How to Establish a Sole Proprietorship in the District of Columbia
To establish a sole proprietorship in Washington D.C., here's everything you need to know.
In Washington, D.C., you can establish a sole proprietorship without filing any legal documents with the Department of Consumer and Regulatory Affairs. There are four simple steps you should take:
- Choose a business name.
- File a trade name with the Department of Consumer and Regulatory Affairs.
- Obtain licenses, permits, and zoning clearance.
- Obtain an Employer Identification Number.
1. Choose a Business Name
In Washington, D.C., a sole proprietor may use his or her own given name or may use an assumed name or trade name. It is always a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
- Washington, D.C. Department of Consumer and Regulatory Affairs: (register for an account and then conduct your search)
- U.S. Patent & Trademark Office: (Click on the TESS link under Tools.)
2. File a Trade Name
If you use a business name that is different from your legal name, Washington, D.C. requires you to register the trade name. You can file an application to register your trade name with the Department of Consumer and Regulatory Affairs (DCRA). It is also important to make your business name distinguishable from other registered business names. The filing fee is $55. You can download the Trade Name Certificate and mail it to the DCRA or you can file it online at the DCRA’s CorpOnline.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain a general business licenses as well as permits depending on its business activities. Most businesses in Washington, D.C. must obtain a general business license unless you are a licensed professional. A complete list of business licenses, registrations, and certifications is available from the DCRA’s guide to Starting a Business. Washington, D.C. provides an online registration tool by going to the DCRA Online Registration.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine digit number issued by the IRS for tax reporting purposes. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Sole proprietors without employees are not required to have an EIN because they can use their Social Security number to report taxes. Nevertheless, you may want to obtain one anyway for your business. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In Washington, D.C., businesses are required to register a combined business tax registration. You will need to use your EIN when registering your business through the Washington, D.C. Taxpayer Service Center.
If you have employees, you must report and pay employment taxes on a periodic basis. Once you have filed your tax registration with the Office of Tax and Revenue, the appropriate government agencies will contact you to provide more details about potential tax obligations for your business.
It is important to consider doing the following once you have established your sole proprietorship:
- Open a business bank account. Using your fictitious business name and EIN, you should set up a bank account to keep your business and personal finances separate.
- Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy may be the only form of financial protection against unforeseen events.
- Report and pay taxes. Depending on your specific business activities, you may be required to report such items as sales tax and use tax. You will need to register with the Washington D.C. Office of Tax and Revenue’s Online Taxpayer Service Center for more information on reporting and paying taxes.