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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.

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.

Single-member LLCs (SMLLC) are taxed as disregarded entities by default, just like sole proprietors. Multi-member LLCs are taxed as partnerships by default. If your LLC keeps its default tax status, you will need to file one of these tax forms annually:

Despite what many people think, an S-corp is a tax classification, not a type of business. Either LLCs or corporations can elect to be taxed as S-corps by filing IRS Form 2553. Businesses with S-corp status are taxed as pass-through entities and don’t pay federal corporate income tax. However, Washington DC S-corps are required to pay the district’s corporate franchise tax. S-corps can make distributions to their members that are not subject to the 15.3% self-employment tax.

LLCs can also elect C-corp status, which is the default tax status for corporations. C-corps must pay the 21% federal corporate income tax and the DC 8.25% corporate franchise tax. C-corps have a few benefits over regular LLCs—they are eligible for more tax deductions and are more attractive to investors. However, you should consult a CPA before you elect C-corp status, as C-corp taxes are significantly more complicated than regular LLC taxes. C-corps file Form 1120 with the IRS.