Doing Business in the District of Columbia
All persons doing business in the District of Columbia, including all contractors and suppliers, must have a Basic Business License (BBL). [1] Under D.C. law, a “business” is defined as “any trade, profession or activity that provides, or holds itself out to provide, goods or services to the general public or any portion of the general public, for hire or compensation in the District of Columbia.” [2] Nearly all business activities in DC require a BBL.
Prior to obtaining a BBL, any entity must “register” with the Superintendent of Corporations of the Department of Consumer and Regulatory Affairs or DCRA Corporations Division (qualify to do business or become domesticated in DC) to conduct business in DC. [3] The DC Code requires any DC corporate entity to register with DCRA or be subject to sanctions for failing to file and register.[4] This is also true for any foreign entity that conducts business in DC. [5] A foreign filing entity may not conduct business in DC without first registering with DCRA).[6] The registration statement must state the name and type of entity, “Alternate Name” or trade name, the entity’s address and jurisdiction of formation, registered agent’s name, a statement of the kind of business it intends to do in the District, the name and address of anyone with interest or control over the entity, and a certificate of good standing from the Registration Authority of the state of incorporation.[7]
Similar to Maryland and Virginia, the DC Code states that no foreign entity conducting business in the District may maintain a legal action or proceeding in the District without first registering.[8] However, failing to register does not impair any contracts the foreign entity may have, and does not prohibit it from defending any lawsuit in the District.[9] However, an entity that fails to register could face civil penalties and fines.[10]
Material Supplier Deliveries
“Doing business” in DC is defined as “any trade, profession or activity which provides . . . goods or services to the general public . . . for hire or compensation in the District of Columbia.”[11] However, the Code does not otherwise define “doing business” or “conducting business” for the purposes of the registration requirement.[12] In the D.C. Code, there are listed several exclusions that do not constitute “conducting business” for the purposes of the registration requirement; these include, for example: maintaining, defending, mediating, or arbitrating a legal action or proceeding; selling through independent contractors; soliciting orders if those orders require acceptance outside the District; doing business in interstate commerce; creating or acquiring indebtedness, mortgages, or security interests in property; and conducting an isolated transaction not in the course of similar transactions.[13]
The Code does distinguish “conducting business” for the purposes of the registration requirement from “the contacts or activities that may subject a foreign filing entity or foreign limited liability partnership to service of process, taxation, or regulation under law of the District” and courts have been careful to separate the issue of transacting business under the registration requirement from jurisdictional contacts analysis.[14]
An out of state distributor or material supplier is generally engaged in interstate commerce, not doing business in the District, and not required to obtain a Certificate of Authority to conduct business in the District.[15] A material supplier that is based in another state is engaging in interstate commerce and not “doing Business” in the District by delivering items into DC.[16] The distributor or material supplier can even send representatives to the District occasionally for sales calls or training sessions without “doing business” in the District.[17]
District of Columbia Contractor Licensing Requirements
The Division of Occupational & Professional Licensing of the District of Columbia Department of Consumer & Regulatory Affairs (DCRA) regulates licensing of general contractors, construction managers, and home improvement work, as well as “specialty trade contractors” that perform electrical, plumbing, asbestos abatement, HVACR (heating, ventilation, air conditioning and refrigeration).[18]
General Contractor or Construction Manager
Any individual or business acting as a general contractor[19] or construction manager[20] is required to have a special endorsement on its Basic Business License.[21] There are five classes of licenses (Class A through Class E) based on the contract value of any single project, with Class A having no limit, Class B for contracts up to $10 million, Class C for contracts up to $5 million, Class D for contracts up to $2 million and Class E for contracts up to $500,000.[22]
Applicants must file an application which can be done by mail, online or in person with the DC Business Licensing Division with the requisite fees as well as supporting documentation such as the following[23]:
An application signed by the owner or authorized representative of the business entity[24];
A Credit Report[25];
A Clean Hands Certification Form which certifies that the contractor does not owe DC more than $100 in fines, penalties, interest or taxes[26];
A registered Tax Number (SSN or FEIN)[27];
A Certificate of Occupancy or Home Occupancy Permit for businesses operating in a building in DC to show that it is in compliance with building and zoning codes;
A Certificate of Insurance for the specific Class of License applied and naming the DCRA as the holder of the Certificate. The Certificate will be in effect for the entire license period and a single violation of the insurance requirement can be grounds for suspension or revocation of the license[28];
Three copies of sample contracts and receipts; and
Be subject to a 30 day background investigation.
