How Much Does an LLC Cost in DC
Setting up a new business is one of the most exciting steps you can take in launching your new career or side hustle. The endless possibilities are matched only by the anxiety you probably feel in figuring out how to set up your LLC (limited liability company). Of course, that probably leads you to the question, “How much does an LLC in DC cost?”
Establishing an LLC in Washington, DC can be difficult if you don’t know what you’re doing. That’s the bad news. The good news is, it doesn’t have to be that expensive. As long as you understand the basic steps, you’ll likely find it easier than you think.
So just what are those steps and costs? What kind of filing fee are we talking upfront? What do the annual fees look like? Should you use a registered agent service, and if so, what will it cost you?
In this post, we’re going to answer those questions. We’ll look at the specific costs for different requirements and services needed when setting up an LLC in DC. We will also tackle one of the most commonly raised issues: whether you need a registered agent. Let’s get started.
General Steps and Costs When Forming a DC LLC
Forming an LLC in the District of Columbia is a multi-step process, with fees attached to many (but not all) of the steps. Instead of feeling overwhelmed, just follow the step-by-step process we’ve outlined here.
Naming your DC LLC
Picking a name is one of the most exciting parts of your business, but it’s also one of the most stressful. You want a name that is:
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Unique and not easily confused with other businesses -
Easy to pronounce -
Memorable -
Able to withstand the test of time as your business grows
Once you have a general idea of the direction you want to take, you should perform a free name search using CorpOnline to ensure your District of Columbia LLC name isn’t already being used.
Make sure you name your business according to DC’s rules, which say that you must append “LLC” to the end of your business, unless it is a profession (attorney, architect, doctor, dentist, etc.), in which case you must add “PLLC.” If you fail to do this, your LLC may not get approved.
In some cases, you may wish to do business under a different name than your LLC. This is useful when you want a very clear LLC name, e.g. Your Name LLC, but want your business to have a more fun one, e.g. KidsJump for a trampoline center. In that case, you want to file a DBA, or “doing business as,” also called a trade name in DC.
This is also useful when you want to operate multiple arms of a business under one LLC, so that you account for income and get taxed the same. In that case, you might have a DBA named KidsJump and another named KidsWear, for instance. The cost of filing a trade name is $55.
Either way, you have the option of reserving your LLC name if you know what you want but aren’t yet ready to file your articles of organization. The cost for doing so is $50.
Filing articles of organization
The cost for filing articles of organization, the paperwork that makes your LLC official, is $99 in Washington, DC. This may be referred to as the LLC filing fee or the articles of organization fee, but they are the same thing.
Beneficial ownership information (BOI) report
All entities who are registered to do business in Washington, DC are expected to file a free beneficial ownership information report with FinCEN. This is a newer federal requirement that may impact your ability to do business in DC if you fail to file it.
Appointing a registered agent
If you’re feeling a little beside yourself at the amount of work to do so far, take heart: There is another option. Of course, you can do all of the above steps by yourself, and many people do.
However, if you don’t feel up to it, you might want to hire a registered agent. A registered agent is a professional who receives business mail on your behalf, understands the business reporting and fee requirements, and can help you assemble your paperwork in a timely fashion.
Registered agents can also help you make sure you are always in compliance.
A registered agent service can also help you gain a better grasp of the fees and expenses you should expect throughout the lifetime of your business. Considering a registered agent costs somewhere between $100 and $600 a year (and only $199 here at Tailor Brands!), it’s a reasonable price to pay for relieving a great deal of stress.
Creating an operating agreement
You do not need an operating agreement to open your LLC at an official level. However, you will need one to open a business account in DC, so you have to create one and keep it on file internally.
You can use a lawyer or a registered agent to create an operating agreement, or you can do it yourself. If you take the DIY approach, it will cost nothing, but beware that it is an exacting document. If you use a lawyer, the cost can be up to $1,000.
Register with the Office of Tax & Revenue
Any LLC that wishes to operate in DC must register with the Office of Tax & Revenue. While there is no charge for this, you must fill out FR-500 using either your federally issued EIN (employer identification number) or your social security number.
