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Limited Liability Company (LLC) is an unincorporated association, with one or more members, domestic or foreign. Owners risk only their investment and personal assets not at risk. Owners manage and control business that can be run by one person. LLCs are more complicated than partnership while it is easier to set up and maintain than corporation. LLCs are being taxed on earnings and owners can be taxed on business income.

To register a new business with the District of Columbia, you will need the following information to complete the tax registration form on the District"s online tax portal, MyTax.DC.gov:

To make updates to an existing business account, please log into your MyTax.DC.gov account. For further assistance, please contact the Customer Service Center.

If you’ve decided to transfer a portion or all of your limited liability company (LLC) membership interest in the District of Columbia, it’s critical that you do it correctly. LLC ownership transfers are different from transferring ownership of a corporation and often more complicated for the following reasons:

Owners of an LLC, referred to as members, hold membership interests in the LLC. Membership interests can be transferred subject to the terms of an LLC’s operating agreement or with the consent of all the members.

At ZenBusiness, we’ve prepared a guide outlining the different procedures for transferring membership interests in a Washington D.C. LLC. For more information about LLC formation in the District of Columbia, see our Washington D.C. LLC formation page.

The operating agreement (OA) for your Washington D.C. LLC functions as a guide for how your business will operate. The OA includes important information about your LLC, including:

Washington D.C. doesn’t require LLCs to have an operating agreement. However, it’s still a good idea to adopt one because it allows you to lay out the rules that govern your LLC and avoid resorting to the default laws of Washington D.C. Additionally, banks and other institutions may require proof of your OA before agreeing to work with your LLC. Including a buyout provision in your LLC’s operating agreement provides the guidance necessary when you need to transfer an ownership interest in your LLC.

There are two ways to transfer ownership of an LLC without dissolving the business entirely. A partial sale, referred to as a buyout, or a sale of your entire LLC.

A buyout provision of an operating agreement is used when a member of your LLC wants to leave. When an LLC member wants to leave, the existing LLC members can buy out that member’s ownership interest in the LLC. The ownership interest is then divided between the remaining LLC members.

To complete the buyout, the departing member enters a buy-sell agreement with the LLC for their membership interest. The OA should include detailed provisions on forming a buy-sell agreement. Having a detailed and comprehensive OA to guide you through the steps of a membership interest transfer is the best way to avoid disputes and in-fighting among the remaining LLC members. An OA also gives all members an equal opportunity to assert their rights within the LLC as a whole.

To sell your interest to a third party, you will need approval from all other members of the LLC before the third party can become an LLC member with full rights.

Alternatively, you and the other LLC members might want to sell your entire business to another party. Determine whether the buyer wants to buy the whole LLC or just the assets of the business. Also, it’s very helpful for the process of selling your LLC to be thoroughly documented in your OA. Your OA could require consent from every LLC member prior to authorizing the sale of the whole company. If that’s the case, you have to obtain approval from each LLC member to sell the business.

After you’ve consulted your OA and followed its procedure for transferring the LLC to a third party, you can draft a buy-sell agreement with the purchaser. The buy-sell agreement includes information about the sale. But keep in mind that selling an entire LLC can be a complicated process for business owners. So it is a good idea to consult with a Washington D.C. business attorney to ensure the transaction complies with state and federal law.

Many issues can arise that force the transfer of ownership in your LLC. Many of these circumstances can be addressed beforehand in your operating agreement.

If an LLC member dies, their interest in the LLC passes to their surviving spouse or heirs, depending on the member’s estate plan and intestacy rules. However, the individual who receives the interest, known as the transferee, doesn’t have the same rights as the deceased member had. The transferee is entitled to receive the deceased member’s percentage of profits from the LLC and other LLC benefits, but they aren’t entitled to participate in the management of the LLC. Remaining members often use a buyout provision in these circumstances.

Depending on how many LLC members want to leave the business, and whether there are other individuals seeking to join as LLC members, it might be easier to dissolve and reform your LLC than go through the hassle of transferring ownership interests. When you dissolve your LLC, the former members receive the value of their ownership interest. You can then reform an LLC with new LLC members, allowing other individuals to join if desired.

LLC Articles of Organization in Washington D.C. require you to include the names and addresses of each LLC member in the document. When an LLC member leaves the business, the change is reflected by filing a Certificate of Amendment with the Department of Consumer and Regulatory Affairs.

LLC ownership interest transfers can seem complex and troublesome, but a well-drafted operating agreement can make the process straightforward and easy. If you’re forming an LLC, need a new operating agreement, or are looking for help with legal compliance, ZenBusiness is here to help. Take a look at our full slate of products and services to see how we can help you best.