The general contractor/construction manager may be required to provide a bond as a condition for the issuance of the license as well.[29]
The general contractor/construction manager license can be assigned or transferred but only if approved by the DCRA. The license is valid for 2 years and the DCRA may send notice of impending termination to the licensee 60 days prior to the expiration date. A license can be renewed up to 6 months after expiration for additional fees and penalties. If a license has expired for more than 6 months, the DCRA will treat the licensee as a new applicant.[30] If a licensee works in the period during the six months after the expiration date, the contractor will be viewed as conducting business without a license and will be liable for fees and fines and penalized.[31]
A contractor’s license can be denied, suspended or revoked by the DCRA if a licensee fails to maintain any qualifications for a license.[32] Grounds for action include material misstatements, failure to comply with laws and regulations, conviction, misrepresentation, fraudulent conduct, false, misleading or deceptive advertising of contracting services, working beyond the scope of the license, refusal or failure to complete the work and other conduct.[33] If it is determined that there has been a pattern of substantial code violations[34] a temporary suspension may be issued for a period of 10 days, during which time the contractor shall have the opportunity for a hearing.[35] If there is sufficient evidence of code violations, suspension can be for a longer period or the license can be revoked.
Subcontractor
A subcontractor is any person that performs construction related services for a general contractor, construction manager or another subcontractor.[36] All subcontractors hired by the general contractor must be licensed and registered to engage in the type of work specified in the subcontract as required under DC law.[37]
The Board of Industrial Trades of the DCRA’s Occupational and Professional Licensing Administration governs specialty trades such as such as electrical, plumbing, asbestos abatement, gasfitters and HVACR (heating, ventilation, air conditioning and refrigeration) contractors.[38] The Board has additional qualification and examination requirements for specialty trade contractor licenses that are unique to the specialty trade.[39] Most specialty trade contractor licenses have bonding and insurance requirements as well.[40]
Home Improvement Contractor
Any contractor that performs home improvement work on contracts that exceed $300 must have a home improvement contractor license. Home improvement work is defined as the addition to or alteration, conversion, improvement, modernization, remodeling, repair, or replacement of a residential property,[41] or a structure adjacent to the residential property, including a driveway, fence, garage, porch, deck, or swimming pool.[42] It does not include new residential construction, work performed by tradesmen (electricians, plumbers, HVACR and gasfitters) limited to their licensed profession or work done by a homeowner on his or her own property.[43] It is important to note that a homeowner under DC law includes any residential property owned or occupied by the homeowner.[44]
Similar to the general contractor/construction manager license requirements discussed above, a home improvement contractor must submit a Basic Business License Application for the Home Improvement Category , a Clean Hands Certification, Tax Number, a Certificate of Occupancy/ or Home Occupancy Permit and be subject to a 30 day background investigation.[45] In addition, applicants must provide a Police Criminal History Report from the jurisdiction in which they reside.[46] Applicants must post a cash or surety bond in the amount of $25,000 which is held by DCRA for at least 3 years after the expiration of the license.[47] Insurance in the amount of $50,000 to $100,000 for liability and $10,000 to $25,000 for property damage are also required.[48] Applicants must also submit sample contracts and receipt forms for approval by the DCRA.[49] Home improvement contracts must be reduced to writing, signed by the homeowner and contractor, and must contain certain information such as license number, name, address and phone number for contractor, payment terms, start and completion dates, specifications, and notice in large bold type that homeowner shall not sign the contract until all blank spaces are filled in and no changes without written approval of the homeowner.[50] Other provisions regarding no delay damages for unforeseeable circumstances not caused by the contractor, period of review and rejection of the contract and refund of any payment may also be included. Contractor cannot accept payment from a homeowner until a receipt has been given to the homeowner upon completion of the work.[51]
Note that a general contractor who performs work on residential property does not require a Basic Business License for the home improvement category in addition to the general contractor category if the general contractor complies with 3 additional requirements for a home improvement contractor’s license.[52] They include the requirements for home improvement contracts, sample contracts and receipt forms for approval and not accepting payment from a homeowner until a receipt has been given to the homeowner as discussed in the prior paragraph.
