Washington, DC business legal requirements are stricter than in most of the country, and several key numbers changed in 2026. The big ones: a near-total non-compete ban below $162,164 in pay, an $18.40 minimum wage, an employer-paid family leave tax, a Basic Business License, biennial DLCP reports and an 8.25% franchise tax that reaches many LLCs. Here’s how each works for a company in the $1 million to $5 million range.
DC’s non-compete ban: the 2026 threshold and what’s still allowed
DC’s Ban on Non-Compete Agreements Amendment Act of 2020, as narrowed by a 2022 clarification act, took effect October 1, 2022. It’s one of the toughest non-compete laws in the country. For most DC workers, a non-compete signed on or after that date is unenforceable.
Who the ban protects
The ban covers employees who spend more than 50% of their work time for you in the District. Before someone starts, the test looks at what you reasonably expect. A DC-based employee who splits time across the region can also be covered, so don’t assume a hybrid schedule takes someone outside the law.
The highly compensated employee exception
The main exception is for highly compensated employees. DOES has set the 2026 thresholds at:
| Employee type | 2026 minimum annual compensation |
|---|---|
| Highly compensated employee | $162,164 |
| Medical specialist | $270,274 |
These numbers reset every January 1 based on inflation. A salary that cleared the bar when you hired someone may not clear it for a new agreement next year.
Meeting the threshold isn’t enough by itself. A non-compete with a highly compensated employee must:
- Be in writing and spell out the restricted services, roles, industry or competitors.
- State the geographic area it covers.
- Last no more than 365 days after separation (730 days for medical specialists).
- Be delivered at least 14 days before the employee starts, or 14 days before a current employee must sign.
What the ban doesn’t touch
You can still protect the business in other ways. The statute’s definitions exclude confidentiality provisions that stop an employee from disclosing or using confidential employer information. They also exclude a seller’s non-compete signed alongside the sale of a business. For most DC companies, a strong confidentiality agreement and clear IP assignment do more real work than a non-compete ever did.
Retaliation is a separate risk. You can’t punish an employee for refusing to sign, asking about a proposed non-compete or objecting to one. If your offer-letter templates came from another state, have them reviewed. Our post on essential contracts for growing businesses covers the agreements worth standardizing.
DC minimum wage, tipped wages and pay rules in 2026
The $18.40 minimum wage
On July 1, 2026, DC’s minimum wage rose from $17.95 to $18.40 per hour. It applies to every employer, regardless of size, and adjusts each July 1 with regional inflation. You must post the updated DOES minimum wage poster where employees work.
Tipped workers after the Initiative 82 changes
Tipped wages have been a moving target. Voters approved Initiative 82 in 2022 to phase out the tip credit. In 2025, the Council partially repealed it and tied the tipped base wage to a percentage of the full minimum wage instead. As of July 1, 2026, the tipped base wage is $10.30. If base pay plus tips falls short of $18.40 in a week, you pay the difference. Restaurants and bars should confirm the schedule each year, since the percentage steps up over time.
Pay ranges in job postings
DC’s Wage Transparency Omnibus Amendment Act applies to any employer with at least one DC employee. Every job listing needs a good-faith minimum and maximum pay range. You also can’t screen applicants based on their pay history. The DC Attorney General can enforce these rules.
Paid family leave and sick leave for DC employers
DC’s Universal Paid Leave program is funded entirely by employers. Since July 1, 2024, the contribution rate is 0.75% of each covered employee’s wages. It’s paid quarterly. For 2026, the remaining due date is January 31, 2027, for the fourth quarter. Employees can receive benefits for parental, family, medical and prenatal leave through DOES.
Paid sick leave is a separate obligation that you fund directly. Accrual depends on headcount. A 30-person company provides 1 hour for every 43 hours worked, up to 5 days a year. Tipped restaurant and bar workers get that same rate regardless of company size. Neither program replaces the other, and federal FMLA rules can stack on top. If you’re unsure whether someone is an employee at all, see our guide to employee vs. independent contractor classification.
Licensing and filings: the BBL, Clean Hands and biennial reports
Basic Business License
Most businesses operating in DC need a Basic Business License from DLCP. The license category depends on what you do. Getting one involves several steps:
- Register your entity with DLCP, if you operate through a corporation or LLC.
