If you own a business that was created somewhere other than Washington, DC (DC), you will need to qualify or register that business in DC if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-DC) limited liability company (LLC) to do business in the District of Columbia.
Note: Unlike most states, the District of Columbia does not have laws specifically for registering foreign LLCs. Instead, DC has a set of laws that cover registration of foreign businesses generally. The District of Columbia law refers to these businesses collectively as “foreign entities.”
For District of Columbia purposes, if your LLC is formed in another state, then it is known as a foreign LLC in DC. In other words, foreign doesn’t mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in Indiana is a foreign LLC in Illinois.
According to the District of Columbia foreign entities laws, you are required to register your foreign LLC with the District of Columbia if you are “doing business” in DC. What does this mean? Well, like most states, DC law does not specifically define the phrase “doing business” in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state’s residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules can get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo’s articles on Internet Sales Tax: A 50-State Guide to State Laws.
Like most states, District of Columbia law for foreign businesses specifies certain activities that do not constitute doing business in the state. The items listed include:
DC’s foreign entities law also makes clear that the latter list is not exclusive; other activities also may be exempt. For the full, legal description of each of the items, check Section 29–105.05 of the DC Code.
If your LLC’s only activity in the District of Columbia is one or more of the listed items, you should not need to register with the state.
To register your business in District of Columbia, you must file a Foreign Registration Statement (Form FN-1) with the District of Columbia Department of Consumer and Regulatory Affairs (DCRA). You can download a copy of the application form from the DCRA website. Be aware that the registration form is not specific to LLCs but, rather, is used for all types of businesses (corporations, partnerships, and so on).
To complete the statement, you must provide more or less the same information that you need to create an LLC in your home state. More specifically, for a DC registration statement, you need to provide:
The certificate of good standing or certificate of existence included with your filing must not be more than ninety days old. You can file on paper or online. The filing fee is $220.
If your LLC does business in the District of Columbia without being registered, it cannot bring a lawsuit in DC. In addition, the LLC will be liable for all fees, penalties, and other charges that it should have paid had it properly registered, and will be prohibited from registering until all those costs are paid. However, not being registered does not invalidate your LLC’s contracts or prevent your LLC from defending a lawsuit in the District of Columbia. Also, the limitation on the liability of an LLC member will not be waived solely because the company does business in DC without registering.
Check this DCRA webpage regarding foreign entity registration for additional information.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in the District of Columbia are essentially the same. See the DCRA website for forms, information, and filing instructions for registering a foreign corporation in District of Columbia.