How to Start an S Corp in Washington D.C.

Is an S Corporation the Best Strategy for Your Business?

For help with choosing the right structure for your business, visit ourChoosing a Business Structureguide.

S Corporation Restrictions

S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read ourWhat Is an S Corporationguide for full details.

Are S Corp Tax Advantages Right for You?

An S corporation is a tax designation that can be elected by an LLC or corporation. With an S corp, business owners are considered employees of the company and must receive areasonable salary. Since all S corps technically have employees, the s corp must run payroll.

In order to benefit from a Washington D.C. S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take largedistributionsin addition to their salary.

To learn more about the tax advantages of an S corp, read ourLLC vs. S corpguide and take a look at ourS Corp tax calculator.

Steps for Forming an LLC and Electing S Corp Status in Washington D.C.

Starting a Washington D.C. LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider likeNorthwestto guide you through this process.

There are five basic steps to start an LLC and elect S corp status:

Step 1:Name Your LLC

Step 2:Choose a Registered Agent

Step 3:File the Articles of Organization

Step 4:Create an Operating Agreement

步骤5:Get an EIN and File Form 2553 to Elect S Corp Tax Status

Step 1: Name Your LLC

Choosing a company name is the first and most important step in starting your LLC in Washington D.C.

Be sure to choose a name that complies with Washington D.C. naming requirements and is easily searchable by potential clients.

1. Follow the naming guidelines for a Washington D.C. LLC:

• 哟ur namemustinclude the phrase “limited liability company” or “limited company” or one of its abbreviations (LLC,L.L.C.,LC, orL.C.).
• 哟ur namecannotbe the same as, or deceptively similar to, the name of any department, agency, or instrumentality of the United States or the District of Columbia.
• 哟ur namecannot包含单词“银行”、“银行”,“信用联盟,” “insurance,” or words of similar meaning without the prior approval of the Mayor.
• 哟ur namemust be distinguishablefrom any existing business in the district. This includes Washington D.C. reserved names.

哟u can also read the Washington D.C. statutes aboutpermitted namesandgeneral naming requirementsfor more information.

2. Is the name available in Washington D.C.?Make sure the name you want is available by doing a business entity search on theDC Business Centerwebsite.

3. Is the URL available?We recommend checking to see if your business name is available as a网络域. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.

Washington D.C. S Corp Biennial Report

All businesses in Washington D.C. are required to file a biennial report with the Washington Department of Licensing and Consumer Protection, Corporations Division. This report is due within the first year of registering your business by April 1 and every two years following the initial report filing. For example, if you formed your business on January 1, 2020, your first report will be due by April 1, 2021. The next report will be due by April 1, 2023, and the following by April 1, 2025, and so on.

Visit ourWashington D.C. Biennial Reportguide for a step-by-step overview of the filing process.

华盛顿特区股份公司税收

S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from theirreasonable salaryanddistributions, and Washington D.C. S corp owners can expect to pay the following taxes:

Federal Self-Employment Taxes

Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.

Federal Income Taxes

哟ur federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.

Washington D.C. Income Taxes

Washington D.C. has a graduated income tax that varies based on income and status. The tax rate ranges from 4% to 10.75% through income brackets. This means that the lower your income for the tax year, the less the percentage of income tax you will have to pay, and the more you make, the higher the income tax you will have to pay.

While the income tax has the potential to be higher, there are a number of benefits and incentives for small businesses that make Washington D.C. a great place to start a business.

Washington D.C. Sales and Use Tax

The sales and use tax rate is a simple 6% flat rate across the District of Columbia. This makes it simple to collect sales tax as there are no cities within the district to collect additional taxes.

Additional State Taxes

There are additional taxes that your business may be required to pay. The Washington D.C. Office of Tax and Revenue provides information on the taxes specific to the District of Columbia. Some examples of taxes your small business may be required to pay include:

• Alcoholic beverage tax
• Cigarette tax
• Public utility tax
• Motor vehicle excise tax
• Vehicle rental tax

Visit Washington D.C.’sOffice of Tax and Revenuewebsite for more information.

Washington D.C. Local Taxes

Washington D.C. is a small yet mighty district within the United States. Because there are no local municipalities, you do not have to worry about paying additional taxes based on your location. You only have to worry about what the District of Columbia has set up for its tax structure.