To work for yourself, you don’t have to legally register a business. But doing business without legally establishing one comes with personal risks, including responsibility for company debts, tax disadvantages, and a lack of personal legal protection. For these reasons, most entrepreneurs choose to legally create businesses before rendering services or selling goods. If you’re a licensed professional service provider in the District of Columbia, such as an accountant, engineer, or dentist, consider opening a professional limited liability company (PLLC). This guide shows you how.
District of Columbia PLLC vs. Professional Corporation
In Washington, D.C., many professionals are legally prohibited from making their businesses limited liability companies (LLCs). The closest alternative is the PLLC, but you can also choose a professional corporation (PC).
Compared to PLLCs, PCs are:
- Less flexible
- More formal
- Generally better for higher-risk businesses
In Washington, D.C., only licensed professionals can perform professional work for PCs. In other words, you can hire unlicensed employees to work for your business if it’s a PC, but they cannot perform any of the professional work. Rather, they may provide support services, such as secretarial or clerking.
Compared to PCs, PLLCs are:
- More flexible
- Less formal
- Generally better for lower-risk businesses
Contrary to PCs, in PLLCs — only some professions — you can hire unlicensed workers to perform professional work if they are supervised by a licensed professional.
Choose a name
Don’t worry — Washington, D.C., doesn’t have many restrictions when it comes to naming your PLLC. In D.C., every PLLC needs to have one of the following in its name:
- Professional limited liability company
You can also use the following abbreviations in the name:
- Ltd. in place of limited
- Co. in place of company
Check whether your preferred name is available
You can’t use a name that another business has already registered. It’s also not a good idea to choose a name that could be easily confused with an existing business.
You can see if the name you want to use for your PLLC is available on the business name search engine at the District of Columbia Department of Consumer and Regulatory Affairs (DCRA) website.
Reserve your business name
If your name’s available, you can reserve it for 60 days by filling out and mailing in an Application for Name Reservation form from the DCRA website along with a $50 fee paid via check made out to the DC Treasurer. Keep in mind that processing time can take up to ten days.
Department of Consumer and Regulatory Affairs
P.O. Box 92300
Washington, D.C. 20090
Rather than deal with this time-consuming process, ZenBusiness has an excellent name reservation service that’s simple to use.
Reserve your business domain name
Our goal is to make the lives of entrepreneurs and business leaders easier, including yours. Yet another way we accomplish this goal is by registering your desired business domain. ZenBusiness can register your domain name in no time, allowing you to start creating an online presence.
Select a registered agent
Although your business might not ever get involved with any legal issues, the District of Columbia requires all business registrants to select someone to receive legal documents. Whoever you select to act as your registered agent, as they’re legally known, must have a physical address in Washington, D.C.
Not sure who to select as your registered agent? Look no further than ZenBusiness! Our registered agent service will:
- Always receive correspondence within regular business hours.
- Relay this correspondence to the appropriate people at your business in a timely manner.
- Safeguard your legal documents from prying eyes.
Simply reach out to us — or visit us here — to get started.
Complete and file Washington, D.C., Articles of Organization
Put simply, Articles of Organization outline who owns a business, what services it renders, and other basic information. It also makes your PLLC official with the D.C. government, once they approve it. You can submit your Articles of Organization via the DCRA’s online portal.
Member-Managed vs. Manager-Managed PLLCs
You can also file your PLLC’s Articles of Organization via Form DLC-1. As part of filling out this document, you must determine whether your PLLC will be member-managed or manager-managed.
Member-managed PLLCs enable all members to be part of their top-level decision-making processes. Manager-managed entities, on the other hand, reserve decision-making for hired managers who aren’t necessarily members.
Delivering your Articles of Organization
To have your Articles of Organization accepted by the Department of Consumer and Regulatory Affairs, you’ll need to pay the $220 filing fee.
Create an operating agreement for the PLLC
If you incorporated your PLLC alone or with only one or two others, you may wonder why writing out rules for governing your PLLC is necessary. Formalizing your business’s management in an operating agreement is useful for several reasons:
- It helps resolve disagreements between members. Without a quick resolution, these disagreements could turn into long, expensive legal battles, foster dissatisfaction, or increase your legal liability for things you thought you’d be protected against.
- If you are the only member, having an operating agreement creates a formal plan that helps you comply with government regulations related to keeping your business and personal assets separate and complying with filing deadlines. You can even sketch out a plan to distribute equity interests in the event you invite members to join your PLLC.
- It can help protect you and co-owners from legal liability.
Handle tax obligations
Are you the sole owner of your PLLC? If so, you’ll report all profits and losses via Schedule C on your personal income tax return. You can still have employees as the sole owner of your PLLC. If you employ workers, payroll taxes will be one of your costs.
As an employer, you must register for an employer identification number (EIN). PLLCs with multiple members or who meet certain other criteria must also apply for an EIN with the IRS. Let ZenBusiness take the hassle out of signing up with our EIN service.
