance.
Income reporting
Every LLC has to report on its profits, so the district can fairly calculate the taxes. You must submit the form, even if your company suffers losses. Here, the District of Columbia provides all resources on understanding income reporting as well as needed forms.
Referring to the services of a qualified accountant
Washington DC obliges every LLC to present a biennial report. You can submit the form per Internet here. The submission is fee-based; the fee currently amounts to $300. Your report is a means to keep the district informed on any vital data relevant to your LLC, as well as the changes it has undergone over the reporting period.