How Much Does An LLC Cost In Washington D.C.? (Full Report)
If you intend to establish a limited liability company (LLC) in Washington, D.C., it is important to learn the finances needed to form the business.
To assist you with the process, we devoted considerable time and effort to determining the finances associated with the requirements needed to start a Washington, D.C., LLC.
After opening dozens of LLCs and working closely with founders, I can truly understand frustration with everything budget-related. This is why I have decided to pour my practical knowledge into this guide. The information provided here will help you prepare for every LLC-related cost.
Quick Summary
- Forming an LLC in Washington, D.C., includes a $220 filing fee with the Department of Consumer and Regulatory Affairs.
- In addition to state fees, other costs may be associated with forming an LLC, such as legal or accounting fees.
- According to the U.S. Chamber of Commerce, the market for new businesses in D.C. experienced a -5.6% change in new business applications from December 2022 to December 2023.
- I have firsthand experience forming an LLC in Washington, D.C., and my total expenses, including filing fees and other associated costs, came to around $500.
Cost to Start an LLC in Washington, D.C.
An LLC in Washington, D.C., costs $200, which only covers the filing fee for the Articles of Organization, also referred to as the Certificate of Formation.
In addition to the $200 filing fee, there are several other expenses to consider when setting up an LLC in Washington, D.C.
Factors to consider include whether you plan to engage a Washington DC Registered Agent, reserve a Business Name, obtain a Certificate of Occupancy or Home Occupation Permit, acquire a Basic Business License, and submit your LLC's Biennial Report.
"LLCs are typically recognized as 'pass-through' entities for tax purposes, permitting owners to subtract as much as $5,000 in initial expenses from their federal tax obligations during the first year of operation."
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions
1. Washington D.C. LLC Filing Fee ($220 - Mandatory)
The Department of Consumer and Regulatory Affairs (DCRA) charges a filing fee of $220 for Washington, D.C., LLC formation.
This fee covers the basic processing and filing of the Articles of Organization. However, additional fees may apply if expedited processing or other services are required.
2. Washington D.C. Registered Agent Service Fee ($100-$300 - Optional)
The Washington, D.C., LLC Registered Agent Service Fee is the cost of hiring a registered agent for an LLC in Washington, D.C.
The fee for a registered agent service in Washington, D.C., can range from approximately $100 to $300 per year, depending on the service provider and the level of service required.
A registered agent must have a physical address in Washington, D.C., and be available during normal business hours to receive legal documents and other official correspondence on behalf of the LLC.
This is, speaking from my experience, one of the best investments. Not only will you never miss a deadline, but you will also have instant support for many LLC-related issues.
Though you can be your own registered agent, hiring a professional registered agent is essential to ensure that the LLC complies with all state and federal regulations and that all legal correspondence is received and handled appropriately.
3. Name Reservation Fee ($50 - Optional)
A Name Reservation Fee is required for those who want to reserve their desired business name for their LLC in Washington, D.C.
The name reservation fee is $50 and can be paid by check, money order, or credit card. The name reservation application can be filed online or by mail with the Department of Consumer and Regulatory Affairs (DCRA).
Interestingly, according to the U.S. Chamber of Commerce, the market for new businesses saw a -5.6% change in new business applications in December 2023 compared to December 2022, a statistic that highlights the ever-changing landscape for entrepreneurs in D.C. [2].
Once the application is processed, you will receive a confirmation notice with the reservation number, allowing you to reserve your desired business name for up to 120 days.
You need to know that a name reservation does not guarantee that the name will be approved for use when you file the Articles of Organization for your LLC.
Washington D.C. Business/License Tax
The Washington, D.C., LLC Business/License Tax is a tax imposed on LLCs in Washington, D.C. LLCs in Washington, D.C., must pay annual fees for LLC Business Licenses based on the LLC's gross receipts earned in the District of Columbia.
The Business License fee for LLCs in Washington, DC, ranges from $250 to $4,000, depending on the LLC's gross receipts.
Moreover, under the Tax Cuts and Jobs Act of 2017, LLC owners may benefit from a 20% deduction on qualified business income, a significant tax relief for pass-through entities, though subject to specific conditions and limitations [1].
Expenses Following the Approval of Your Washington D.C. LLC
1. DBA
A DBA is known as a trade name. The D.C. LLC cost of filing for a DBA is $55. This fee is paid to the Department of Consumer and Regulatory Affairs (DCRA) at the time of filing.
Registering for a DBA allows a business to operate under a different name than its legal name.
Still, it does not provide legal protection for the name or prevent others from using a similar name.
Registering a DBA is primarily for branding and marketing, as it allows a business to operate under a name that is more memorable, descriptive, or creative than its legal name.
2. Certificate Of Fact
The fee for obtaining a Certificate of Fact is $50. In Washington, D.C., a Certificate of Fact is a document that verifies the existence and status of a business entity registered with the Department of Consumer and Regulatory Affairs (DCRA).
A Certificate of Fact is often necessary for legal, financial, licensing, or permitting purposes, as well as meeting third-party requests for proof of a business entity's status.
To obtain one, submit a request with the business entity's DC LLC name, registration number, and required information, along with the service fee, to the DCRA.
3. EIN
EIN stands for Employer Identification Number, a unique nine-digit number the Internal Revenue Service (IRS) assigns to identify a business entity for tax purposes.
In Washington, D.C., obtaining an EIN is free of charge and can be done online, by mail, fax, or by phone.
Business owners must obtain an EIN if they hire employees, operate as a partnership or corporation, file certain tax returns, or engage in other specific business activities.
To apply for an EIN, a business owner or authorized representative must provide certain information about the business, such as the legal name, mailing address, and business entity type.
4. Operating Agreement Fee
The operating agreement fee for an LLC in Washington, D.C., is $0, as there is no requirement to file an operating agreement with the DCRA.
An operating agreement is a document that outlines the rules and regulations governing your LLC's management and operation.
It is highly recommended that all LLCs have operating agreements to protect the members' interests and establish the business structure.
While there is no official operating agreement fee in Washington, D.C., the cost of creating one can vary depending on how you draft it.
FAQs
Are There Any Ongoing Fees To Maintain An LLC In Washington, D.C.?
LLCs in Washington, D.C., must file an Annual Report with the Department of Consumer and Regulatory Affairs (DCRA) and pay a $300 fee.
How Long Does It Take To Form An LLC In Washington, D.C.?
The processing time for LLC formation service in Washington, D.C., varies, but it typically takes 3-5 business days for standard processing. Expedited processing is also available for an additional fee.
Do I Need A Physical Office In Washington, D.C. To Form An LLC There?
You don't need a physical office space in Washington, D.C., to form an LLC there. You can use a D.C.-registered agent.
What Are The Benefits Of Forming An LLC In Washington, D.C.?
Benefits of forming an LLC in Washington, D.C. include personal and business asset protection, pass-through taxation, a flexible management structure, and raising capital by selling LLC ownership interests.
References:
- https://www.law.cornell.edu/wex/tax_cuts_and_jobs_act_of_2017_(tcja)
- https://www.uschamber.com/small-business/new-business-applications-a-state-by-state-view?state=dc
