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Advantages of Incorporating a Business in District of Columbia

If you are planning to establish a startup company District of Columbia then you can choose from different types of business entities including Limited Liability Companies, C and S Corporations, Nonprofit Corporations, Professional Corporations, General Partnerships, Limited Partnerships, Benefit Corporations, Statutory Trusts, and General or Limited Cooperative Associations. It is home to one of the strongest economies in the nation with over $3.36 billion in capital investment forecasted over the years. It is a thriving marketplace for invention and innovation and is the favored headquarters for giants like Lockheed Martin, General Dynamics, The Advisory Board, Blackboard, CoStar, Hilton Worldwide, Fannie Mae, and the World Bank.

Salient Advantages leading to Business Growth

What makes District of Columbia a great state of small businesses and start-ups? The most important reason is that DC is the capital and supports a positive business climate. There are plenty of reasons to register a new company in District of Columbia and there are several drivers or catalyst that will aid in the overall growth of a business entity. It is also important that you identify the type of business that you want to establish as each entity type will have its own set of advantages and disadvantages. Let’s take a look at some of the advantages of these two business entities:

Advantage#1: The benefits of Incorporation or LLC formation

C or S Corporation

Tax Credit and Exemption Programs

If you register a new company in District of Columbia then you will be able to benefit from the variety of tax credit and exemption programs and this includes:

  • Stormwater Retention Credits (SRCs): The program has been implemented by the Department of Energy & Environment (DOEE). As a part of the program, you can generate as well as sell Stormwater Retention Credits (SRCs) and earn revenue for those projects that help in reducing harmful stormwater runoff caused by installation of green infrastructure (GI). More Information
  • Alternative Fuel Infrastructure Credit: If you register a new business in District of Columbia, you will be able to apply for a maximum credit of 50% of the allowable costs related to purchase and installation of alternative fuel storage stations. You derive credit of up to $10,000 on infrastructure and a maximum of $19,000 per vehicle.
  • Work Opportunity Tax Credit (WOTC): This is a Federal program and its objective is to help businesses in reducing their federal tax liability especially for private-for-profit entities. Application

Independent life

When you register a new business in District of Columbia as an S Corporation, it will enjoy an independent life. This means that the incapacity or death of a stockholder will not have a negative impact on the business operations.

Limited Liability Company

Grants, Loans & Reimbursement

A startup company District of Columbia or even a small business will require financial support in the starting phase. The good news is that there are several loan, reimbursement, and grants program that an LLC can benefit from:

  • Anacostia Economic Development Corporation (AEDC) Program: This is a community development program and it contains the “Façade Improvement Program” that helps in facilitating a Storefront Facade Improvement Project in low or moderate income commercial or retail areas in Wards 7 & 8 of the DC area. This program is primarily for small businesses and you can get a grant assistance of almost 75% of the project cost. More Information
  • The Community Development Financial Institutions (CDFI) Fund: This is an innovative federal agency within the Treasury Department and has in the recent past awarded $2.3 billion on a competitive basis to small and emerging CDFIs and financial institutions. It’s primary objective is to promote economic development through offering a variety of financial products. More Information
  • On-the-Job (OJT) Training Program: A startup company District of Columbia can participate in this program and you can benefit from a reimbursement of 50 to 75% of eligible trainee’s wages for a maximum of 1040 hours. The program has been implemented by Department of Employment Services (DOES) and is aimed at small to mid-size companies as well as large companies with over 100 employees. More Information

Flexible Profit Distribution

A startup company District of Columbia LLC has the benefit of being able to select different ways of distribution of profits unlike a partnership where the distribution is 50-50.

Advantage#2: District of Columbia Business Incentives

Once you register a new company in District of Columbia, there are several business incentives and programs that your business entity can benefit from. Let’s take a look at some of the most popular programs:

DC Main Streets Program

This is a highly comprehensive program with an objective of promoting the revitalization of traditional business districts in the DC area. In order to participate in the program, you have to first register a new business in District of Columbia. Some of the accredited DC Main Streets programs include:

  • Tenleytown Main Street
  • Barracks Row Main Street (DSLBD-CBO)
  • Eastern Market Main Street
  • North Capitol Main Street
  • Georgetown Main Street
  • Deanwood Heights Main Streets (DSLBD-CBO)

As a part of the program, your business entity will require Free Small Business Technical Assistance. This assistance includes information regarding marketing and social media, questions on renovations, tenant recruitment, information on permits, and other services for business entities. Some of the programs within this program like ARCH Development Corporation (DSLBD-CBO) provide a maximum of 80% of the cost for eligible exterior improvements. More Information

Qualified High Tech Companies (QHTC) Program

This is a type of DC Tech incentive program where your startup company District of Columbia can claim a really attractive incentive package in the country. The benefits or incentives include reduced corporate franchise tax rate, lowered costs of hiring & training, reduced capital gains tax rates, and lower cost of relocating workers. You can enjoy the following:

  • 0% corporate franchise tax for first 5 years followed by a rate is 6% only
  • New hire wage tax credit of up to $15,000 annually
  • Tax exemption for a period of 10-year from the date of acquisition of personal property being used for operating your business
  • Relocation tax credit of up to $7,500
  • A 5-year freeze period on real property taxes

There are several other benefits of this program as well! Application Docket

Are there any Disadvantages of Incorporating in District of Columbia?

What disadvantages could possibly be there for a start-up company District of Columbia? In reality there is none except a few that are common to different types of businesses like processing of incorporation can be time consuming and corporations would require more paperwork while LLC formation has the disadvantage of limited life. These are small disadvantages as compared to the many incentives DC has to offer.

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