How to Start a Business in Washington DC in 11 Easy Steps

Washington DC has always attracted serious excitement and attention, whether it’s for world-changing cultural movements or its incredible international food scene. With a population of around 700,000 in the city, not to mention the larger area population of around 6 million, starting a new venture in the District of Columbia can turn your professional world inside out and upside down.

The DC economy is largely driven by politics, with government jobs generating around $44 billion and professional services coming in not too far behind at $38.6 billion. And, while there’s usually plenty of tumult in the capital no matter who’s in charge, a savvy business owner can capitalize on the momentum no matter what direction it’s heading. Here, we’ll look at how to get your business off the ground, including how to navigate some of the trickier legalities, so you can start living the life you’ve always imagined.

The steps:

1. Fine-tune your business idea
2. Create a business plan 
3. Choose a business name
4. Choose a business structure and register your business
5. Set up banking, credit cards, and accounting
6. Get funding for your Washington DC business
7. Get insured
8. Obtain permits & licenses
9. Find your team
10. Market and grow your business
11. Open the doors!

1. Fine-tune your business idea

You likely already have at least a basic outline of what you want to do and how large you want to grow. Fine-tuning an idea starts with understanding how the business fits with the larger DC area.

Local demand

When demand for products and services can drastically change from house to house (let alone neighborhood to neighborhood), consider how interests and preferences can dictate your bottom line.

For example, selling products in a neighborhood that’s already saturated with the same goods could be an easy way to get lost in the crowd. If you want to stand out in a scene with so much competition, you’ll need a really strong value proposition, such as superior customer service or items that are twice as durable as your nearest competitor.

Understanding the sectors 

DC has some very distinct economic needs, so fine-tuning may mean adapting your talents. So, if you have a degree in clean energy, you might open a consulting business to help Senators understand how they can apply clean energy principles to their latest legislation. Or if you’re in real estate, you might focus on short-term rental locations for visiting dignitaries.

2. Create a business plan 

All business plans should have a few core components. We’ll break down each major section and provide a brief overview. But if you really want to nail these, you should check out our links for a deeper dive.

Market research 

Market research boils down to who your customers are and what they want. This doesn’t just refer to their budget or their age range, but rather takes a bigger jump into the deeper motivations that propel their decisions. Market research can be the best way to hone your business idea, tweaking it so that you don’t waste time and energy during your business’s earliest days.

Financial plan 

Your financial plan is an estimate, meaning there’s some room for error. List and organize not just your projected expenses, including basics like salaries, office rent, and supplies, but also your projected profits. Seeing how well the two numbers match can help you scale up or down based on the rough numbers. For example, you might choose commercial space in an area just outside of DC if there isn’t quite enough demand to sustain a more central location.

Your business model should also factor in both upfront and downstream costs. So, let’s say that you offer professional services, such as campaign planning. This may make your upfront costs low, because you may only need a small office to provide professional advice, but it may also make you more vulnerable to reputation loss or litigation if you make a professional error.

Marketing plan 

Marketing can refer to anything from mentioning to friends and family that you’re opening a business to taking out huge billboards to proclaim it to the world. Whatever channels you choose, it’s important to cement your general marketing tactics so you can work out how they’ll fit into your everyday operations.

Choose a location 

When you can expect to pay around $54 per month for each square foot of commercial space you have, you can’t afford to play fast and loose with location. This is particularly important if you’re running a business like a restaurant or retail store, when your customers may not go very far off the beaten path.

Neighborhoods like Capitol Hill, Georgetown, and Foggy Bottom are all extremely popular, but again, you’ll need to ensure that demand is strong enough to sustain the expense of the location. 
You’ll also want to keep in mind:

• Permitting: Certain permits in DC are relatively inexpensive and easy to come by. Others, like liquor permits, may sometimes take years and thousands of dollars to get. If the location you choose has a finite number of permits to offer, you’ll need to prepare for the logistics of all that red tape. 
• Zoning: Zoning regulations can impact your office space, blocking you out of certain locations or setting ultra-specific requirements to legally operate in an area. 

It’s worth noting that DC does offer some official and unofficial perks of setting up there. For example, the sheer proximity to government facilities and officials can help speed your business and approvals along, whether you have a question or need a form signed.

Instead of gumming up the works, many business owners find that it’s easy to develop and retain a network from right off the bat. Plus, DC is known for offering a fairly consistent list of incentives to new business owners, including tax credits, grants, and realistic financing plans. (We’ll cover this more in Step #6.)

Decide if you’re an online-only business

Once you’ve done your research into locations, you might decide to move either some or all of your business online. For example, you might sell a large stock of clothing on your e-commerce store while limiting your local sales to a boutique shop.

