How to start a business in Washington, DC [Updated 2024]
Small business owners seeking a diverse and educated workforce, steady economy, and excellent infrastructure can find all that and more in Washington, DC. The US capital is an increasingly popular city for startups and companies from various industries due to its proximity to the federal government and ready access to R&D money—an attractive benefit for tech entrepreneurs in particular.
When you’re ready to start your new District of Columbia business, you’ll begin your journey by developing a detailed business plan, conducting market research, and figuring out startup costs. After that, you’ll need to comply with DC’s regulations, including selecting the right business structure, registering your business with the municipality, and filing your taxes correctly.
Sound daunting? Our straightforward, step-by-step guide will explain how to set up a Washington, DC business compliantly.
1. Name your business
You need a great business name for your idea before you can set up shop. However, before you officially settle on one, there are a few regulatory compliance steps you need to take. Here’s what to do:
- Check the Washington DC Business Entity Search online database to make sure the business name you chose is available. You’ll need an Access DC account to use CorpOnline, the city government’s online portal that allows you to register new domestic and foreign corporations, order good standing certificates, and perform other regulation-related business functions.
- Ensure your business entity’s name meets the district’s naming criteria. Among other rules, Washington, DC prohibits using words like “Treasury” or “FBI” in business names to prevent them from sounding like official government institutions. You’re also restricted from using terms for financial institutions, like “bank” or “credit union,” without the Mayor’s approval.
- Do a search on the US Patent and Trademark Office website to ensure the business name you chose hasn’t already been trademarked.
If you’ve selected a business name but aren’t ready to register it, the District of Columbia allows you to reserve the name for 120 days. Just fill out the proper forms on CorpOnline and submit them—along with a filing fee of $50—to the Washington, DC Department of Consumer and Regulatory Affairs (DCRA). Incidentally, the DCRA is the department you’ll actually register the name with when you’re ready to go through the process and make your business name official.
Additionally, it’s good practice to register a web domain name and social media accounts right away so nobody else can use them.
If a business name doesn’t contain the full legal names of the owner(s), you’ll need to register a trade name—DC’s term for a fictitious name or a “doing business as” (DBA) name—through CorpOnline with your Access DC account. Under DC regulations, this applies to all business types, regardless of structure.
2. Explore your funding options
As you decide how to fund your business idea, make sure you look into District of Columbia grants, small business loans, and federal programs before you settle on a choice. You can read more about the current funding opportunities on the website of the Office of the Deputy Mayor for Economic Planning and Development, but here’s a brief overview:
- Vitality Fund. This DC government grant is intended to attract high-growth employers to the District by providing funding for companies with 25 or more employees that commit to hiring locally and settling their business in a specified area of the city.
- Creative and Open Space Modernization Grant. This grant is specifically focused on tech companies, with the intent of attracting technology startups and entrepreneurs to the District and creating jobs.
- Federal loan programs. In addition to local government grants, the federal Small Business Administration (SBA) offers a variety of resources to new business owners and small businesses, including start loans and access to business coaching. You can learn more on sba.gov.
3. Decide on your business structure
The business structure you choose for your company determines a lot of things, including your personal liability, how much you pay in taxes, and what types of investment opportunities you’re allowed to offer, so it’s crucial to pick the right one. Below, we’ll go over the six major business entity types in DC.
Business type
Contractor
Employee
Sole Proprietorship
An individual enterprise owned and managed by one person; there’s no legal distinction between the business and the owner
✔ They’re easy and inexpensive to set up.
✔ All the money you make is considered to be your personal income.
✘ You also take on unlimited liability, and you have to pay self-employment taxes.
Limited Liability Company (LLC)
A business structure that allows a company to be owned by one or more individuals and protects the owners from unlimited liability
✔ Creditors can’t pursue the owner’s personal assets to pay off business debts.
✔ LLCs are flexible in terms of taxes: You decide how you want to be taxed. You can elect to be taxed as a pass-through entity.
✔ You’ll have more credibility in the eyes of outside investors than if you were to set up a sole proprietorship.
