LLC Biennial Report and Tax Filing Requirements in the District of Columbia

Many business owners start limited liability companies (LLCs) to take advantage of the business structure's many benefits. An LLC gives limited liability to its owners and has flexible management and tax structures. However, while an LLC has many advantages, it takes some effort to legally upkeep.

If you have a District of Columbia (Washington, D.C.) LLC, you'll need to file a biennial report with the state and pay applicable business and employer taxes. Let's look at the most important ongoing reporting and state tax filing requirements for Washington DC LLCs. (If you'd like information about other states' LLC requirements, check out our article on LLC tax and filing requirements.)

Washington, D.C. LLC Biennial Report

The District of Columbia requires you to file a biennial (two-year) report for your LLC with the DC Department of Licensing and Consumer Protection (DLCP). You can file your LLC's biennial report either:

• online through CorpOnline, or
• by mail or hand delivery using Form BRA-25.

The first biennial report is due April 1 of the calendar following the year in which you formed your LLC. Subsequent biennial reports are due on April 1 each second calendar year thereafter. For example, if you created your LLC in 2023, then your first report would be due on April 1, 2024. Subsequent reports would be due by April 1 in the years 2026, 2028, and so on.

As of 2024, the fee to file your biennial report is $300.

State Business Taxes in Washington, D.C.

Most LLCs are considered "pass-through tax entities" for income tax purposes. By default, multi-member LLCs are taxed as partnerships and single-member LLCs are taxed as disregarded entities. An LLC, as a pass-through entity, passes on the responsibility for paying taxes on its income to its members. In other words, the LLC doesn't pay taxes on its income. Instead, the LLC members pay taxes on their share of the LLC's income.

You'll file your individual and business tax returns with the Office of Tax and Revenue (OTR). You can register your business with the OTR to file returns and pay taxes through the OTR's online tax system, MyTax.DC.gov (MyTax DC).

Unincorporated Business Franchise Tax

Washington, D.C. imposes an unincorporated business franchise (UBF) tax on some LLCs. Generally speaking, the franchise tax applies to unincorporated businesses with gross receipts of more than $12,000 (as of 2024) from D.C. sources. Some businesses are exempt from this tax. Importantly, your LLC would be exempt from the UBF tax if:

• 80% of your LLC's gross income comes from personal services that you and other LLC members provide, and
• capital isn't a material income-producing factor (for example, there's no significant investment in inventory and machinery).

As a result, if your LLC mostly provides personal services (such as consulting, accounting, and the performing arts), then you might be exempt from paying the UBF tax. Other exemptions also apply. But if your LLC rents or leases real or tangible personal property, then you must pay the UBF tax.

The UBF tax is usually calculated at a flat rate of taxable net income. You can deduct a 30% salary allowance for owners and a $5,000 exemption to calculate your taxable net income. The UBF tax has two minimum taxes:

• a $250 minimum tax for businesses with D.C. gross receipts of $1 million or less, and
• a $1,000 minimum tax for businesses that have more than $1 million in gross receipts.

You must report and pay the UBF tax to the OTR using Form D-30. If your tax year matches the calendar year, the tax is due on April 15. You can file your return and pay the UBF Tax using MyTax DC.

Visit the D.C. business franchise tax rates webpage on the OTR website for more information. It can be difficult to determine whether the UBF tax applies to your business. If you have any questions, talk to a D.C. business attorney or tax professional.

LLCs Taxed as Corporations

While LLCs are typically taxed as partnerships by default, you can have your LLC taxed as a corporation for federal tax purposes. You make this corporate tax election by filing IRS Form 2553 with the IRS. If you elect to have your LLC taxed as a corporation a the federal level, your LLC will also be taxed as a corporation in Washington, D.C.

Washington, D.C. taxes corporation income via the corporate franchise tax. As of 2024, the corporate franchise tax in Washington, D.C. is a flat 8.25% rate of taxable net income. Like the UBF tax, there's a $250 minimum tax for corporations that have gross receipts of $1 million or less. A $1,000 minimum tax applies to corporations with gross receipts of more than $1 million.

Use the OTR's corporation franchise tax return (Form D-20) to pay the tax. You can file and pay this tax using MyTax DC. Read the form instructions for more details regarding the corporate franchise tax.

Washington, D.C. Employer Taxes

If your LLC has or plans to have employees, you must pay employer taxes to the federal and state governments. If you haven't done so already, make sure you get an employer identification number (EIN) from the IRS so you can report and pay these taxes as an employer.

Withholding employee wages. As a Washington, D.C. employer, you must withhold and pay employee income taxes to the OTR. Begin by registering your business for withholding taxes online through MyTax DC. Most employers will file quarterly withholding reports using Form FR-900Q. You must also make payments periodically—for example, weekly, semiweekly, and monthly. You can find more guidance in the instructions section of the withholding forms.

Unemployment insurance (UI) tax. In addition to withholding taxes, your LLC will probably need to pay state UI taxes to the Department of Employment Services (DOES). Your business can register for an employer account via the DOES's Employer Self-Service Portal. Every quarter, you must file an Employer's Quarterly Contribution and Wage Report (Form UC-30). Some employers can file annually. You can file these reports and make payments through the Employer Self-Service Portal. For more information, including links to helpful employer resources, see the UI tax for employers section of the DES website.

Washington, D.C. Sales and Use Tax

If your LLC plans to sell taxable goods or services to customers in Washington, D.C., you must collect and pay sales tax to the OTR. Register your LLC to report and pay sales tax through MyTax DC. (You can register your business for multiple tax types through one application process.) Once your LLC is registered, you'll receive a certificate of registration from the OTR. You must display this certificate at your business location.

Depending on your sales and use tax liability, you'll file a sales and use tax return (using some version of Form FR-800) either annually, quarterly, or monthly. You must use MyTax DC to file your returns and pay taxes owed.

For more, see the sales and use section of the MyTax DC frequently asked questions webpage.

LLC Registration in Other States

Sometimes, owners will form a business in one state or district but do business in a different state. For example, you might organize your LLC in Washington, D.C. but have business activities in Virginia or Maryland. In this case, you might need to register your LLC as an out-of-state (foreign) business in Virginia, Maryland, and any other state where you have business activities.

Every state has rules and requirements for when an out-of-state business must register. But usually, you'll need to qualify as a foreign business if your LLC:

• has a physical presence in the state (such as an office, warehouse, or store)
• hires employees in the state, or
• solicits business in the state (for example, through the internet or by mail or print ads).

Check each relevant state's laws around qualifying as a foreign business. If you need more guidance on when to register, see our state guide to qualifying to do business outside your state.

More Information About Washington, D.C. LLCs

The District of Columbia provides useful information on how to form and maintain your LLC on its various government websites. But if you want more general guidance related to managing and running your LLC, you can read the articles in the LLC section of our website.

While many business owners can start and manage their LLCs on their own, many others can benefit from professional assistance. Washington, D.C.'s franchise taxes are particularly complex and dense. If you have questions about which taxes your LLC is responsible for or whether you need to register in another state, talk to a local business lawyer. They can help you determine whether a particular tax applies to you and what your registration and reporting responsibilities are.