Home improvement contractor’s licenses are valid for two years. DCRA issues identification cards which must be carried by the contractor and display it or present it in any dealings with a homeowner.[53] The identification card shall be returned to the DCRA within 5 days upon termination of the licensee.
A home improvement contractor’s license can be denied, suspended or revoked by the DCRA for failing to maintain all qualifications.[54] Other grounds for denial, suspension or revocation include material misstatements, failure to comply with laws and regulations,, conviction, misrepresentation, fraudulent conduct, false, misleading or deceptive advertising of contracting services, refusal or failure to complete the work within a reasonable time and other conduct[55] If DCRA decides to deny suspend or revoke a license, the contractor will be given notice with facts as to which statute or regulation has been violated, the action proposed and an opportunity to appeal the decision. [56] Notice to the licensee can be made in person or by first class mail. A contractor may appeal the decision by filing an appeal with the Office of Administrative Hearings.
Consequences & Penalties
Besides the authority to deny, suspend or revoke a contractor’s license, the DCRA has the authority to investigate complaints by homeowners and impose fines and fees against any contractor.[57] Additionally, the bond provided in a home improvement contractor’s application for licensure can be used to pay a homeowner for any judgment rendered against the licensed contractor where the homeowner incurs a monetary loss resulting from a regulatory violation.[58] To the extent a contractor violates any provision of the DC licensing laws and regulations the contractor can be fined up to $300 or imprisoned for up to 90 days or both upon conviction.[59]
Violation of a licensing statute or regulation that is designed for a regulatory purpose to protect the public will result in a contract being void and unenforceable.[60] Therefore a contractor will not be able to recover monies for work performed or exercise any mechanic’s lien rights. Several court cases have ruled that an unlicensed contractor who accepts payments under a home improvement contract prior to completion of the project loses all rights to receive or keep any payment, including any progress payments. [61] Even where a homeowner was aware that a contractor was not licensed and that money advanced to the contractor was for purchase of materials only, the court has allowed the homeowner to rescind the contract and recover the monies advanced.[62]
The license must be in effect at all relevant times.[63] There can be no performance in anticipation of a license and courts have held that an after acquired license will not be recognized. The license must be “in effect during the entire time of the home improvement work and the receiving of advance payments[64].
A contractor that violates the licensing regulations can also be subject to a violation of the District of Columbia Consumer Protection Act.[65] The Act applies where a home improvement contractor required or accepted payment from the homeowner and the contractor was not licensed as a home improvement contractor. Courts can award the homeowner up to three times the actual damages suffered by the homeowner as well as attorney’s fees for a violation of the Act.[66]
[1] DC Code Section 47-2851.01 et seq.
[2]See D.C. Code Section 47-2851.01.
[3] DC Code Section 29-105.02. Registration can be done online at: http://dcra.dc.gov/service/corporate-registration.
[4] DC Code Section 29-101.06 & § 29-105.02.
[5] DC. Code Section 29-101.06. For Foreign Registration see: http://dcra.dc.gov/sites/default/files/dc/sites/dcra/publication/attachments/Foreign_Registration_Statement_FN-1.pdf
[6]See DC Code Section 29-105.02
[7]See DC Code Section 29-105.03; see also https://eservices.dcra.dc.gov/DocumentManagementSystem/Home/retrieve?id=Foreign%20Registration%20Statement%20FN-1.pdf
[8]See DC Code Section 29-105.02.
[9]See DC Code Section 29-105.02.
[10]See DC Code Section 29-101.06;See also DC Code Section 29-105.02 [A foreign filing entity that does business in the District without being registered under § 29-105.03 shall be liable for all fees, penalties, and other charges for which the entity would have been liable if it had registered and had filed all reports required by this chapter for the period during which it did business in the District. The Attorney General for the District of Columbia may bring an action in the Superior Court of the District of Columbia to recover these fees, penalties, and other charges. A foreign entity shall not be registered under this chapter until it has paid these fees, penalties, and other charges]. A listing of all DC registration fees the entity could be liable for may be found on the DCRA website seehttp://dcra.dc.gov/book/fees-corporate-registration-services.
[11]DC Code Section 47-2851.01 et seq.
[12]SeeAspire Channel, LLC v. Penngood, LLC, 2015 U.S. Dist. LEXIS 136567 (D.D.C. Oct. 7, 2015).