An online business will need a strong digital presence, including a comprehensive, user-friendly website and detailed social media profiles. You’ll also need a supply and distribution plan that details how you’ll replenish and distribute your stock.

DC’s laws for online businesses generally mirror the federal laws for online businesses. Essentially, this means that you’ll need to comply with all general rules (e.g., obtain a business license, employee-identification number, etc.), but you won’t need to build in location-specific language or regulations (e.g., extended consumer privacy protections, etc.).

3. Choose a business name

Choosing a business name should be more than just naming what you do. A strong name is often the first touchpoint with the customers, so it needs to say something meaningful to your customers.

Branding

Your business name should be both memorable and match your brand personality. In Washington, DC, a DBA (Doing Business As) is referred to as a trade name. You can use a trade name if you want to operate under multiple names while keeping your legal business entity the same. A DBA allows you to legally use a different name for your customer-facing business. To make it official, you’ll need to complete DC trade name registration through the District of Columbia Department of Licensing and Consumer Protection (DLCP).

For example, you might set your legal name as Dave’s Liquidation, but your DBA name as Dave’s Wacky Emporium. 

Or, if you’re setting up a subset of your business, such as a personal shopping service under your clothing boutique line, you might use a DBA to separate the service while still keeping everything under one business name umbrella.

Legalities  

Before you name your business, start by performing a DC business entity search. This ensures that you don’t take another business’s name, which can help you avoid legal disputes in the future as well as general customer confusion down the line.

4. Choose a business structure and register your business

Your business structure can have a huge impact on everything from taxes to liability. By choosing the right business structure, you can protect yourself and your family against potentially eye-watering expenses.

Common business structures 

There are four basic business structures, which we’ll look at below. Just keep in mind that these are general frameworks only:

• Sole proprietorship: This refers to a business owned by one person. It can be great for simple businesses that take in relatively modest earnings, but the downside is that the business owner is personally obligated for all expenses, including debt or liability fees. 
• Partnership: Partnerships are similar to sole proprietorships except that it’s two or more people equally sharing the risk, responsibilities, and rewards. 
• Corporation: Corporations are separate legal entities that can set up their own laws. It offers you protection against debt, so you’re not obligated to sacrifice your personal assets in the case of failure. 
• LLC: When you form an LLC, it’s something of a hybrid, removing the personal liability from the owner but also allowing them to take advantage of some of the tax benefits of either sole proprietorship or partnership options. 

Tax advantages of each business structure

Here, we’ll look at the core tax advantages of each structure:

• Sole proprietorship/partnership: The biggest tax advantage of both these options comes down to simplicity. If you’re filing everything under your personal taxes, this can be easier than separating everything out and trying to keep it all straight. If you’re just starting out or you’re doing this solely as a side hustle, it could keep you out of legal hot water. Just keep in mind that it may not be worth taking the legal risks.  
• Corporation: Corporations give you more leeway to make your own rules, including equity distribution, but they can also be heavily taxed. The largest corporations end up getting double-taxed, meaning that both their profits and their dividends are taxed at different levels. In general, most new business owners won’t choose this option unless they’re ready to start an empire. 
• LLC: Usually, this is your best option for taxation, because you can potentially still file under personal taxes without the risk of liability or the threat of being double-taxed. There are no corporate business taxes, and companies can choose a tax structure that works for their needs.

Registration 

Once you’ve settled on a name and structure, you can file an application with the Department of Licensing and Consumer Protections and pay the $55 registration fee.

5. Set up banking, credit cards, and accounting 

Depending on your business, you may not technically need to set up official banking accounts. However, even if you don’t, you should have a way to keep your finances separate from your personal. We’ll look at what you’ll need to do below, and what to consider about your finances. 

Banking 

Business bank accounts give you a way to control your financing from one location. To set up a business bank account, you’ll need:

• EIN or SSN: You can use your Social Security Number if you’re a sole proprietorship. Otherwise, you’ll need your Employee Identification Number issued via the IRS. 
• ID: You’ll need government-issued IDs for any signatories on the account. 
• Business address: This can be your home address, but usually can’t be a PO Box.  
• Documents: You may need your official articles, certificates, and licensing paperwork, including DBA certificates and company bylaws. Rules may vary per institution. 

Credit cards 

Credit cards can be a great way to explore new opportunities with additional credit lines or even get sign-up bonuses that help you pay for business expenses. To open a business credit card, you’ll typically just need your EIN/SSN, business address, and government-issued ID.

Accounting 

Smaller businesses may use one-time accountants to file their taxes or part-time bookkeepers to ensure that money is properly tracked. Ultimately, it can take some time to find an accounting style that works for both your business and budget. Just keep in mind that the more disorganized or inaccurate your accounting, the more likely you are to be audited by the IRS.

