Here is an outline of the steps you need to follow in order to form a corporation (specifically, a "C corporation") in the District of Columbia. You should also read the general section on forming a corporation for information applicable in any state. Additionally, you should familiarize yourself with the Department of Consumer and Regulatory Affairs website, which has useful information and resources.
1. Choose a business name for the corporation 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.
- District of Columbia law requires that a corporation name include the word "corporation," "company," "incorporated," or "limited," or an abbreviation of one of these words. Additionally, your corporation name may not be the same as, or deceptively similar to, the name of any other corporation on file with the Department of Consumer and Regulatory Affairs, and it may not indicate that the corporation is organized under an act of Congress.
- Although you are not required to do so, consider registering your business name as a federal and/or state trademark.
2. Recruit and/or appoint a director or directors for the corporation.
- Under DC law, a corporation must have at least one director.
- Directors do not have to be residents of the District or shareholders of the company, unless the articles so require.
- There does not appear to be a minimum age requirement for directors, but incorporators (i.e., those filing the paperwork) must be at least eighteen years old.
3. Prepare and file articles of incorporation with the Department of Consumer and Regulatory Affairs.
- The filing fee is $185. The Department of Consumer and Regulatory Affairs website has a sample articles of incorporation for a DC corporation, with instructions. You can file online by registering for the District's online filing system. For general information on corporate articles of incorporation, please see the Articles of Incorporation page.
- DC law requires that the articles of incorporations contain a clause stating that the company will not commence business until it has raised $1000 in capital.
- DC law requires that the articles of incorporation state the number of directors that will constitute the corporation's board of directors and identify the individual or individuals who will serve as directors until the first annual meeting of shareholders.
4. Raise $1000 in capital.
- DC law is unique in requiring a corporation to raise $1000 in capital before commencing business or incurring any debt. This requirement does not stop a corporation or its owners from taking steps necessary to organize the corporation or to obtain subscriptions to or payment for its stock. This requirement does not apply to non-profit corporations, LLCs, and other unincorporated businesses in DC.
5. Create the corporation's bylaws.
- There is no set criteria for the content of bylaws, but they typically set forth internal rules and procedures for the corporation, touching on issues like the existence and responsibilities of corporate offices, the size of the board of directors and the manner and term of their election, how and when board and shareholder meetings will be held, who may call meetings, and how the board of directors will function. You are not required to file bylaws with the Department of Consumer and Regulatory Affairs, but the corporation should keep a copy at its principal place a business. For general information on corporate bylaws, please see the Corporate Bylaws page.
6. Hold an organizational meeting.
- After the Department of Consumer and Regulatory affairs issues the corporation a "certificate of incorporation" approving its articles, the initial directors must hold an organizational meeting for the purpose of adopting bylaws, electing officers, and transacting any other necessary business. Minutes of the meeting should be recorded. You can find the DC statute relating to the organizational meeting at D.C. Code Ann. § 29-302.05.
7. Issue stock certificates to the initial owners of the corporation.
- See the general section on forming a corporation for details. The DC statute relating to stock certificates is located at D.C. Code Ann. § 29-304.21. Unless the articles of incorporation state otherwise, the board of directors has the authority to set the "consideration" (i.e., the amount to be received) for each share of stock.
8. 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 to help you determine whether you need a BBL.
9. Determine what tax and other regulatory obligations the corporation has, and take care of any necessary registrations.
- Request an Employer Identification Number (EIN) from the IRS. This can be done via its online application. 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.
- The District of Columbia's current income tax rate for corporations is 9.975%.
10. 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 corporation. You will probably need a Tax ID number (EIN), a copy of the articles of incorporation, and a resolution identifying authorized signers if those names are not listed in the articles.
- DC corporations must file a Two-Year Report with the Department of Consumer and Regulatory Affairs every two years. The filing fee is $250. Note that the first such report is due April 1st of the first year after incorporation, with each subsequent report filed every two years thereafter.
- DC law requires certain documents to be kept at a corporation's principal place of business. A list of the required documents is located in D.C. Code Ann. § 29-313.01.
- An S corporation has the same basic organizational structure as a regular corporation, but some of the tax advantages of a partnership or LLC. An S corporation pays no federal income tax, except for tax on certain capital gains and passive income. Instead, the corporation's profits and losses "pass through" to shareholders, and profits are taxed at individual rates on each shareholder's Form 1040. Certain requirements and additional obligations apply -- please see the S Corporation page for details.
- To form an S corporation, designate "S" status with IRS via Form 2553 within 2 months and 15 days of filing your articles of incorporation with the Distrrict of Columbia. There is no additional paperwork that you need to file with DC.
- The District of Columbia does not recognize the "S" status of a corporation and subjects S corporations to the same corporate state tax as other corporations. This does not mean, however, that you cannot designate your DC corporation an S corporation for federal tax purposes.
- DC law has provisions relating to what is known as a "close corporation" -- a classification for a corporation with a small number of shareholders (thirty-five maximum) that does not issue stock to the general public. In general, running a close corporation permits a less formal management style under the auspices of a shareholders' agreement. Please see the Close Corporation page for details.
- The articles of incorporation of a close corporation are different from ordinary articles of incorporation. The Department of Consumer and Regulatory Affairs has a sample articles of incorporation for a DC close corporation. Among other things, close corporation articles must contain:
- A heading stating the name of the corporation and that it is a close corporation.
- A provision stating that all of the corporation's stock, of all classes, is not to be held by more than thirty-five persons.
- A provision stating that all of the corporation's stock is subject to certain transfer restrictions.
- A provision stating that the corporation shall make no offering of any of its stock of any class which would constitute a "public offering" within the meaning of the United States Securities Act of 1933 (15 U.S.C. § 77a et seq.).
- The articles may also include a provision stating that the corporation will be managed by its shareholders rather than a board of directors pursuant to D.C. Code Ann. § 29-305.42.
- Running a close corporation generally requires a shareholders' agreement. This is an agreement among all or most of the corporation's shareholders, in which they agree to the relaxation of various corporate formalities, such as holding frequent shareholder and board meetings.
- If you are interested in forming a close corporation, you should contact a lawyer.