[13]See DC Code Section 29-105.05.
[14]See D.C. Code Section 29-105.05. See also, Aspire Channel, LLC v. Penngood, LLC, 2015 U.S. Dist. LEXIS 136567, footnote 4 (D.D.C. Oct. 7, 2015); Hargrove Displays, Inc. v. Rohe Scientific Corp., 316 A.2d 330 (D.C. 1974); Lehigh Portland Cement Co. v. Ornstein, 334 F. Supp. 1032, 1033 (D.D.C. 1971) [“it is beyond the power, of a state or the District of Columbia to impose burdensome conditions on interstate or foreign commerce.”]. In the District of Columbia, as in Virginia and Maryland, whether a foreign entity is “doing business” will be a fact-intensive inquiry by a court.
[15]See DC Code Section 31-2502.02; see e.g., Hargrove Displays, Inc. v. Rohe Scientific Corp., 316 A.2d 330, 331 (D.C. 1974).
[16]See DC Code Section 29-105.05:
(a) Without excluding other activities that do not have the intra-District presence necessary to constitute doing business in the District under this title, a foreign filing entity or foreign limited liability partnership shall not be considered to be doing business in the District under this title solely by reason of carrying on in the District any one or more of the following activities: . . .
(9) Conducting an isolated transaction that is not in the course of similar transactions; and
(10) Doing business in interstate commerce.
(b) This section shall not apply in determining the contacts or activities that may subject a foreign filing entity or foreign limited liability partnership to service of process, taxation, or regulation under law of the District other than this title.
(c) A person does not do business in the District solely by being an interest holder or governor of a foreign entity that does business in the District. DC Code Section 29-105.05 (emphasis added).
[17]Hargrove Displays, Inc. v. Rohe Scientific Corp., 316 A.2d 330, 331 (D.C. 1974) [a medical instrument distributor was found to be engaged in interstate commerce, was not doing business in the District, and was not required to obtain the certificate, even though the distributor “solicited orders on one occasion through an agent at a national trade show, advertised in national trade magazines, and direct mailings. Sales prospects gathered at the trade show were pursued by personnel in [the distributor’s] California offices where negotiations were to be conducted and arrangements made to ship equipment purchased directly to interested buyers. One sale generated by the trade show was ultimately made to a hospital within the District. The only other contact [the distributor] had with its one buyer was to send an employee to show it how to use the equipment and to make arrangements for service of the machine. [It] had neither offices nor warehouse facilities in the District of Columbia”].
[18]See DC Municipal Regulations Section 16-3301 “Business and Professional Licensing Administration Infractions”.
[19] DC Municipal Regulations Section 17-3999.1: Any person who, for a fee, is contracted to do construction on real property owned, controlled, or leased by another person of commercial, industrial, institutional, governmental, residential or accessory use buildings or structures including remodeling, repair, improvement or demolition of these buildings or structures. It also includes those that perform heavy construction, land development, and new construction of buildings. This does not include architects or engineers acting as such.
[20] DC Municipal Regulations Section 17-3999.1: Any person who, for a fee, is contracted to supervise and coordinate the work of design professionals and multiple general contractors, while allowing the design professionals and general contractors to control individual operations and the manner of design and construction..
[21] DC Code Section 47-2851.03d; DC Code Section 47-2851.02 [“A person which is required under law to obtain a license in the form of an endorsement to engage in a business in the District of Columbia shall not engage in such business in [D.C.] without having first obtained a basic business license”].
[22] DC Municipal Regulations Section 17-3901.2
[23] For fees and form: http://dcra.dc.gov/service/get-general-contractorconstruction-manager-license.
[24] Basic Business License forms are available at: http://dcra.dc.gov/service/basic-business-licensing-bbl-forms
[25] DC Municipal Regulations Section 17-3901.5.
[26]Seehttp://dcra.dc.gov/publication/dcra-clean-hands-self-certification-form.
[27] For registration with Office of Tax & Revenue, Seehttp://otr.cfo.dc.gov/publication/fr-500-combined-business-tax-registration-application.
[28] DC Municipal Regulations Section17-3902.
[29] DC Code Section 47-2851.03d.
[30] DC Code Section 47-2851.10.
[31] DC Code Section 47-2851.10.
