Limited liability companies (LLCs) are recognized as a legitimate company structure in the District of Columbia (DC). LLCs give you the flexibility of a partnership with the limited liability protection of a corporation. By submitting articles of organization to the Department of Consumer and Regulatory Affairs (DCRA), LLCs can be created in the District of Columbia. In order to keep their status, LLCs must submit a report to the DCRA every two years.
Due to this, all companies doing business in DC are obliged to submit a personal property tax return. LLCs, corporations, partnerships, and single proprietorships are all included in this. The value of the tangible personal property owned by the company in DC is used to calculate the personal property tax return, which is due on July 31 of each year. Penalties and interest may apply if the personal property tax return is not submitted.
The corporate income tax rate in DC is 8.25% as well. Corporations, including LLCs that have chosen to be taxed as corporations, are subject to this. The corporate income tax is not applicable to LLCs that chose to be taxed as partnerships or sole proprietorships.
In this regard, a DC Corporate Franchise Tax Return (D-20) must be filed by all DC corporations, including LLCs that have chosen to be taxed as corporations. The D-20 is used to determine the corporation’s franchise tax obligation and is due on March 15 of each year. The corporation’s net income earned in DC is used to calculate the franchise tax.
Likewise, DC levies an Unincorporated Business Franchise Tax (UBFT) on unincorporated companies, including LLCs that have chosen to be taxed as partnerships or sole proprietorships. The UBFT has a maximum tax rate of 9.975% and is dependent on the business’s gross receipts generated in DC. Every year on April 15th, the UBFT is due.
In conclusion, DC accepts LLCs as legitimate company structures and mandates that all companies doing business there submit a personal property tax report. LLCs that chose to be taxed as corporations must file a DC Corporate Franchise Tax Return and are liable to the corporate income tax. Unincorporated Business Franchise Tax is applicable to LLCs that have chosen to be taxed as partnerships or sole proprietorships, and these entities must submit the appropriate return. To avoid fines and interest, it’s critical for LLCs and other businesses doing business in DC to maintain compliance with all tax laws.