If you want to launch a business in Washington, DC, you might be wondering if limited liability companies (LLCs) are accepted by the local government. DC does acknowledge LLCs, thus the answer is yes. Actually, one of the most widely used corporate entities in the state is the LLC. They provide a number of advantages, including limited liability protection, pass-through taxation, and management and ownership flexibility.
There are a few steps you must do in order to register an LLC in DC. You must first decide on a name for your company. The name must be original and unclaimed by another company operating in the state. On the DCRA Business Name Availability Tool, you can determine whether your preferred name is available.
The Department of Consumer and Regulatory Affairs will then need to receive your Articles of Organization. This document, which formally establishes your LLC, contains details about your company’s name, goals, and members’ names and addresses. $220 is the filing fee for this document.
After the IRS has authorized your Articles of Organization, you must apply for an EIN (Employer Identification Number) from them. This number serves as your company’s tax identification number. Online EIN applications are free to submit.
Additionally, DC imposes a franchise tax on LLCs. The annual tax is dependent on the net profits of your company. For enterprises with net income over $1 million and under $1 million, the tax rate is 9.975% and 8.25%, respectively. There are certain exceptions to this tax, though. For the first year that they are in business, newly created LLCs are, for instance, free from the franchise tax.
The DCRA typically processes your Articles of Organization within two to three weeks of submission. This schedule, however, may change based on the number of applications they are currently receiving. The DCRA will issue you a Certificate of Organization once your LLC has been approved.
In conclusion, LLCs are a common alternative for business owners in DC because the law recognizes them. You must take the actions listed above, such as submitting Articles of Organization, obtaining an EIN, and paying the franchise tax, in order to register an LLC in DC. Although the process can take a few weeks, it’s rather simple and can have a number of advantages for your company.
Depending on the needs and conditions of your particular firm, you must decide whether an LLC or a sole proprietorship is preferable. While sole proprietorships are easier to set up and have less administrative obligations, LLCs offer personal liability protection and tax flexibility. It is advised that you seek advice from a legal or financial expert to choose the right business structure for you.