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Start a Business in the District of Columbia Today

The District of Columbia is growing at the fastest rate since 1950. That’s good news for aspiring entrepreneurs. If you’re wondering how to start a business in the District of Columbia, use the guide below to start turning your business dreams into profitable realities.

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Benefits of Opening a Business in the District of Columbia

Although the tax situation in D.C. isn’t ideal for business, the District has a very diverse and educated workforce. There are nineteen colleges and universities in Washington, D.C., and it’s becoming known as an area that’s particularly friendly to female business owners. The Washington, D.C. Women’s Business Center (DCWBC) supports women entrepreneurs with services like one-on-one free counseling and training workshops to help women start and grow their own companies.

When it comes to financing a small business, the District of Columbia’s Department of Small and Local Business Development (DSLBD) has resources for you. The DC Capital Connector helps pair entrepreneurs with the right lender, contracting opportunity, and/or support service.

Another program called District Capitalized provides additional tools to help businesses get the capital they need to prosper.

How to Start a Business in the District of Columbia Checklist

Follow the steps below to get your new company started off right:

Step 1: Create a business plan for your District of Columbia company

Business plans do much more than just help keep a new business on track. They’re also crucial if you need to land investor funding or score a business loan. They’re an essential way to prove your business idea has a chance to be viable. When you create a business plan, consider doing the following:

  • Clarify your business idea: Most businesses fail because there is no market need, so this section can help you identify what you’re offering and why consumers need it.
  • Create a financial outline: How much money does your business need to operate, and what are your products’ and services’ price points? When do you expect to be profitable, and do you need outside funding? Include a list of “SMART” goals
  • Choose a location: Beyond zoning laws, some locations are better or worse depending on the type of business. 
  • Perform a market analysis: Who is your key demographic and how can you best serve them?
  • Perform a competitive analysis: Who are your competitors, and how can you improve upon what they’re doing?
  • Search for tax breaks, local grants, and other government resources.

Step 2: Choose a business structure in the District of Columbia

One of the most important decisions you’ll need to make for your D.C. company at the start is what type of business entity it will be. Popular entities include the sole proprietorship, the general partnership (GP), the limited liability company (LLC), and the corporation.

Sole proprietorships and GPs are the easiest to set up. On the flipside, without legal separation between you and your business, if the business runs into legal or financial trouble, your personal assets could wind up at risk.

Corporations are more complex and costly to set up, though they offer the strongest protection against personal liability for their owners, who are called shareholders. 

it’s worth considering if an S or C corporation is the right structure for you. Among other differences, C corporations pay business income tax at the corporate level, and those profits are taxed a second time when they’re distributed to the shareholders. This “double taxation” can be avoided with an S corporation, which instead only reports revenue on the owners’ personal tax return. However, S corporations are harder to qualify for and have more restrictions.

LLCs combine attributes of corporations and sole proprietorships. LLCs provide legal separation between the business and your personal property, so problems in the business, such as lawsuits against the LLC, don’t put your personal assets at risk. Also, unlike C corporations, LLCs aren’t subject to double taxation. A District of Columbia LLC can have one “member” or multiple members (they don’t use the term “owner”).

We can file the paperwork to form an LLC or corporation for you with our business formation plans.

Step 3: Determine your District of Columbia business startup costs

As part of your business plan, it’s important to figure out exactly what you need financially to both launch your business and operate it on a monthly basis. Calculating these costs will help you bring your dream company into reality. 

Your startup expenses are typically one-time costs. You can factor them into the amount of money you need to get your business off the ground. However, you likely won’t get customers or sales on day one. That means you’ll need to figure out how much it would cost to operate for 6 to 12 months. Assuming zero income during that time period will give your new company the financial breathing room to succeed. 

Some of the costs you can include in your calculations include: 

  • Real estate or rent costs
  • Equipment
  • Cost to hire employees, if necessary
  • Marketing materials
  • Inventory
  • Office supplies
  • Cost to register your business
  • Taxes

While accessing funds to cover business costs may take some time, it’s an essential step in the startup process, so include it in your detailed business plan. 

Step 4: Create a name for your District of Columbia business

Naming your business is often the most enjoyable and creative part of the setup process. When selecting an official name for your company, consider a name that helps market your brand by easily communicating the goods or services you offer to customers. It’s a good idea to come up with a few memorable names and jot them down on a list during this step.

