How to Start a Sole Proprietorship in Washington, D.C.

If you've started selling your homemade jewelry online or running personal training sessions out of your garage, you've likely formed a sole proprietorship already—and you're not alone. When an individual starts a business (sells goods or services) and they haven't filed any legal documents with their state officially registering the business, then they've automatically created a sole proprietorship.

A sole proprietorship is low maintenance. It doesn't typically require you to file any creation documents or submit renewal filings or fees, and you can usually report your income on your personal tax return. But sole proprietors are personally liable for the business's debts and obligations, so you might need to dip into your personal funds to satisfy any debts your business can't pay.

In Washington, D.C., you can establish a sole proprietorship without filing any legal documents with the D.C. Department of Licensing and Consumer Protection (DLCP). Though no action is required to legally create a sole proprietorship, you should follow four simple steps to start your business:

1. Choose a business name.
2. File a trade name registration with the DLCP.
3. Apply for licenses, permits, and zoning clearance.
4. Obtain an employer identification number (EIN).

For more information, read our article on how to start a business in Washington, D.C.

1. Choose a Business Name

In Washington, D.C., a sole proprietor can use their own legal name or a trade name—also sometimes known as an "assumed business name" or "doing business as" (DBA)—to conduct business. If you plan to use an assumed name or trade name for your business, it can't be the same name as any other company currently registered with the state.

It's also a good idea to choose a name that's not too similar to another registered business to avoid trademark infringement. Under trademark law, your trade name can't be used by someone else in a way that would cause confusion among consumers. If you use a name that's the same as or too similar to someone else's trademark and you both provide similar goods or services, then you could be infringing on their trademark. If you find a competitor company already exists with a similar name, then it's best to choose another name.

For example, suppose you want to operate a food cart under the business name Crushing Capitol Caramel Corn. But a soda shop a few blocks down is using the name Crush Capital Caramel Corn and Candies. Because the names are so similar and you and the soda shop both sell caramel corn, you'll probably cause some confusion if you adopt your name. In that case, you'll probably need to find another name.

To make sure your business name is available, you should run a search in the following government databases:

• DLCP's CorpOnline tool (you'll need to register for an account before you can conduct your search), and
• United States Patent and Trademark Office's Trademark Electronic Search System.

For more information, read our FAQ on how to choose and register a business name.

2. File a Trade Name Registration in Washington, D.C.

If you use a business name that's different from your legal name, Washington, D.C. requires you to register your trade name with the DLCP. (D.C. Code § 47-2855 (2023).)

For example, suppose Keigo Takami provided flight lessons under the trade name Hawks Number Two. Because his business name is different from his legal name, Keigo Takami, he would need to register his trade name with the DLCP.

As of 2023, the filing fee is $55. You can download the TN-1 Trade Name Registration form and mail it in to the DLCP, or you can file online using the DLCP's CorpOnline tool. You'll need to create an Access DC account to log on to CorpOnline and file your form.

3. Apply for Licenses, Permits, and Zoning Clearance

Depending on your business activities, you could need to apply for business or professional licenses. Unless you're a licensed professional, you'll likely need to obtain a general business license. For example, lawyers wouldn't be required to obtain a general business license because they're already regulated by the D.C. Bar. (D.C. Code § 47–2851.03d. (2023).)

You might also need to comply with local regulations, building permits, and zoning laws.

4. Obtain an EIN

Sole proprietors who wish to have employees need to obtain an EIN. This is a nine-digit number issued by the IRS for tax reporting purposes. All businesses with employees are required to report wages to the IRS using their EIN. You can register for an EIN online with the IRS.

Sole proprietors without employees aren't required to have an EIN. Instead, you can use your Social Security number to report taxes. Nevertheless, you might want to obtain an EIN. Some banks require an EIN to open a bank account, and having an EIN can reduce the risk of identity theft.

Unless exempt, businesses are required to report combined net income and gross receipts. You might need to use your EIN when reporting business taxes.

Next Steps for Sole Proprietors

You should consider taking the following additional steps once you've started your sole proprietorship:

• Open a business bank account for your sole proprietorship. Using your trade name and EIN, set up a bank account to keep your business and personal finances separate. You should keep your business income and expenses separate from your personal funds so you can easily distinguish your business's financial profile for tax purposes. For instance, you can more easily report business deductions on your tax return if you've created a separate account.
• Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy can offer financial protection against unforeseen events. You should also consider other types of insurance for your business, including property and auto insurance. For more information, read our article on the types of insurance your small business might need.
• Report and pay taxes. Depending on your specific business activities, you could be required to report such items as sales tax and use tax. You'll need to register with the OTR's Business Tax Service Center for more information on reporting and paying taxes. Additionally, if you have employees, you must report and pay employment taxes on a periodic basis. Once you've filed your tax registration with the OTR, the appropriate government agencies will contact you to provide more details about potential tax obligations for your business. (For more information, see our section on business taxes and deductions.)

To find out how to form a sole proprietorship in any other state, see our 50-state guide to establishing a sole proprietorship.

Consulting a Small Business Attorney

You might not need to submit paperwork to start a sole proprietorship in Washington, D.C. But your specific circumstances could require you to file forms at the state and local level and comply with various rules and regulations. As a business owner, it's important to understand what steps you need to take to legally start and operate your sole proprietorship.

If you have business experience and only need to meet a few requirements to establish your sole proprietorship, you can probably do the work yourself. But if you need specific guidance or run into a complicated issue when starting your business, you should talk to a small business lawyer. They can help you register your business name, file your taxes, and obtain licenses and permits.