What District of Columbia expects from a new trade business

Basic Business License first, plus a home improvement license for houses

DC licenses contractors through the Department of Licensing and Consumer Protection (DLCP) as a Basic Business License. General contractors and construction managers apply with liability insurance, a certificate of occupancy or home occupation permit, a sample contract, and tax clearance.

Home improvement work has its own Home Improvement Contractor license, which adds a $25,000 surety bond and a police criminal history report. General and home improvement contractors doing residential work also have to designate a Basic Business License for at least one home improvement salesperson.

Plumbing and other trades go through the Board of Industrial Trades, with apprentice, journeyman and master levels.

A 2024 law created a Board of Construction Managers and General Contractors with experience and eligibility rules. The DC Code marks it not funded and not implemented, so watch for that to change. A construction attorney can check where your work falls.

Source: DLCP, contractor and construction services · D.C. Law 25-244, General Contractor Licensing Amendment Act · D.C. Code 47-2853.78b, status of the new license · D.C. Code 47-2853.121 and .122, plumbers

Who to call: an attorney near you

Workers' comp: pay someone and you're an employer

DC's act has no minimum headcount. An employer is any person or business using the service of another for pay in the District, and every employer must secure coverage, through an insurer or by self-insuring. Casual employees are left out of the act.

You answer for your subs' crews. If your sub didn't secure coverage for their workers, the contractor above them is liable for it and has to secure it. So get a certificate from every sub before they start.

You also have to post a notice showing your coverage. An insurance agent who writes contractors can price it and tell you how the policy treats you as the owner.

Source: D.C. Code 32-1501, definitions · D.C. Code 32-1503, coverage · D.C. Code 32-1534, security for payment · D.C. Code 32-1536, notice

Who to call: an insurance agent near you

Getting paid: notice of intent, then 180 days

DC's lien runs through a notice of intent recorded in the land records:

• Record it during construction, or within 90 days after the earlier of completion or termination of the project. Miss that and the lien ends.
• What it takes: the notice has to be sworn and notarized, and carry a copy of your current license and a good standing certificate. On a home job, attach the home improvement contract. A notice that doesn't comply is void.
• Mail the owner a copy by certified mail within 5 business days of recording. If it comes back, post a copy on the property.
• Subs and suppliers hired directly by the original contractor have the same rights. They also serve the notice on the owner. Until they do, the owner can keep paying the contractor, and those payments reduce the lien.
• Sue to enforce within 180 days after recording, and record a notice that the suit is pending within 10 days of filing.
• If the owner paid the original contractor in full in good faith, subs have no lien. A sub's written notice of what's owed, sent while the owner still owes the contractor, is evidence that later payments weren't in good faith.
• Home improvement work: proof that the owner paid the person who contracted for the work is a defense against any lien and makes it void.

A construction attorney can prepare these for you.

Source: D.C. Code 40-301.01 · D.C. Code 40-301.02, notice · D.C. Code 40-303.01 and .02, subcontractors · D.C. Code 40-303.03, notice to owner · D.C. Code 40-303.13, when to sue · D.C. Code 47-2883.03, home improvement payment defense

Who to call: an attorney near you

Sales tax: materials going into the building are a retail sale

DC's definition of a retail sale includes materials used to build, repair or alter real property that become part of the property, even if the property will be sold later. So a contractor's supply purchases aren't resale. If DC tax wasn't paid when you bought, use tax applies.

The general rate is 7% beginning October 1, 2026. It was 6% before that. Use tax runs at the same rate.

Watch one line. Real property maintenance and landscaping are taxable services, and that covers cleaning and minor adjustments and repairs. Painting and work done as part of construction or major repairs aren't counted as maintenance. A CPA who works with contractors can sort your jobs.

Source: D.C. Code 47-2001, definitions · DC OTR, FR-379 general information for businesses · DC OTR, taxable and non-taxable services · D.C. Code 47-2002, sales tax rate · D.C. Code 47-2202, use tax rate

Who to call: a CPA or tax pro near you

LLC: add the Unincorporated Business Franchise Tax

Forming an LLC with DLCP costs $99. A $300 biennial report is due April 1, first in the year after formation, with a $100 late fee. You also need a Basic Business License, a tax registration and clean hands certification.

The surprise is DC's Unincorporated Business Franchise Tax. Once gross receipts pass $12,000, the business pays 8.25% on taxable income after a 30% owner salary allowance and a $5,000 exemption. The minimum is $250, or $1,000 if District gross receipts top $1 million, and it applies even at a loss. A business with more than 80% of its income from the owners' personal services, where capital isn't a material income-producing factor, is exempt. Whether you fit that is worth asking.

DC's personal income tax runs up to 10.75%. How all this nets out, and whether an S-corp changes it, is a numbers question for a CPA who works with contractors.

Source: D.C. Code 47-1808.03, tax rates · DC CFO, Tax Facts 2024 · DLCP, corporate registration · DC OTR, business franchise tax rates · D.C. Code 47-1808.04, exemption · DLCP, license and corporate filing fees

Who to call: a CPA or tax pro near you