StructureCost2026

Sole proprietorship vs C corp in District of Columbia: which costs less (2026)

At $100,000 profit in District of Columbia, a sole proprietorship costs $30,600 a year in tax and fees and a C corporation costs $32,232. A C corporation starts to cost less from about $330,000 of profit.

More settings revenue, salary, filing status, payroll costs, PTET

+$1,632 a year

more for a C corporation than a sole proprietorship in District of Columbia, at these numbers.

Switching from a sole proprietorship to a C corporation starts to pay at about $330,000 of profit, with the same settings. Setting up costs $99 once in state filing fees.

District of Columbia, 2026: $100,000 profit, single filer

ItemSole propC corpChange
DC unincorporated business franchise taxotr.cfo.dc.gov, checked Oct 23, 2026$5,363$0−$5,363
Self-employment taxirs.gov, 2026 rates$13,372$0−$13,372
Federal income taxirs.gov, 2026 rates$7,358$4,679−$2,679
State income taxotr.cfo.dc.gov, checked Oct 23, 2026$4,507$3,770−$737
Biennial Reportdlcp.dc.gov, checked Oct 23, 2026$0$150+$150
Payroll tax on your salaryirs.gov, 2026 rates$0$6,723+$6,723
Payroll service and tax return (estimate)$0$2,000+$2,000
State corporate income taxotr.cfo.dc.gov, checked Oct 23, 2026$0$4,470+$4,470
Federal corporate income tax (21%)irs.gov, 2026 rates$0$10,440+$10,440
Yearly cost$30,600$32,232+$1,632
What these figures count
  • State income tax, and state taxes on the business itself: franchise, LLC, S corp, gross receipts and excise taxes.
  • Social Security and Medicare on both sides of an owner salary, federal unemployment tax and the state's new-employer rate.
  • The 20% qualified business income deduction with its income limits and the professional-service rule.
  • Yearly report fees, and a cost you can change for payroll and the business tax return.

Many S corp calculators leave out state taxes and the QBI deduction, which can make the election look better than it is.

Yearly cost at each profit level

ProfitSole propC corpDifference
$30,000$6,649$7,970+$1,321
$50,000$13,120$14,111+$991
$75,000$21,357$22,091+$734
$100,000$30,600$32,232+$1,632
$150,000$51,572$55,160+$3,588
$200,000$72,981$77,270+$4,289
$300,000$117,007$122,376+$5,369

Federal and District of Columbia tax and fees, single filer, revenue 1.5 times profit, default salary for S and C corps. "Difference" is C corporation minus Sole proprietorship.

What the switch takes in District of Columbia

  1. File the Articles of Incorporation of Domestic Business Corporation (Form DBU-1) with the state: $99 (fee).
  2. Get an EIN from the IRS (free, online) and open a business bank account in the new name.
  3. Incorporate with the state, then issue shares to yourself.
  4. Register with District of Columbia as an employer and run payroll for your own salary: federal Forms 941 each quarter, Form 940 and a W-2 each year. New employers pay District of Columbia unemployment tax at 2.7% on the first $9,000 of wages. does.dc.gov See what payroll costs.
  5. Federal return each year: Form 1120, due April 15 for a calendar year.
  6. State upkeep each year: Biennial Report, $300 every two years, due April 1 every second year, first due April 1 of the year after formation.

What changes between the two

A C corporation pays 21% federal tax and District of Columbia corporate tax on its profit, and the owner pays tax again on dividends (the double tax). A sole proprietorship pays no federal income tax itself: profit lands on the owner's return, where the 20% qualified business income deduction can apply.

The figures assume all C corp profit after tax is paid out as dividends. Profit kept in the company to grow it is taxed only at the corporate rate until it is paid out, which is where a C corp can come out ahead.

Questions

How much does it save at $100,000 in District of Columbia?

Nothing. C corporation costs $1,632 a year more ($32,232 against $30,600).

When does a C corp make sense in District of Columbia?

Mostly when profit stays in the company, when outside investors need one, or for the qualified small business stock exclusion. For an owner who takes the profit out, the second tax on dividends usually costs more. On these figures the C corp costs less from about $330,000.

More for District of Columbia

Common cases in District of Columbia

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