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Editorial 7 MIN READ

The District of Columbia in 2024: filing fees, biennial reports, and the tax that catches everyone

A $99 formation that looks cheap until the $300 biennial report and the 8.25% unincorporated business franchise tax arrive

The Editors
Staff, Incorporator.org
7 min read Updated
Contents 6 sections
  1. The mechanics
  2. Maintenance, which is where the District gets expensive
  3. The unincorporated business franchise tax
  4. The District versus Delaware, on the numbers
  5. Who the District actually makes sense for
  6. Sources

District of Columbia LLC costs $99 to form through CorpOnline and $300 every two years to keep, due April 1 of even-numbered years. Those two numbers are the headline. The number that actually decides whether D.C. is cheap or expensive is the 8.25% unincorporated business franchise tax, which most operators do not notice until the first return is due.

This is a working guide for anyone forming a D.C. limited liability company in the summer of 2024. It treats the District the way it deserves to be treated, as a small, distinctive jurisdiction with two recurring costs that look modest in isolation and uncomfortable in combination.

The mechanics

You form a D.C. LLC by filing Articles of Organization (Form DLC-1) with the Department of Licensing and Consumer Protection, through the CorpOnline portal at corponline.dcra.dc.gov. The filing fee is $99. The form asks for the LLC's name, its principal office address, the name and address of its registered agent (who must have a D.C. street address, not a post office box), the organizer's signature, and the effective date.

The underlying statute is the District of Columbia Uniform Limited Liability Company Act of 2010, codified at D.C. Code Title 29, Chapter 8. Chapter 8 is the source of every formation and governance rule a D.C. LLC is subject to, including the registered-agent obligation at § 29-104.04 and the articles-content requirements at § 29-802.01.

Standard processing online is typically a few business days. Expedited service is available for additional fees on top of the $99 base. If you file on paper, allow longer, and expect to pay the same base fee plus a modest service surcharge that varies by submission channel.

After formation, you need an EIN from the IRS, which is free and takes the time it takes to complete Form SS-4 online. You will need an operating agreement, which D.C. does not require you to file but expects you to have under § 29-801.07. You will need to register for D.C. taxes through MyTax.DC.gov if the LLC will have gross receipts in the city, which for an operating business is nearly always. A Basic Business License is separate, administered by DLCP, and required before the entity actually does business in most categories. The license is its own fee schedule and its own renewal cadence.

Maintenance, which is where the District gets expensive

D.C. does not charge an annual report. It charges a Biennial Report, and that distinction matters because founders used to annual-report states miss the deadline in the off year and assume they are fine.

The Biennial Report fee is $300, payable every two years, due by April 1 of every even-numbered year. An LLC formed in 2024 files its first biennial report by April 1, 2026, and every two years after that. Miss the deadline and the entity falls out of good standing, with reinstatement requiring the outstanding fee plus penalties before the District will resume issuing certificates of good standing.

Viewed as an annualized cost, $300 every two years is equivalent to $150 a year, which is lighter than Delaware's $300 annual LLC tax and heavier than most states charging $50 or less. The cadence is unusual enough that it warrants a calendar entry the day you form.

The rest of the maintenance stack is ordinary. Keep the registered agent current; update the principal office address through CorpOnline when it changes (there is a fee); file the biennial report on time. The District is administratively straightforward. It is the tax treatment that changes the arithmetic.

The unincorporated business franchise tax

This is the number most founders miss. Under D.C. Code § 47-1808.03, any unincorporated business, which includes an LLC taxed as a partnership or disregarded entity, with gross receipts of more than $12,000 is subject to the District's Unincorporated Business Franchise Tax. The rate is 8.25%. The minimum tax is $250 per year for businesses with D.C. gross receipts between $12,000 and $1 million, and $1,000 for businesses above $1 million in gross receipts, with the actual liability computed on net income at the 8.25% rate and the minimum acting as a floor.

The mechanical surprise is that D.C. taxes unincorporated businesses directly at the entity level. This is unusual. In most states an LLC classified as a partnership pushes all income to members' personal returns, and the entity itself pays nothing. D.C. does not operate that way. The District also taxes the distributive share to any D.C. resident members on their individual returns, which produces a layering issue that needs to be managed (the statute allows for a salary allowance for owner-operators, currently $5,000 per owner, which blunts some of the double counting but does not eliminate it).

LLCs taxed as C-corporations, meanwhile, fall under the regular Corporation Franchise Tax at D.C. Code § 47-1807.02, also at 8.25%, with the same $250 minimum for small filers and $1,000 for filers above $1 million in receipts. Practically, a C-corp conversion does not rescue you from the District's entity-level tax; it only changes which chapter of Title 47 you are reading.

There are narrow exceptions. A business where more than 80% of gross income is derived from the personal services actually rendered by the owners, and capital is not a material income-producing factor, is exempt from the UBT under § 47-1808.01(5). Solo consultants whose only input is their own labor can sometimes fit. Anyone selling product, renting space, employing staff beyond the owners, or holding capital assets on the balance sheet generally cannot. Do not assume the professional-services carveout applies without reading the statute and talking to a D.C. CPA; the District enforces this one.

The District versus Delaware, on the numbers

Delaware charges $90 to form and $300 a year to maintain, for a first-year cost of $390 and a steady-state annual cost of $300. D.C. charges $99 to form and $300 every two years, for a first-year cost of $99 and an annualized maintenance of $150. On the formation-and-report line alone, D.C. is cheaper.

Add the tax layer and the comparison inverts. Delaware does not impose an income or franchise tax on LLCs that do not transact business inside Delaware; the $300 annual tax is a flat entity fee, not a revenue-based levy. A Delaware LLC operating elsewhere pays nothing further to Delaware on its income. A D.C. LLC that actually does business in the District pays 8.25% on net income, with a $250 floor, every year. For an operating entity with $200,000 in net income, the D.C. line item before any salary allowance is roughly $16,500. Add the annualized $150 for the biennial, and the all-in recurring D.C. cost sits near $16,650. The equivalent Delaware figure for an out-of-state operator is $300.

The apples-to-apples comparison is not Delaware versus D.C. on filing fees. The comparison is whether your operations are in the District. If you operate in D.C., you will pay the UBT regardless of where the LLC is formed, because the District taxes the business activity, not the entity's state of organization. Forming in Delaware to escape the UBT does not work if the activity is here. It only adds a foreign qualification fee and a second registered agent to the stack.

Who the District actually makes sense for

A D.C. LLC is the right default if you are running a business that is genuinely based in the District and will be paying the UBT anyway. Under that fact pattern, forming locally saves the foreign-qualification fee (currently $220 for a foreign LLC registering to do business in D.C.), the second registered-agent relationship, and the dual good-standing tracking that comes with any multi-state entity.

It is also the right default for a professional-services practice that fits squarely within the § 47-1808.01(5) personal-services carve-out, because the UBT disappears and the remaining costs are modest: $99 once, $300 every two years, and normal income-tax filings at the owner level.

It is a costly default for a holding vehicle, a real-estate entity owning out-of-District property, or a remote operating business that incidentally has a D.C.-resident member. For those cases, form in the state where the activity actually sits and, if you have a D.C. member, plan for the District's personal income tax rather than the UBT.

One practical note for July 2024 filers: D.C. has a first biennial report due April 1, 2026, and nothing due on April 1, 2025. The off year is real. Use it to get the operating agreement, the BBL, and the first year of tax returns correct, because the second biennial cycle arrives with less patience than the first.

Sources

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