Yes. The terms of an LLC’s operating agreement should describe the process for members seeking to sell their membership interests, and when no OA is in place, you can follow the default Washington D.C. laws pertaining to LLCs.

The IRS does not recognize LLCs as a form of business entity. Instead, it requires LLCs to be classified as either corporations, partnerships, or sole proprietorships.

No. Part of being an LLC member is having an ownership interest in the LLC, even if the member doesn’t participate in the management or operations of the business. However, LLC members can hire officers who don’t have an ownership interest to manage the day-to-day affairs of the LLC.

A DC LLC (limited liability company) is a flexible business structure that—when correctly formed and maintained—protects its owners from being held personally liable for business debt. By default, LLCs are taxed as pass-through entities. To form an LLC in DC, you’ll need to file a form called Articles of Organization with the Department of Licensing and Consumer Protection (DLCP), which costs $99. But first, you’ll need to choose a business name and a registered agent. It can take DLCP up to 15 days to process your paperwork after they receive it, whether you file online or by mail. If you file in person, they’ll process your documents while you wait for an extra $100. Filing the paperwork makes your LLC official, but that doesn’t mean you’re done—there are several further steps needed to get your LLC ready for business. Here, we’ll break down the entire process.

First things first: your LLC needs a name. And not just any name. It’ll need to comply with DC’s naming rules as outlined in Code of the District of Columbia § 29-103.01 and 29-103.02. Basically, your LLC name needs to:

Yes. If you want to put a hold on your business name while you’re preparing to form your LLC, you can reserve your business name for up to 120 days in DC. All you need to do is file the Name Reservation Registration & Transfer (Form GN-3) and pay the $50 filing fee.

A trade name (also known in some states as a DBA or doing business as name) is any name other than your LLC’s name (or your own name, if you’re operating a sole proprietorship) that you use to do business.

An LLC might use a trade name for marketing purposes or just because the owner prefers a shortened version of the name. For example, Claire’s Boot and Sole Repair, LLC might use the trade name Claire’s Boots because Claire likes the sound of it. Claire could also decide to start crocheting and sell knitwear under the trade name Claire’s Granny Squares. Claire can do all of this without forming a new LLC!

A Washington DC registered agent is someone who accepts legal mail on behalf of your LLC in person. Your registered agent could be you, a member or manager, or someone outside of your LLC altogether—like a professional registered agent. Whoever you appoint will need to supply a street address in the District of Columbia for your your Articles of Organization (a public document).

A registered agent serves as your LLC’s official point of contact for service of process, so they need to meet some special legal requirements. Basically, your registered agent must:

Another benefit of hiring a registered agent is peace of mind. A professional registered agent will accept, scan, upload, and notify you of any scary legal mail that shows up for your LLC. This means you’ll see it right away—even if you’re away from the office.

If you have a business name and registered agent, you’re ready to fill out your Articles of Organization. This is the form that—once processed by DLCP—officially establishes your LLC. It’s a big step! You’ll need to fill out this form just right or else DLCP will reject it and you’ll be back at square one. Here’s how to do it.

Miscellaneous provisions. This is where you can include anything extra. If you’re forming an LLC that offers licensed services (a PLLC), you’ll list your professional service here. If you’re forming a series LLC, you’ll need to state that here.

Once you complete your articles, you need to submit them to DLCP by mail, in person, or online. You’ll also need to pay the $99 filing fee. If you want your LLC filing processed fast, you can pay the state an extra $50 to have them process it within 3 days of receipt, or an extra $100 to have your application processed the same day the state receives it.

In a member-managed LLC, members (owners) share the day-to-day responsibilities of running the business—tasks like managing payroll, hiring and firing employees, ordering inventory, entering into leases and more fall to the owners to handle.

In a manager-managed LLC, the members hire one or more managers to handle the LLC’s daily operations. A manager can be a member as long as they’re properly compensated.

A series LLC a special type of LLC only available in some states and in the District of Columbia. In a series LLC, there’s a parent or umbrella LLC with one or more divisions within it. When properly formed and maintained, each division (called a “series”) has its own liability, so that the debts of one series aren’t counted against the finances of another series. In other words, forming a series LLC is an effective way to separate out assets without forming multiple LLCs.

Your LLC needs an operating agreement. It’s the backbone of your LLC—a legally binding document that establishes the rules and procedures for how your LLC will handle big picture situations. Processes for things like voting, allocating profits and losses, dissolving the business, and more are defined in your operating agreement. It’s an internal document that you’ll keep on file with your other business records.