Once you have your list ready, you can go online to the D.C. government website to see if your desired name is available. Registered D.C. business names must be unique within the District, so if another company has already registered the name you want, you’ll need to choose another one. 

To complete this search, you’ll need to create a login to the District of Columbia Department of Consumer and Regulatory Affairs (DCRA) web portal. From there, you can search to see if the name you’ve chosen is available. Once you’ve found an available name you like, you can move on to the next step. Be sure to also review the statute on naming your business and ensure you do not include words that aren’t allowed.

To ensure there are no complications with this name, it’s a good idea (though not required) to reserve your name with the D.C. government. If you’d rather not deal with this process yourself, we have a business name reservation service that can handle it for you. As part of the service, we check to see if your desired name is available.

Once you’ve decided on your new company’s name, you can register a domain name for your business website and start creating social media profiles on Facebook, Twitter, LinkedIn, and other platforms. We have a tool to help you do a preliminary domain name search, and our domain name registration service can help you secure the online name that will best serve your business. 

Step 5: Register your District of Columbia business and open financial accounts

Once you’ve chosen your business structure and (if you have an entity like an LLC or corporation) filed the registration with the DCRA, you can apply for a federal employer identification number (EIN) with the IRS. Having this tax ID number is required for many businesses (sometimes even those without employees) and will allow you to open a business bank account. You can do this yourself or have a partner do it by creating a special document called a banking resolution

Dedicated business bank accounts will keep the company’s finances separate from your personal funds. This not only helps you at tax time, but it can help protect your limited liability status if you have an entity like an LLC or corporation.

Next, apply for any licenses or permits required to do business in the District of Columbia. Permits and business licenses vary by industry, and they can be needed at the federal, state, and local levels. There’s no central authority to tell you every license and permit your business requires, so you’ll have to do some research or have someone like us do the research for you with a business license report.

Be aware that many D.C. businesses, including all LLCs and corporations, are required to have a basic business license (BBL). The D.C. Business Center website can fill you in on the requirements for this and tell you how to apply. In addition, you’ll need to secure a Certificate of Occupancy if you’re working out of an office space or a Certificate of Home Occupation if you’re working out of a residence.

Step 6: Market your business in the District of Columbia

Now that you can legally do business in D.C., you’ll want customers find you. Creating a marketing plan specific to your target customer is vital to growing your sales. Some strategies include building out web content and improving your search engine optimization (SEO), or finding the right print advertisements to distribute to potential customers. 

Also, so that people searching for your products and services are more likely to find you, optimize your company’s profile on Google My Business. If social media is part of your marketing, regularly post content, and engage with people on networks like Twitter, Facebook, and/or Instagram. Also consider joining the District of Columbia Chamber of Commerce.

Examples of Good Businesses to Start in the District of Columbia

Deciding on the right business venture will depend on many variables, such as your own interest and expertise, your location within the District of Columbia, and the existing competition in that area. It sometimes helps to look at what businesses are not well represented in your area to see if there’s a vacuum you can fill. The D.C. Policy Center has identified the industries that are most lacking in the District, including:

  • Motor vehicles and parts dealers
  • Manufacturing
  • Repair and maintenance
  • Transportation and warehousing
  • Building material and garden supplies
  • Insurance carriers
  • Services for the elderly and those with disabilities
  • General merchandise stores

Consider whether any of these voids could be a business opportunity for you.

Bottom Line

The U.S. capital is a unique place to live, and so it follows that establishing a business there will have unique rewards and challenges, as well. For help meeting the challenges, check out our services to see the many ways we can help you start, run, and grow your D.C. business.

The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

District of Columbia Business FAQs

  • How much does it cost to start a business in the District of Columbia?

    The costs associated with starting your business depends on the type of entity you form. Keep in mind that there are also costs for various licenses and permits beyond the start up cost. The DCRA website is a good resource to see what your business needs to get started.

  • Is the District of Columbia a good place to start a business?

    According to data, the District of Columbia is one of the top places in the country to start a business. Keep in mind, though, that it is also considered one of the most expensive places to start a business.

  • What business and state tax regulations are compulsory for a business in the District of Columbia?

    The District of Columbia Office of Tax and Revenue website is a great resource to research exactly what taxes your business needs to pay in order to stay compliant.

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