Here is an outline of the steps you should follow to get started as a sole proprietor in the District of Columbia. You should also read the general section for information that is applicable in any state.
1. Choose a business name for your sole proprietorship and check for availability.
- Please see our section on choosing and checking the availability of a name for your small business, as well as our section on the trademark law aspects of choosing a name.
2. Register the business name with local, state, and/or federal authorities.
- If you will be operating your sole proprietorship under a name that is different from your own name, then you need to apply for permission to use a "trade name". The cost to register a trade name is $50.
- Although you are not required to do so, you should consider registering your business name as a federal and/or state trademark. Please see the Trademark for Business Naming section for details.
3. Obtain any required local licenses.
- The District of Columbia issues what is known as a Basic Business License (BBL) to new local businesses. The Department of Consumer and Regulatory Affairs website has a helpful Basic Business License Information page, which includes an online interface to help you determine whether you need a BBL.
4. Determine what tax and other regulatory obligations your sole proprietorship has, and take care of any necessary registrations.
- If you have an employee or employees, you need to apply for an Employment Identification Number from the IRS. You can apply for an EIN online. You may apply for an EIN even if you have no employees. Doing so may make it easier to open a bank account and reduce your risk of identity theft. There is no filing fee.
- Register for District of Columbia business taxes using the FR-500 Combined Business Tax Registration service. This service will tell you what taxes you will be responsible for (including income and employment taxes), guide you to what forms you will need to file, and tell you when they must be filed.
- Whenever you hire an employee in the District of Columbia, you must inform both the IRS and the District of Columbia. The IRS details all of the necessary steps to complete, including verifying work eligibility and withholding allowances certificates, on its page entitled Hiring Employees. Information on what to do on the District level will be detailed when you register for taxes using the FR-500 Combined Business Tax Registration service.
- If you have employees in the District of Columbia, you must carry workers' compensation insurance.
- There may be other informational returns that you may have to file annually or semi-annually with both the IRS and the District. For more information, check out the IRS Guide To Information Returns and the DC Business Resource Center's Report Requirement and Deadline Generator.
- You may be subject to unincorporated business franchise taxes imposed by the District on income earned within the District.
5. Open a bank account for your business.
- It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your business. The bank will probably require your Social Security Number or EIN and a copy of your business name filing, although you may not need any documentation if your business's name includes your surname. (Here is an example of what banks may require.)