LLCs, including PLLCs, have some local tax obligations in Washington, D.C. The vast majority of PLLCs will pay the Unincorporated Business Franchise Tax. Assuming you’ve earned more than $12,000 in revenue in a tax year, you must pay the Unincorporated Business Franchise Tax by filling out Form D-30.
If you pay employees in Washington, D.C., you must register with the D.C. Office of Tax and Revenue for an Employer Account Number and register with the D.C. Department of Employment Services for an Employment Services Number. You will have to withhold D.C. income taxes from your payroll and pay D.C. state unemployment insurance.
Obtain business licenses and permits
As a Washington, D.C.-based business, you’ll definitely need a Basic Business License (BBL). Provided by the Department of Consumer and Regulatory Affairs’ Business Licensing Division, the BBL helps maintain consumer and business safety.
In the District of Columbia, you’ll need to fill out a Certificate of Occupancy. This will make sure you’re complying with zoning requirements. No one can use a building, land, or structure for any reason other than a single-family dwelling until they fill out a Certificate of Occupancy.
If you plan to work from home, you’ll need to know what kind of businesses are allowed by law. If you qualify, you can apply for a Home Occupation permit.
Although the BBL is the only universally required business license in Washington, D.C., you may need other federal and local licenses. There’s no central place to check to see if you have them all, so use ZenBusiness’s business license service to ensure you cover all your bases.
Industry-Specific Regulatory Permits and Professional Licenses
Considering that you’ve read this far about establishing your own PLLC, it’s almost certain that you’re an established, licensed professional. Use this knowledge of relevant regulatory authorities and professional organizations to ensure you receive all the legal green lights before operating your PLLC in Washington, D.C.
No matter what line of business you’re in, there’s no central aggregator of all business, professional, and regulatory licenses you’ll need to legally operate your PLLC. With this in mind, the District of Columbia’s DCRA offers a solid professional licensing directory on its website.
General Business Insurance
General business insurance is a broad family of commercial insurance policies that cover business liabilities, including property damage, bodily injury, or misleading advertising. Also known as commercial general liability (CGL) insurance, these policies cover many more business-related liabilities.
However broad they are, general business insurance policies still don’t cover everything. If you’re involved in a niche market or have substantially different weaknesses than the average business, consider adding more specific policies to your steak-and-potatoes CGL insurance policy.
Professional Malpractice Insurance
Although every business owner is prone to liability, licensed professionals are especially susceptible to malpractice lawsuits or other claims.
Surgeons, for example, who operate behind professional limited liability companies should definitely invest in rock-solid, wide-ranging malpractice insurance.
Malpractice usually refers to medical malpractice. As such, while looking for professional malpractice policies, make sure to search for professional liability insurance. This type of coverage is sometimes called errors and omissions insurance.
Workers’ Compensation Insurance
Every business in Washington, D.C., with at least one employee must have workers’ compensation insurance. In addition, D.C.-based employers who hire domestic workers for more than 239 hours in any calendar quarter must also maintain active workers’ compensation policies.
Open a business bank account
Commingling refers to mixing two distinct entities’ or parties’ funds together when they shouldn’t be. Even if you run a single-owner PLLC, you should never make the mistake of commingling accounts.
Make audits simpler
You should always use a dedicated commercial bank account for your business. Even if it might seem tempting to make a simple, one-time transfer from your personal account to your PLLC’s account, it isn’t worth it. Getting in the habit of commingling could spell tax trouble in your near future.
Although the IRS expects you to keep clean business records, it’s possible that Uncle Sam could open up a larger audit upon finding poor record-keeping practices or other messy financial situations.
Enjoy easier profit-and-loss calculations
Every self-respecting business owner regularly crunches numbers to determine whether they’re earning or losing money. Without good figures to start with, you can’t expect to make accurate profit and loss calculations.
Making a habit of separating your personal and commercial accounts can make profit-and-loss calculations leaps and bounds easier.
Ready to kick-start your business?
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or are looking to register a domain name, our goal is to help you succeed. Check out our services and contact us today to see how we can help you grow your company.
District of Columbia PLLC FAQs
What are the filing fees for a Washington, D.C., PLLC?
It costs $220 to file your Articles of Organization with D.C.’s Department of Consumer and Regulatory Affairs.
Do I need a lawyer to form a Washington, D.C., PLLC?
While it’s a good idea to consult a legal professional when forming your business, it’s not required by law.
Does Washington, D.C., have a professional corporation (PC) entity?
Yes, Washington, D.C., does have a PC entity, but it’s less flexible and more suited to higher-risk professions than the PLLC designation.
Can professionals from different fields form a Washington, D.C., PLLC together?
Unlike many states, D.C. does not require that all members of a PLLC be licensed in the business’s respective field; however, to practice in the business’s trade, a member/owner must be licensed.
How will I be taxed as a Washington, D.C, PLLC?
PLLCs are subject to an unincorporated franchise tax. After income is distributed to the members, they’re responsible for both federal and state taxes.