Nope. The Code of the District Columbia defines the powers and limitations of an operating agreement (see § 29-801-07), but there are no statutes requiring LLCs to adopt an operating agreement. No one legally requires you to brush your teeth, either. If you want a healthy, well-functioning LLC, you need an operating agreement, whether its required or not.

A solid operating agreement will plan for every major situation your LLC is likely (and maybe even unlikely) to face. Here’s a list of the topics most operating agreements address:

Yes. Without an operating agreement, a single-member LLC can appear perilously similar to a sole proprietorship (a business type without liability protection) in the eyes of the court, should you ever face a lawsuit. And although you won’t need to resolve a dispute with yourself, you will need an operating agreement to open a bank account for your business.

An employer identification number (sometimes called a FEIN), is a nine-digit number the IRS will assign to your LLC for tax identification purposes. You’ll apply for your EIN directly with the IRS online or by mail. Like with most things, filing online is fastest, but if you don’t have a social security number, you’ll need to file by mail.

Yes. Legally speaking, your LLC only needs to obtain an EIN if it has employees or elects to be taxed as a corporation. However, you’ll need an EIN to open a business bank account. And your EIN spares you from the need to give out your social security number out to vendors and other business associates.

You have an LLC, but you’re not done yet. You need to take a few more steps before you’re ready to do business, and the first is to open a business bank account. This will ensure you can keep your business money separate from your personal money, which is a crucial step in maintaining your limited liability status and protecting your personal assets.

You have a shiny new business bank account for your LLC—time to pony up. Each member should make an initial contribution to pay for their percentage of ownership in the LLC (called membership interest). You can do this by having each member write a check or set up a bank transfer to the LLC’s bank account. Members can also make initial contributions in the form of property or services, but doing so often triggers a tax event.

Membership interest is the percentage of the LLC that a member owns. Most of the time, it’s determined by how much a member invests. So if you put $25 into your LLC but the other member puts in $75, you’ll have 25% membership interest and the other member will hold 75%. Unless another arrangement is spelled out in the operating agreement, membership interest usually correlates directly with voting power. So in this example, the other member would hold decision-making power in the LLC.

The District of Columbia requires your LLC to file a report every two years. The purpose is basically to keep DLCP up-to-date on who owns your LLC and how they can get in touch with you. It costs $300 to file and can be submitted online or by mail.

Washington DC LLCs are taxed as pass-through entities by default. This means that any money the LLC makes “passes through” the LLC itself, right to the members. The members report the income on their personal tax returns and is subject to the federal self employment tax of 15.3%. LLCs have the option to file with the IRS to be taxed as an S-Corp or C-Corp.

Probably. Most LLCs in DC will need to apply for a business license from DLCP. There are specific licenses for certain business activities—if your LLC doesn’t fit one of these categories, you’ll need a general business license. You can apply for a business license online, in person, or by mail.

First, you will need to create a new account with the Washington, DC Department of Consumer and Regulatory Affairs business portal. You can do it here. Make sure you keep your user name and your password safe and secure. For more info on the DC LLC creation and the reporting requirements, you can read here.

One of the best names you can use for your LLC is the property address. For example, 1234 Street LLC. You can almost rest assured that there is no other LLC with that name. However, once you select an LLC name, make sure it’s available.

A registered agent is an individual or business responsible for receiving the tax forms, legal documents, notices of any lawsuits, and any other official government correspondence on behalf of your newly registered LLC.

The registered agent must be a resident of Washington, DC, or a registered agent service authorized to conduct business in the District of Columbia. If you live in DC, you might select yourself as a registered agent.

The Articles of Organization is a legal document that verifies your business in Washington, DC. It might include the chosen LLC name, the name and the address of its registered agent, and a list of services your LLC offering.

To register your LLC, you will need to file the Articles of Organization with the District of Columbia Department of Consumer and Regulatory Affairs (DCRA). This can be done online, by mail, or in-person. Since you have already created your account with DCRA in step 1, it is recommended to register online. Your registration culminates in you paying the DC filing fees.

An Operating Agreement is a legal document outlining the ownership and operating procedures for your limited liability company. An operating agreement is a key document used by LLCs because it outlines the business’ financial and functional decisions including rules, regulations, and provisions. Once the document is signed by the members of the limited liability company, it acts as an official contract binding them to its terms. Here is some additional information on creating the Washington, DC operating agreement. You can also create your operating agreement for a Washington, DC LLC using Eforms (minor charges may apply).

Your Employer Identification Number (EIN) is a nine-digit number assigned to your business by the IRS. This number helps to identify businesses for tax purposes. In other words, this is your LLC’s Social Security Number. Getting your EIN number is free and you can apply for it here.