6. Get funding for your Washington DC business 

Funding can come from any number of sources, including bank loans and credit lines. However, it’s also important to explore other sources of funding, including grants or investors. 

Loans

There are many funding programs and organizations that purport to help fledgling business owners. For example, the Small Business Administration (SBA) provides loans for countless small businesses at more reasonable interest rates than standard banks. You can also look into individual credit unions or smaller banks that cater to business owners’ needs.

Support organizations 

In DC, you can also look into organizations like Aspire to Entrepreneurship, Dream Accelerator Program, the DC Green Bank, or Community Development Financial Institutions, which may be able to supply funding or point you to new sources that you haven’t considered. Many of these locations offer more than just money: they offer advice, guidance, and practical assistance on how to get ahead in the DC area.

Investors

From angel investors to private equity firms, you can explore a number of funding options via investors. Just keep in mind that the competition for investment capital can be quite cut-throat, and the terms and conditions of the investment agreement may be more strict than you’re comfortable with. 

The nature of funding  

Funding a small business is like trying to keep up with an ever-moving target. Programs that distribute small business grants may unexpectedly run out of money, private equity firms can dry up, and interest rates on loans may only be slightly different from the national average. The best thing that you can do is stay on top of your research and ask questions about the terms of every financial agreement. 

7. Get Insured 

Business insurance is more than just a legal requirement for most businesses. It’s the safety net that keeps you from having to declare bankruptcy when the unexpected occurs. So, even if you don’t technically need the policy in order to meet legal requirements, you may want to weigh the financial pros and cons of avoiding certain types of protections. 

There are a number of commercial insurance policies available for businesses, including:

• Workers’ compensation: If you have employees, workers’ compensation protects you from having to pay for expenses if they’re injured on the job. 
• General liability: This protects your business assets (as opposed to your personal assets) from damages that may result during the course of normal operations. For example, if a customer slips on an icy walkway. Proof of general liability insurance is often required in order to receive your business license. 
• Errors and omissions: If you offer professional service or advice, errors and omissions can cover both mistakes and negligence.
• Commercial insurance: This covers not just buildings, but your equipment, furniture, and stock from natural and man-made disasters alike.

Every business owner will also have to research industry-specific insurance as well as extended policies like umbrella insurance. For example, a restaurant owner will need liquor liability insurance because a general liability insurance policy will not cover accidents or injuries that result from alcohol. 

Extended policies like umbrella insurance can also cover extreme expenses from liability claims. So, if your general liability covers up to $500,000 in legal expenses, your umbrella insurance would pick up the slack in case you exceed that number. It’s important to remember that even small business owners can be subjected to some very serious claims, so additional coverage is something to consider (even if you ultimately choose to forego it). 

8. Obtain licenses and permits

There is no general DC business license, every neighborhood has its own permit and licensing laws, so you’ll need to know how your location impacts your business operations. For example, if you’re located in an area of DC that hosts multiple special events throughout the year, like political conventions, you may need temporary permits to continue conducting your affairs (e.g., parking, unloading, etc.). We recommend talking to business owners in the area for a better heads up of what it’s really like to stay inside the legal lines. 

Permits and licenses 

• Basic Business License: This is usually a must for any business to operate in the District, though the application details may vary depending on your industry. 
• Clean Hands Certificate: This document is an official declaration that you do not have any outstanding debts that would interfere with your business operations.   
• Construction: You’ll need a permit from the Department of Buildings for both new construction or major renovations (including demolitions).  
• Trade/specialty: Electrical, plumbing, mechanical, or gas work will all need permits through the Department of Buildings. 
• Environmental: If your business impacts the local air, water, or soil quality, you may need environmental permits to certify your safety practices.  
• Public Space: If you want to extend your business into the public space, like building a small deck onto your restaurant, you’ll need a permit from the Department of Transportation. 
• Occupancy: This permit is issued through the DOB and verifies that your building is safe to enter. 

Federal income tax and Washington DC local tax

We’ve covered some of the general tax structure above, but there are a lot of ways to work within each of the frameworks. For example, an LLC might set up an S Corporation within the organization to reclassify taxes and potentially reduce tax payments.

It’s important to talk to an accountant who understands how both the federal and local taxes affect your business. For example, DC has a Sports Facilities Fee that applies to businesses making $5 million or more to fund building of new facilities within the city. Other taxes, including unemployment insurance tax and incorporated/unincorporated franchise tax, should also be factored into your calculations long before you open your doors.

9. Find your team 

When it’s easier than ever to get lost behind a screen, you can’t forget the importance of the people that surround you, especially in a competition-soaked place like Washington DC. You’ll need to both find and support people who genuinely want to help.