✘ It’s extremely difficult to bring a new owner on or change the ownership structure unless all the LLC members agree.
✘ LLCs are more expensive to set up than sole proprietorships.
Limited Liability Partnership (LLP)
Flexible legal entities where the liability of each partner is limited to the amount they put into the business
✔ You’re not responsible for your partner’s negligence should something happen.
✔ Creditors can’t go after your personal assets to settle business debts.
✘ There are fewer tax advantages compared to setting up an LLC, and you’ll need to make some public financial disclosures.
Corporation
A legal entity that is separate and distinct from its owners, who are called shareholders and who elect a board of directors to advise the company’s operations
✔ Corporations provide the most personal liability protection to owners out of any business entity.
✔ It’s much easier to access capital—all corporations need to do is sell stock, which is a major advantage in terms of business continuity.
✔ Can be structured as an S-Corp or C-Corp (more common).
✘ If you have a C-Corp, you’ll face “double taxation,” where the company pays income taxes on its income, and its shareholders pay taxes on the dividends they receive.
Limited Partnership (LP)
A partnership made up of at least two partners: a general partner, who manages the business, and at least one limited partner, who doesn’t have a role in managing business operations
✔ If you’re a limited partner, you’re only liable for the amount you invested in the business.
✔ You’re only taxed once.
✘ It can be tough to transfer ownership of an LP.
✘ If you’re the general partner, you have unlimited liability for any debt or lawsuits the business might incur.
General Partnership
A business entity in which everything—from management to profits, losses, and liability—is divided equally between two or more individuals or partners
✔ General partnerships are easy to set up.
✔ These business entities are relatively flexible: Partners can agree on control and other responsibilities via an operating agreement.
✘ Partners have liability for each other’s mistakes and debts.
✘ If you want to raise money from outside sources, a general partnership is not the best choice of business structure.
4. Register your business in Washington, DC
The owners of sole proprietorships don’t need to register their businesses with the District of Columbia Department of Licensing and Consumer Protection (DLCP). All other structures need to register and pay the associated filing fees; you can find both in the table below.
Business type
How to register
Costs
LLC
File Washington DC Articles of Organization (Form DLC-1) with the DLCP either online through the CorpOnline portal, by mail, or in person
$99
Corporation
File Articles of Incorporation with the DLCP
$99-$1,650 (filing fee depends on how much authorized capital your corporation has)
5. Decide on a registered agent
If you’re forming a Washington, DC LLC, incorporating a company, applying for a license, or registering an out-of-state business entity, you need to assign a registered agent. A registered agent is a person or company that accepts tax and legal documentation on your behalf and gives the state and public offices a reliable way to contact your company.
You have the option of hiring a registered agent service or acting on your own behalf—as long as you are a District of Columbia resident and have a local physical address in the city. If you hire a professional, it’ll cost anywhere from $100 to $300 per year.
6. Apply for an Employer Identification Number
All business owners need to get a federal Employer Identification Number (EIN) from the IRS. This nine-digit identifier is your federal tax ID (similar to a Social Security number), and it allows you to hire and pay employees, apply for licenses and permits, and open a business-specific bank account. All you need to do is submit Form SS-4 to the IRS.
7. Get up to speed with Business Tax Credits
To encourage local economic development, the city government of Washington, DC offers business tax credits, just like states and the federal government. The DC Office of Tax and Revenue has information on the current tax incentives being offered to small businesses and corporations, as does the Washington, DC Economic Partnership and the website of the DMPED—the office of the Deputy Mayor of Planning and Economic Development.
DC also offers powerful tax-related incentives. The Small Retailer Property Tax Relief Credit, for instance, provides qualifying small businesses in DC with up to $5,000 in tax relief.
8. Stay on top of filing requirements and taxes
New businesses in Washington, DC need to file Form FR-500 New Business Registration with the Office of Tax and Revenue (OTR) to be fully compliant with local laws and complete the tax registration portion of setting up a new company. Then, to remain in good standing with the OTR and the city, you need to file tax documents regularly. Here’s a brief overview of tax filing requirements for each business entity:
- Sole proprietorship: Sole proprietors don’t need to file a separate business income tax return. Just report the business’s income on your personal tax returns.