[32] DC Municipal Regulations Section 17-3908.1.
[33] DC Municipal Regulations Section 17-3908.1.
[34] DC Municipal Regulations Section 17-3999 [Defined as 5 or more violations of building code that affects the public health or safety or 2 or more violations of any stop work order issued under the Code, or any combination of 5 or more violations of the Code within a 6 month period at 1 or more construction sites within DC.
[35] DC Municipal Regulations Section 17-3908.1.
[36] DC Municipal Regulations Section 17-3999.1.
[37] DC Municipal Regulations Section 17-3999.1 [“’general contractor’ does not include . . . any subcontractor . . . licensed or required to be licensed under this chapter and acting within the scope of his or her contract”].
[38]See DC Municipal Regulations Section 16-3301 “Business and Professional Licensing Administration Infractions”; see also, DC Municipal Regulations Section 47-2853.52 [Asbestos]; DC Municipal Regulations Section 46-2583.122 [Plumbing]; DC Municipal Regulations Section 17-313 [HVACR]; D.C. Municipal Regulations Section 17-200 [Electricians].
[39] Forms and publications for the individual trades can be found at: http://www.pearsonvue.com/dc/industrial_trades/
[40]See e.g., DC Municipal Regulations Sections 17-210 [Electricians]; 17-311 [HVACR]
[41] DC Municipal Regulations Section 16-899.1 [Includes a single-family dwelling or two-family dwelling (flat), including an individual apartment unit in a condominium or cooperative apartment building, together with any structure or grounds appurtenant to the single-family or two-family dwelling].
[42] DC Municipal Regulations Section 16-899.1
[43] DC Municipal Regulations Section 16-899.1
[44] DC Municipal Regulations Section 16-899.1
[45]Applicants for a home improvement contractor’s license can file in person, online or by mail. For fees and forms: http://dcra.dc.gov/service/get-home-improvement-contractor-license.
[46] If the applicant is a partnership or corporation, all partners and officers of the corporation must provide a Police Criminal History Report. Form PD-70 can be obtained from the DC Metropolitan Police Department for DC for those who reside in DC.
[47] DC Municipal Regulations Section 16-802.
[48] DC Municipal Regulations Section 16-803.
[49] DC Municipal Regulations Section 16-811.
[50] DC Municipal Regulations Section 16-808.
[51] DC Municipal Regulations Section 16-810.
[52] DC Municipal Regulations Section 17-3900.7.
[53] DC Municipal Regulations Section 16-806.
[54] DC Municipal Regulations Section 16-813.
[55] DC Municipal Regulations Section 16-813.
[56] DC Municipal Regulations Section 16-814.
[57] DC Municipal Regulations Section 17-3909 “Penalties”; see also DC Code Section 2-1801.4 “Monetary Sanctions”.
[58] DC Municipal Regulations Section 16-802.
[59] DC Municipal Regulations Section 800.7; DC Municipal Regulations Section 17-3909.2.
[60]Bathroom Design Institute v. Parker, 317 A.2d 526 (D.C. 1974).
[61]Bathroom Design Inst., 317 A.2d 526, 527 (D.C. 1974) [A contract entered by a contractor in violation of the Home Improvement Licensing Regulations is void and unenforceable, and leaves the unlicensed contractor with no equitable base recovery can be predicated].
[62]Nixon v. Hansford, 584 A.2d 597 (D.C. 1991) [Unlicensed contractor was unable to recover for materials acquired to build a back patio for the homeowner].
[63]Authentic Home Improvements v. Mayo, 2006 D.C. Super. LEXIS 9, at 36
[64] DC Municipal Regulations Section 16-800.1; see e.g., Cevern, Inc. v. Ferbish, 666 A.2d 17, 22 (D.C. 1995)[The District Court of Appeals upheld the lower court’s decision to preclude enforcement of a mechanic’s lien for any work during the course of performance when unlicensed at the time of entering the contract. The court refused to entertain unjust enrichment as a basis for recovery in regards to the work done by the contractor after obtaining licensure]. See alsoSee also, Authentic Home Improvements v. Mayo, 2006 D.C. Super LEXIS 9, at 39 [“there is no theory or provision that the contractor may perform the home improvement work in anticipation of receiving a license”].
[65] DC Code Section 28-3901 et seq.