Other Annual and Additional DC LLC Costs
Overall, setting up an LLC in the District of Columbia is fairly affordable. However, there are a few items on the LLC DC cost list of which you should be aware.
Corporate franchise tax
In addition to the 21% federal corporate income tax, you will pay a state-level franchise tax. To calculate your tax, you multiply your net income by .0825 (equivalent to 8.25% of your income).
However, it’s not a straight income tax, but rather a franchise tax. This means there is a minimum rate you must pay, as follows:
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If your gross receipts do not exceed $1 million, then you pay $250 minimum in tax -
If your gross receipts do exceed $1 million, then you pay $1,000 minimum in tax
If you are not a math fan, no sweat; taxes confuse most people. A registered agent can help you ensure you collect all the necessary documents so that you report the right income when tax time comes.
Business licenses and permits
The business licenses and permits you need vary widely depending on your business. You may need:
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A professional license -
A liquor or food handling license -
Permits to rent in a certain building or zone -
Permits for signage
The best way to determine what you need is to check with your professional organization or speak with a knowledgeable registered agent.
Annual report
Whereas many states require an annual report to impart information on the standing of their LLC – including about the owners, the income, and the business activities – DC only requires you to submit one every 2 years.
The report must be submitted by April 1st within the first year the LLC is created, then every other April 1st after that. It costs $300 to file, with a $100 late fee if you miss the deadline.
Note that nonprofits pay an $80 filing fee for the report, but there are lots of rules for being a nonprofit LLC and it’s usually not the best way forward for your business.
Certificate of good standing
A certificate of good standing is not required for all businesses, but it is for some, depending on the activities you’re planning. This can include:
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Opening a bank account for your business -
Buying insurance -
Getting a loan -
Selling, transferring, or expanding your business
… and a number of other activities. As such, it’s almost certainly a necessity for those operating a business in DC. The cost is $25 and can be completed online in just a few minutes.
What expenses you can write off
The good news is that many LLC formation costs are deductible on your federal taxes. These include filing your articles of organization, DBA fees, costs associated with operating agreements and registered agents, and so forth.
You can often also deduct:
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Self-employment tax preparation expenses – if you employ yourself, you’re often able to write off tax prep costs. -
Accounting and legal fees – legal fees are deductible if they are “ordinary and necessary” for the business, while accounting fees usually qualify as well. -
Registered agent costs – typically, a registered agent service is a tax-deductible cost as well. -
Reinstatement or amendment fees – if at any time you let your LLC fees and paperwork lapse, you may need to pay an additional cost to reinstate it with the DC government. That will cost you $220. The same is true if you need to amend your business name or information in some way.
DC LLC Costs – Summary
It’s not always easy to stay on top of every cost involved with forming an LLC and keeping it in good standing every year thereafter. That’s why we’ve created a handy chart for you here, so make sure to bookmark this page in your browser for future reference!
|
LLC filing fee (articles of organization) |
$99 |
|
Reserve business name (optional) |
$50 |
|
Filing a DBA (optional) |
$55 |
|
Certificate of good standing |
$25 |
|
Registered agent (optional) |
$100 to $600 |
|
Business license (cost varies widely by profession; see examples) |
Caterer: $349 Pet shop: $485 |
|
Operating agreement (optional) |
$0 to $1,000 |
|
Franchise tax |
8.25% of income Minimum $240 if your gross receipts are under $1 million and $1,000 if they are over $1 million |
|
Biannual report |
$300 |
|
Biannual report late fee |
$100 |
|
Expedited service (optional) |
$100 for same day $50 for 3-day |
|
Amendment or restatement of certificate of organization |
$220 |
|
Statement of dissolution |
$220 |
Conclusion
While establishing an LLC in DC isn’t cheap, per se, it’s absolutely doable if you … well, know what you’re doing. Budget accordingly, get help where you need it, and good luck with your new venture!
Related LLC articles
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Learn more about LLC in DC
How to Dissolve an LLC in Washington DC
How to Do a Business Entity Search in Washington DC
5 Best LLC Formation Services in District of Columbia
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