According to a recent CNBC analysis, Washington DC is the third-best city in the country for launching a business. Despite the fact that start-up activity in the area is increasing, it is still the third costliest market in the country to establish a firm, according to a recent SmartAsset analysis. The yearly cost of running a small business in the DC region is $395,017, which is only surpassed by San Francisco, at $422,455, and San Jose, at $439,831.
Here are a few more statistics that highlight the state of small businesses in the District of Columbia.
Quick Washington DC Small Business Statistics for Entrepreneurs
- Small businesses account for 98.2% of all private enterprises in the city.
- Approximately 49.2% of Washington DC employees work for small businesses.
- Racial minorities own 42.8% of businesses in Washington DC.
- Military veterans make up 2.8% of workers and own 4.6% of businesses.
- The per capita disposable income in Washington DC is $72,295.
- In 2019, small businesses exported goods worth $876 million.
- Between March 2019 and March 2020, 4,538 businesses in the District of Columbia opened and 3,801 closed, resulting in a net increase of 737.
- The per capita consumption expenditure in Washington DC is $65,169.
- The sales tax rate in Washington DC is 6%.
Washington DC Small Business Statistics
1. What is considered a small business in Washington DC?
According to the Small Business Administration (SBA), which sets small business standards in Washington DC, a small business is defined as having fewer than 500 workers for manufacturing enterprises and less than $8 million in annual revenue for most nonmanufacturing businesses.
There are currently 79,814 small businesses that represent 98.2% of all private enterprises in Washington DC. Between September 2019 and September 2020, DC outpaced new business openings in Maryland and Virginia, adding 1,951 of the region’s 2,396 net new establishments.
If you want to start a business in Washington DC, you should look for a limited liability company (LLC) formation service that will guide you through the complicated registration process by processing and submitting your Articles of Organization to the Department of Consumer and Regulatory Affairs (DCRA) on your behalf. Find out which is the best LLC formation service in Washington DC by reading this review.
2. How many people are employed by small businesses in Washington DC?
Small businesses in Washington DC currently have a total of 254,920 employees working for them. That is 47.2% of the entire state’s workforce.
The minimum hourly wage for non-tipped employees in Washington DC increased to $15.20 on July 1, 2021, as a result of the Fair Shot Minimum Wage Amendment, enacted in 2016. The tipped minimum wage was also raised to $5.05 per hour. However, if an employee’s hourly earnings (with tips) do not match DC’s full minimum wage on a weekly basis, the employer must cover the difference.
3. Washington DC small business statistics by industry
The professional, scientific, and technical services sectors cumulatively represent the largest industry in Washington DC in terms of small business investment with a total 21,842 firms operating in them. Approximately 17,348 of these firms have no employees, 3,699 have 1–19 employees, while 795 have 20–499 employees.
Mining, quarrying, and oil and gas extraction represent the smallest industry in the state with only four small businesses invested in it.
4. Washington DC small business ownership by ethnicity
Washington DC has a population of 1,782,959 residents. White/Caucasian Americans form the largest ethnic group representing 93.5% of the population. They are followed by Black/African Americans (3.6%), Hispanic/Latino Americans (1.7%), Asian Americans (0.8%), and American Indian and Alaska Natives (0.3%).
Here is a breakdown of how small business ownership is distributed among these groups:
- White/Caucasian — 41,082
- Black/African American — 25,666
- Hispanic/Latino — 5,313
- Asian — 4,746
- American Indian and Alaska Native —- 171
- Native Hawaiian and Other Pacific Islander — 40
5. Washington DC small business ownership by gender
There are 31,849 small businesses owned by women in Washington DC. Around 29,000 of these firms are nonemployer businesses and 2,849 have employees working for them. Men own 38,103 small businesses, of which 30,000 have no employees and 8,103 have employees on payroll.
There are also 2,026 small businesses in DC that are equally owned by both men and women.
6. Business taxes in Washington DC
Standard limited liability companies (LLCs) are pass-through businesses. Most states do not require LLCs to pay income taxes to either the federal or state governments. However, in Washington DC, LLCs are liable to the unincorporated franchise tax. Furthermore, LLC revenue is dispersed to individual members, who pay federal and state taxes on the amounts assigned to them.
However, you might choose to have your LLC classed as a corporation. In that instance, the LLC would be liable to the corporate franchise tax imposed by Washington DC. The top corporate franchise tax is 8.25%.
If you want your LLC to remain in good standing with the District of Columbia Secretary of State’s office, you must always file your company taxes on time. A registered agent can assist you with the difficult tax filing procedure and ensure that you are kept up to speed on any upcoming filing deadlines.
To learn more about how a registered agent may help your business, read my review of the best registered agents in Washington DC
7. COVID-19 economic effect in Washington DC
The pandemic’s chilling impact on commuter and tourist activities has been particularly visible in fluctuations in spending within Washington DC, as well as the tax income connected with that spending. After all pandemic restrictions were eased in June 2021, office buildings remained mostly unoccupied.
Only one out of every four workers had returned to work, and Metrorail usage was less than one-sixth of pre-pandemic levels. As a result, consumer spending lingered a percentage point below pre-pandemic levels.
8. Small business financing in Washington DC
The Community Reinvestment Act (CRA), enacted in 1977, requires the Federal Reserve and other federal banking authorities to encourage financial institutions to help satisfy the credit needs of the communities in which they operate, particularly low- and moderate-income (LMI) neighborhoods.
Large banks are required by this statute to disclose new small business loans. In 2019, reporting banks in Washington DC paid out $184.7 million in loans to firms with $1 million or less in sales. Total reported new lending to firms with loans of $100,000 or less was $237.1 million, while total reported new lending to businesses with loans of $1 million or less was $609.2 million.
9. Washington DC small business export statistics
According to data from the US Census Bureau’s profile on US exporting and importing companies, 597 recognized firms shipped items worth $937 million from Washington DC in 2019. Approximately 434 (or 72.7%) of the exporters were small businesses that shipped items totaling $876 million, accounting for 93.5% of all reported business exports.
The Final Word
Washington DC is all about politics, and everyone who isn’t employed by the federal government is most likely employed by a lobbying firm, a nonprofit organization, or another entity seeking to gain from its proximity to Capitol Hill. Start-ups are increasingly becoming a part of this.
The DMV region—DC, Maryland, and Virginia—provides several perks and incentives to businesses. Washington DC gives income tax credits to companies, Virginia provides excellent incentives for relocating firms and training personnel, and Maryland is devoted to reviving their metropolitan regions for entrepreneurs.
- DC Policy Center
- US Small Business Administration
- Square Up
- Tax Foundation