- LLC: The Internal Revenue Service taxes Washington, DC LLCs based on how many members they have. Then, the DLCR taxes your LLC the same way the IRS does. Single-owner LLCs are taxed the same way as sole proprietorships. LLCs with two or more owners are taxed like partnerships. In some cases, you can elect to have your LLC taxed like a corporation if you wish.
- Partnerships: Partnerships themselves—both limited and general—don’t pay taxes. Instead, they’re taxed as pass-through entities. They need to file Form 1065 with the IRS each year, and then the partners themselves pay taxes on the profits they’ve made on their individual tax returns.
9. Find a payroll solution
If you plan on hiring employees or independent contractors to work at your DC business, you need to take a number of things into consideration as you set up your business entity. For instance, you’ll need to make sure you’re classifying them in compliance with the law to avoid serious penalties. You also need to be mindful of DC labor laws, such as the District government’s minimum wage law, which mandates an hourly wage of $17.00 for workers who don’t receive tips—an amount far higher than the current federal rate.
In addition to staying compliant with local laws, you need to find the right payroll software to ensure employees and independent contractors are paid accurately and on time. Rippling takes the manual work out of running payroll and gives you peace of mind by ensuring you stay compliant with minimum wage, overtime, and other employment laws. And with Rippling Time & Attendance, you can automatically track employees’ hours and get a notification when someone is about to go into overtime. Better still, syncing approved hours to payroll is seamless. All you have to do is click “submit” once, and Rippling calculates net pay and taxes in seconds.
Hiring globally? Rippling offers an all-in-one solution for global employers, too. With Rippling, you can manage all your people, systems, and data around the world in one centralized, easy-to-use hub. Pay your employees—regardless of their tax jurisdiction or currency—in a single pay run. And you can include contractors in each pay run as well.
10. Support and scale your growing business with Rippling
Even if you’re just starting a new business, you likely have some long-term plans to grow. As your company expands, you’ll need an HRIS (Human Resource Information System), a software solution that will streamline your HR workflows and help you manage everything from onboarding to administering benefits, running payroll, managing performance and talent, and much more.
It’s crucial to select a tool that offers integrations and other features designed to accommodate a growing company. HRIS systems are invaluable to business owners, especially if you’re planning to expand your business on a global scale.
Rippling is an all-in-one solution that has everything you need to manage a global workforce with one customizable system. With Rippling, you can:
- Develop a plan of action for local, state, and federal compliance and avoid infractions.
- Hire, pay, and manage your people—no matter where in the world they’re based.
- Maintain updated recruiting data—from open headcount to new hires—without lifting a finger and automate every step of the hiring lifecycle.
- Manage benefits—health insurance, 401(k), commuter, and more—with one system and free up time by automating tasks like new hire enrollment, COBRA administration, and other busy work.
- Have a single source of truth for HR analytics, policies, and more.
FAQs about setting up a business in Washington, DC
Do I need a business license in DC?
Yes, most businesses need a Washington, DC Basic Business License (BBL) to operate. You can obtain a license from the Department of Consumer and Regulatory Affairs (DCRA). You’ll need to have a physical location in DC and get a Certificate of Occupancy Permit or a Home Occupation Permit for the business premises.
Do I need a business bank account when launching a business in Washington, DC?
Small businesses aren’t required by law to set up business checking accounts, but the IRS recommends doing so anyway. Not only does it streamline the tax filing process, but it also makes keeping track of your personal assets and company assets much easier. And if you hire employees, you’ll need a business bank account before running payroll.
Do I need to get business insurance?
DC businesses with one or more employees are required to carry workers’ compensation insurance.
What are Washington, DC’s payroll taxes?
There are two local payroll taxes in the District of Columbia:
- Unemployment Insurance (UI) – employer contribution
- Personal Income Tax (PIT) – employee contribution
Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
