Here’s an overview of the key steps you’ll need to take to start your own business in Washington, D.C.
The most common legal structures for a small business are:
There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check Choose Your Business Structure on Nolo’s website for more information on how to choose the best ownership structure for your business.
For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the DC Department of Consumer and Regulatory Affairs (DCRA). You can check for available names by doing a Business License Verification on the DCRA website. You can reserve an available name for 120 days. File name reservations online at the DCRA website or on paper by filing Form GN-3, Name Reservation Registration & Transfer. There are certain name requirements for LLCs and corporations (like including a word such as “L.L.C.” for LLCs or “Company” for corporations). See How to Form an LLC in the District of Columbiaand How to Form a Corporation in the District of Columbia for more information.
Is your business a sole proprietorship that uses a business name that is different from the legal name of the business owner? If so, you have the option to register a trade name with the DCRA. Is your business a general partnership? If so, you must file Form DGP-1, Statement of Authority for Domestic General Partnership, with the DCRA.
If you plan on doing business online, you may want to register your business name as a domain name. See Choose and Register a Domain Name for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.
Note: All business entities in the District of Columbia need some kind of business license (see next section).
Tax Registration. If you will be selling goods in Washington, DC, you must register with the Office of Tax and Revenue (OTR) to collect sales tax. If your business will have employees, you must register with the OTR for employer withholding taxes. You can register for both types of tax, among others, either online via the DC Taxpayer Service Center (TSC) or on paper using Form FR-500, Combined Registration Application for Business DC Taxes/Fees/Assessments.
EIN. If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.
Basic Business License (BBL). All businesses operating in the District of Columbia must be licensed in some way by the D.C. government. In many cases this means getting a Basic Business License (BBL). However, some businesses where the principals are required to be licensed by a certification board or body—which often means licensed professionals (see below)—are not required to have a BBL. BBLs are issued by the Department of Consumer and Regulatory Affairs (DCRA). You can apply for a BBL online or on paper.
Regulatory licenses and permits. These cover areas such as:
Your particular business may need a regulatory license or permit. For example, you may need an environmental permit issued by the Department of Energy & Environment.
Professional and occupational licenses. These cover people who work in various fields. The DCRA's Occupational & Professional Licensing Administration (OPLA) licenses, for example, certified public accountants, architects, real estate agents, master electricians, plumbers, and asbestos workers. However, other professions and occupations are licensed through agencies such as:
You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking municode.com.
The District of Columbia taxes every kind of business. All forms of unincorporated business, such as sole proprietorships, general partnerships, and LLCs, that have at least a certain minimum amount of gross receipts and are not otherwise exempt, are subject to D.C.’s Unincorporated Business Franchise Tax (UBFT). To pay the Unincorporated Business Franchise Tax, use Form D-30.
Corporations are subject to D.C.’s Corporate Franchise Tax. To pay the Corporate Franchise tax, use Form D-20.
Sole proprietorships. Pay state taxes on business income as part of their personal state income tax returns (Form D-40). They are also subject to the UBFT.
Partnerships. Partners pay state taxes on partnership income on personal tax returns. In addition, some District of Columbia partnerships also must file Form D-65, Partnership Return of Income. They are also subject to the UBFT.
LLCs. Members pay state taxes on their share of LLC income on personal tax returns. In addition, LLCs themselves are subject to either the UBFT or the Corporate Franchise Tax. D.C. LLCs classified as corporations for federal tax purposes also have to file a D.C. corporate tax form. Furthermore, District of Columbia LLCs also are required to file a biennial report with the DCRA. See District of Columbia LLC Annual Filing Requirements for more information.
Corporations. Shareholders must pay taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay income tax on his or her personal state tax return. Moreover, the corporation itself is subject to the District of Columbia’s Corporate Franchise Tax. And, finally, corporations must file a biennial reportwith the DCRA.
If you have employees, you must also deal with state employer taxes.
And, apart from District of Columbia taxes, there are always federal income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business, available at irs.gov.
Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check Obtaining Business Insurance for more information.