Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Washington D.C., you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting a Washington D.C. LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
What’s the least amount I have to pay to form an LLC in Washington D.C.?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Washington D.C. LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
D.C. LLC Start-up costs
There are two primary start-up costs in the District of Columbia. The most important one (and one of the most substantial ones, really) is the Articles of Organization. The fee is $220. But regardless of whether that sounds like pocket change or an expense you’ll need to budget for, it’s a cost you can’t avoid. After all, the Articles of Organization is what officially forms your business in the District. Without it, you’re not a recognized business.
Every business in Washington D.C. will also need to obtain a business license. There are a few different kinds, though; the D.C. Business Center can help you determine which one you need, and in turn, which fee you’ll pay.
Beyond that, Washington D.C. also has a variety of professions that require licenses: athlete agents, tour guides, and cosmetologists are just a few examples. You can find a full list here, and the Start a Business Wizard can help you assemble a personalized list of what licenses you need.
Unfortunately, we can’t provide a comprehensive list of price tags for these licenses, but you can reasonably expect to pay an application fee when you get one.
Ongoing costs for an LLC in D.C.
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals, annual reports, and taxes. Let’s dig into those prices and fees.
On a somewhat regular basis, the District of Columbia’s Business Center will send you an application packet to renew your basic business license. When they do, it’s up to you to fill out the required paperwork, pay the fee that fits your business, and send it back.
There’s also a good chance that you’ll need to renew your professional or occupational permits. Each D.C. licensing board has its own policies for renewals, though, so we won’t list them all here. This guide would get tedious if we did. When you obtain your industry-specific licenses, we recommend taking note of the renewal requirements for your industry so none of the fees surprise you.
In Washington D.C. (or any area, really), one of the biggest annual costs you’ll have will be taxes. And for D.C. LLCs, the most notable tax is the District’s Franchise Tax. This tax has a base rate of 8.25%, but there’s a minimum tax of $250. And of course, if your business is involved in retail sales, you’ll be expected to collect and pay the District’s sales tax (6%).
There’s also a wide variety of miscellaneous business taxes that might apply to your LLC: professional baseball and mobile food vendors are just a few examples. But we won’t dig into all the nitty-gritty details here. To learn more about business taxes in Washington D.C., check out the D.C. Office of Tax and Revenue.
Most states require LLCs to file some version of an “annual report,” or a document that informs the state about the current standing of your business. This document is usually required in addition to annual tax reports, since it usually includes information about your business address, members, your registered agent, and so on.
In Washington D.C., the report isn’t technically “annual.” While the general principle of the report looks just like the report in other areas, Washington D.C. only requires it every other year. So technically, it’s a biennial report.
It’s easiest to file the report online. In your first year of business, you’ll need to complete it by April 1st. Then it’s due every other year on the same date. But every time you file, you’ll need to pay the $300 filing fee.
What are the discretionary costs to form a Washington D.C. LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Washington D.C. doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet district name requirements, and of course, ensure that the name isn’t already in use (you can check using a Corporation and Business Entity Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Articles of Organization, or by filing an Application for Reservation or Renewal of Reservation of an Entity Name. You should only file this form if you’re not yet ready to file your Articles. Otherwise, you’d be wasting your hard-earned cash. Washington D.C. requires a $50 fee for this application, but it protects your desired name for 60 days. If you need even more time than that, you can file the form again. By paying the $40 fee again, you’ll get another 60 days’ reservation.
2. Obtaining a Trade Name
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Articles of Organization, is the legal name of your business. A trade name, sometimes called a DBA, assumed name, or fictitious name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
A Trade Name acts kind of like a nickname for your business; some LLCs and corporations also use Trade Names to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use a Trade Name, if it differs from your legal name, you need to register it before you can use it.
Quick note: before you register your Trade Name, you need to ensure that it’s available for you to use. Washington D.C. requires all names, both legal names and trade names, to be “distinguishable on the record” from all other names in use in the district. So you should search your name against the district’s database; if no exact matches emerge, you can probably use that Trade Name.
After that, you can register your name online through CorpOnline. There is a $55 fee, and the registration is good for 2 years. After that, you’ll need to renew for another $55. If you fail to renew on time, you’ll owe an additional $55.
3. LLC formation services
Paperwork is a massive hassle. And unless you’re starting an LLC to help other Washington D.C. residents with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting a Washington D.C. LLC: the Articles of Organization, biennial reports, license applications—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of packages, with basic options starting at low prices like $39 from Zen Business (one company, Incfile, even offers a starter package for $0). But if you’re willing to shell out some serious cash for comprehensive assistance, you’ll find package prices going as high as $799.
These services are completely optional; you can DIY your Washington D.C. LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying. Some services charge one-time fees, and others tack on “free services” that will cost you next year. If you don’t read the fine print, you can get slapped with unexpected service fees. And surprise bills are never fun.
4. D.C. Registered agent services
Washington D.C. law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the District. Long story short, the registered agent accepts service of process (and any other official communication from the District) on your behalf.
Technically, this is another thing you can DIY; Washington D.C. allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the District can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Washington D.C. registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Expedited filing fees
In Washington D.C., just how long it takes for the District to process your Articles of Organization largely depends on how you choose to file. If file by mail, you’ll wait 3-4 weeks to receive your documents back. Online filings take approximately 10 days. If that sounds like too long to wait, there are a few different expediting options. $50 will get you a 3-day turnaround. But if you need rapid approval, an extra $100 will get you same-day filing.
Since those expediting fees aren’t unreasonable, you may decide it’s worth the extra expense to expedite your filings. That said, patience works, too. You can let your budget and your timetable be the deciding factors.
6. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Washington D.C. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Long story short: starting a Washington D.C. LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (perhaps with the exception of the $300 biennial report fees). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Washington D.C. LLC off on the right foot. We wish you and your new business the best!