Are you looking to form a professional limited liability company (PLLC) in Washington DC, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Washington DC PLLC that is compliant and able to do business in the state.
What is a Washington DC Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In Washington DC, a PLLC is an LLC formed for the purpose of providing any type of personal service to the public that may only be lawfully rendered pursuant to a license, including the services performed by, among others, certified public accountants, attorneys, architects, practitioners of the healing arts, dentists, optometrists, podiatrists, and professional engineers.
The Washington DC PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Washington DC have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Washington DC (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In Washington DC, every professional limited liability company must have “PLLC” or “Professional Limited Liability Company” as a part of its name.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. To check if a business name is available, you’ll need to create an CorpOnline Web Portal account. Through CorpOnline, you can access the Business Search tool. If you’ve chosen a name but you’re not yet ready to form your PLLC, you can also reserve the name for future use through CorpOnline. The reservation period is 120 days, and the fee is $50. A paper Name Reservation form can also be filed by mail or in person with the Department of Consumer and Regulatory Affairs.
Step Two) Designate a Registered Agent
Every PLLC in Washington DC is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
Your PLLC’s registered agent in Washington DC can either be a commercial registered agent or a non-commercial registered agent. Commercial registered agents are agents registered with the Department of Consumer and Regulatory Affairs. A non-commercial registered agent can be (i) an individual or domestic or foreign entity, (ii) an individual who holds an office or other position in an entity, or (iii) a member in good standing of the District of Columbia Bar who maintains an office in the District of Columbia. Your PLLC’s registered agent will need to have a street and mailing address in the District of Columbia.
Without a registered agent, you could lose your good standing with the state of Washington DC, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Washington DC professional limited liability company, you will fill out the Articles of Organization
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of your PLLC
- Street address of your PLLC’s initial registered office
- Your PLLC’s registered agent’s name and address in Washington DC
- Statement that your PLLC has at least one member
- Effective date of the Articles of Organization, if other than the filing date
- Description of professional services to be rendered
- Any other optional provisions agreed to by the members
- Name, address, and signature of the organizer
Your PLLC’s Articles of Organization can be filed with the Corporations Division of the Department of Consumer and Regulatory Affairs in person, by mail, or online through the CorpOnline Web Portal.
Cost to Form a PLLC
The filing fee for the Articles of Organization in Washington DC is $220. Expedited processing costs an additional $50-100 depending on the level of service.
Online and mailed filings are generally processed within 15 business days. Same day and three day expedited processing options are also available. In person filings are all subject to the same day or three day expedited processing fee. In person flings can also be processed while you wait.
Step Four) Create an Operating Agreement
After you register a PLLC in Washington DC, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
In Washington DC, your PLLC will need to file a business franchise tax return and may need to pay business franchise tax based on its gross receipts. You can learn more about the business franchise tax and other Washington DC taxes on the Office of Tax and Revenue’s Business Tax Service Center website. You can also use the MyTax DC website to access your PLLC’s tax account information, make payments, file returns electronically, and more.
Depending on where in Washington DC your business is located, you may also need to pay some local taxes. The four largest cities in Washington DC each provide online resources for businesses: Birmingham, Montgomery, Mobile, and Huntsville.
Step Six) Obtain Business Licenses and Permits
Washington DC requires all businesses or their principals to be licensed in order to operate. Your PLLC may need to get a Basic Business License, BLL, from the Department of Consumer and Regulatory Affairs depending on its business activities in Washington DC. Some businesses are not required to obtain a BLL if their principals are required to be licensed by a local, state, or national certification board or body.
Note that if needed, you can obtain a BBL through the DC Business Center website. You can find further information about business licensing and professional licensing on the Department of Consumer and Regulatory Affairs website.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Washington DC
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
In Washington DC, employers with even just one employee are required to obtain workers’ compensation coverage. If you hire employees for your PLLC, you can meet this requirement by purchasing private insurance or by getting approval from the Office of Workers’ Compensation to self-insure. You can visit the Department of Employment Services website for more information about workers’ compensation in Washington DC. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
In Washington DC, assuming your PLLC meets the income threshold for filing, your income will be reported on a business franchise tax form. Which form you use will depend on how your PLLC is classified for tax purposes. You can find the various tax forms and instructions on the Office of Tax and Revenue’s website.
Understand annual reporting
In Washington DC, your PLLC will be required to file a biennial report containing basic information about your PLLC every two years with the Corporations Division of the Department of Consumer and Regulatory Affairs. The initial report is due April 1 of the year after the year your PLLC is registered. Thereafter, the report is due April 1 every two years. The filing fee is $300. Note that this report is required in order to maintain good standing.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.