Starting a business in District of Columbia costs as little as $220 for an LLC filing fee. The state income tax rate is up to 10.8%, with a 8.3% corporate tax rate. Below we compare LLC vs. S-Corp vs. Sole Proprietorship costs, walk through the 6 steps to form your business, and provide calculators pre-filled for District of Columbia.
LLC vs. S-Corp vs. Sole Proprietorship — 2026 estimated costs
| Entity Type | Filing Fee | Annual Fee | Franchise Tax | 1st Year Total | Ongoing/Yr |
|---|---|---|---|---|---|
| LLC | $220 | $300 | -- | $670 | $450/yr |
| S-Corp | $300 | $200 | -- | $650 | $350/yr |
| Sole Proprietorship | $75 | -- | -- | $75 | -- |
High business costs. Biennial report fee of $300. Access to federal government market.
Your LLC name must be unique in District of Columbia and include"LLC" or"Limited Liability Company." Search the District of Columbia Secretary of State database to verify availability. Consider reserving the name (typically $10-25 for 60-120 days) while you prepare your filing.
File your Articles of Organization (or Certificate of Formation) with the District of Columbia Secretary of State. The filing fee is $220. You can file online in most states for faster processing. Include your registered agent information, member names, and business purpose.
Apply for a free Employer Identification Number (EIN) from the IRS at irs.gov. You need this for opening a bank account, hiring employees, and filing taxes. The online application takes about 5 minutes and you receive your EIN immediately.
Register with the District of Columbia Department of Revenue for state income tax withholding and sales tax collection (6.0% state rate). If you have employees, register for unemployment insurance and workers' compensation. The state income tax rate is up to 10.8%.
Check District of Columbia and local requirements for business licenses, professional licenses, and permits. Requirements vary by industry and location. Common needs include a general business license, zoning permit, and industry-specific permits (food service, construction, healthcare, etc.).
Open a dedicated business bank account to maintain your LLC's liability protection. You may need your Articles of Organization, EIN, and operating agreement. Keep personal and business finances strictly separate — commingling funds can pierce the corporate veil and expose personal assets.
Total estimated first-year cost: $670 (filing fee + registered agent + annual fees). Ongoing annual cost is approximately $450/yr after the first year.
DC's COL index of 148 is among the highest in the nation, driven almost entirely by housing costs.
Groceries and healthcare are 10-15% above the national average.
DC income tax ranges from 4% to 10.75% — the top rate applies to income over $1M.
DC has a state estate tax with a $4,528,800 exemption (indexed to CPI).
DC does NOT tax Social Security benefits.
DC first-time homebuyers are exempt from transfer/recordation taxes on homes under $600,000.
National averages based on mean of all 50 states + DC. "pp" = percentage points.
The District of Columbia LLC filing fee is $220. Including a registered agent ($150/yr) and annual fees ($300), the first-year total cost is approximately $670. This is $88 above the national average filing fee.
An LLC is simpler and cheaper to maintain in District of Columbia ($670 first-year cost vs. $650 for an S-Corp). An S-Corp can save self-employment taxes if you earn over ~$50K in profit by splitting income into salary and distributions. Most District of Columbia businesses start as an LLC and elect S-Corp taxation later when profits justify the additional complexity and payroll costs.
District of Columbia businesses face: personal income tax on pass-through income (up to 10.8%), corporate income tax at 8.3% for C-Corps, franchise tax, sales tax at 6.0%, payroll taxes, and property tax at 0.6% on business-owned real estate.
Requirements vary by business type and location. Most District of Columbia businesses need: (1) a state business license or registration, (2) a local business license from your city/county, (3) industry-specific permits or professional licenses, and (4) a sales tax permit if selling taxable goods. Check with the District of Columbia Secretary of State and your local city clerk for specific requirements.
Business formation costs are estimates based on District of Columbia Secretary of State fees as of 2026. Tax rates use 2026 data. Registered agent fees based on market averages. Actual costs may vary. Consult a CPA or business attorney for personalized advice. Last updated: April 2026.