People are the backbone of the business

Your team doesn’t just refer to your full-time or part-time employees, but to everyone who supports your business. It’s important to make relationships, whether it’s with mentors or fellow business owners, that are mutually beneficial. Because your employees will likely do much of the grunt work, whether that’s speaking to customers, hauling stock around, or processing invoices, investing in quality work is ultimately an investment in your long-term business health. While it can be tempting to offer lower wages to save money now, this can end up costing you far more than you realize down the line. 

Comply with Washington DC payroll regulations 

General payroll regulations include posting the salary or hourly pay of the position (or the salary or hourly pay range) and general benefits of the position (e.g., healthcare, dental, etc.). Minimum wage is $17.50 for standard employees and usually $10 for tipped employees. All employees must be paid on time in regular increments, usually twice a month. 

Hire contractors 

Contract employees, like a lawyer on retainer or an accountant, can make strong contributions and a real difference to your business. Consider how one single tax maneuver can potentially save some LLCs thousands of dollars. Lawyers can also alert business owners to big changes in their industry, so that they have time to prepare before they’re subjected to major fines. 

If you’re entering a particularly crowded market, you may also consider a consultant in addition to a mentor. A consultant may be able to give you more up-to-date information about your sector, especially if customer demands are liable to change on a day-to-day basis. This step could make it easier to prepare for the unexpected events that can shatter (or at least shake) your livelihood. 

10. Market and grow your business 

We covered part of the marketing strategy above. Here, we’ll do a deeper dive into how to use common marketing tactics to nurture relationships with customers as you’re getting your business off the ground. 

Invite customers to opt in to a mailing list or newsletter

Mailing lists are a great way to keep customers up-to-date on everything from your latest sale to your newest products, and you can start these lists even before you officially open. You can also invite initial feedback or comments from customers, providing a two-way conversation to better understand what your customers are really looking for and why. 

Consider making special offers to attract new customers

You’re likely aware of how other companies offer attractive deals and specials for new customers. This is the business’s attempt to tempt customers to break habits and try something new (in hopes that the new business will become the new habit). Whether you advertise your offers on a standing chalkboard outside or on your website, make sure that you’re emphasizing the value of the offer. For example, you might offer a free month’s trial of a delivery service with no credit sign-up required as a way to establish trust with customers. 

Consider paid ads 

Ideally, you’ll fuel your business with quality customer service, stellar reviews, and helpful online content. However, the reality is that new businesses can really struggle before they open because they simply don’t have any history to draw upon. While paid ads are an additional expense, they can also be the only way for you to stand out in a crowded Google search. If you go this route, it’s important to keep a sharp eye on your ROI (and to cancel the ads once you start getting enough traction without them). 

Look for local businesses or brands to collaborate with

Part of a business’s success is everyday exposure: the more consistent you are, the more likely you’ll stay in business, and this is true whether you’re dealing with customers or fellow professionals. If you want to accelerate your relationships, though, it may take more than just opening your doors on time day after day. 

Instead, you can look for brands to collaborate with to both offer more value and develop stronger relationships. For example, a new dry cleaner might partner with a car wash, offering a limited-time special to get both your clothes and car clean on the same day. 

Invest in word-of-mouth

The best way to invest in word-of-mouth is to offer incredible products or services with a smile. When you’re just starting out, though, you may not have any happy customers to crow about you. This step can be tricky, but you may want to talk to your friends and family about potentially doing some user content marketing. For example, if you’ve ever done small jobs for your friends, you might have them post on their Instagram about the quality of your work. When it comes to word-of-mouth, even minor mentions can quickly snowball to major goodwill for your business. 

Create unique and helpful content to showcase your activity

Your website content should genuinely focus on helping the searcher. Usually, that means answering the biggest questions upfront, but it can also mean providing a fun, frothy experience. For example, a new party-planning company might send out flirty invitations by mail as a way to entice their mailing list to check out their website or come to their launch. 

11. Open the doors! 

Now that you’ve laid out the groundwork, the only thing that’s left is to fling open the doors. 

Plan a successful launch event

We often think of launch events as grand openings, which can be a really fun way to cement your customer base from the word go. Restaurants, retail establishments, and other commercial-facing businesses can all benefit from having a party or a one-day sale. 

However, launch events don’t have to be full-scale productions with caterers and fireworks. For example, small business owners might invite their core team of people as a way to toast and celebrate the grand opening. Practical and luxury businesses alike should mark the occasion somehow, even if it’s just a small speech about all the hard work. 

Land your first sale

Now, it’s time to land your very first sale. As you generate more business, make sure to keep a sharp eye on your online reviews. The goal is not to make everyone happy (because that’s unrealistic), but rather to make sincere efforts to satisfy your customers’ needs.

Conclusion

Now that you’ve completed all the steps, all that is left is to open the doors and start managing your dream Washington DC business.

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