- Register with the Office of Tax and Revenue.
- Get a Certificate of Occupancy for a commercial space, or a Home Occupation Permit for a home-based business.
- Apply for the BBL with your documents and payment.
Clean Hands can stall a renewal
DC runs a Clean Hands check on every license application. Under OTR’s rule, you can’t owe the District more than $100 or have unfiled tax returns. An overlooked fine, an unpaid tax notice or a late return can block a license renewal. Check your status before the license expires, not the week it does.
Biennial reports, not annual reports
DC entities file reports every two years. The first is due April 1 of the year after you form or register in DC. After that, a report is due April 1 every second year. The DLCP fee is $300 for a for-profit entity, plus a $100 penalty if it’s late. A report missing required ownership information can lead to administrative dissolution, or termination of a foreign entity’s registration. Our operating agreement checkup pairs well with this filing cycle.
DC franchise tax: what LLC owners miss
DC taxes business income through franchise taxes rather than a state income tax on the business. OTR’s rate table shows:
| Item | Corporate franchise tax | Unincorporated business franchise tax |
|---|---|---|
| Rate | 8.25% | 8.25% |
| Filing trigger | DC net income | DC gross receipts over $12,000 |
| Minimum tax, DC gross receipts ≤ $1M | $250 | $250 |
| Minimum tax, DC gross receipts > $1M | $1,000 | $1,000 |
The unincorporated tax surprises owners of multi-member LLCs who expect the pass-through treatment common in other states. There’s an exemption for a business where more than 80% of gross income comes from the owners’ personal services and capital isn’t a material income-producing factor. Whether you fit it is a question to settle with your tax advisor.
Government contracting and federal-adjacent businesses
Contracting with the District
DC runs its own small business program through the Department of Small and Local Business Development (DSLBD). Companies certified as Certified Business Enterprises (CBEs) get access to District set-asides. According to DSLBD, District contracts over $250,000 carry a 35% subcontracting set-aside for CBEs, which an agency can ask to waive. If you hold a District contract or grant of $100,000 or more, the Living Wage Act applies. That rate matched the minimum wage at $18.40 on July 1, 2026.
Federal contractors and subcontractors
For federal-adjacent companies, the 2026 risk is less about DC law and more about contract terms. The District’s own revenue forecast projected a mild recession in fiscal year 2026, driven by federal job cuts. That has meant terminations for convenience, stop-work orders and slower payments. Federal procurement rules are also in flux. The FAR Council has been rewriting the Federal Acquisition Regulation through class deviations and formal rulemaking, so clause numbers and flow-downs in new subcontracts may differ from older ones. Read every teaming agreement and subcontract for termination rights, payment timing and flow-down obligations. If you’re thinking about an exit, our post on preparing your business for sale explains what buyers will review.
Getting ongoing legal help in DC
These rules interact. A layoff touches the non-compete ban, wage payment rules and paid leave. A new District contract triggers living wage, CBE and Clean Hands issues at once. That’s why many DC owners want a lawyer who already knows the business.
Flex Business Lawyer is a monthly legal subscription for small and mid-sized businesses, offered by Chase Neely, PC. For $1,997 per month, subscribers get up to 5 attorney hours to use on any business legal matter, including contracts, employment, governance, trademarks, disputes and transactions. Additional time is $550 per hour, and unused hours don’t roll over. The service is built for companies with roughly $1 million to $5 million in revenue that need regular legal help but aren’t ready to hire in-house counsel. Chris Clark, a business attorney with more than 20 years of practice, leads client work and coordinates licensed co-counsel when a matter requires it. The firm has offices in Charlotte, Nashville, Denver and Washington, DC.
You can see how the subscription is priced, learn more about our Washington, DC business lawyer office, or start your subscription when you’re ready.
Frequently asked questions
What is the DC non-compete salary threshold for 2026?
For 2026, DC’s non-compete ban doesn’t apply to highly compensated employees earning at least $162,164 a year, or $270,274 for medical specialists. The figures adjust every January 1 based on inflation. Agreements with those employees still have to meet DC’s writing, notice and duration rules.
What is the minimum wage in Washington, DC in 2026?
Since July 1, 2026, DC’s minimum wage is $18.40 per hour for all employers, regardless of size. The base wage for tipped workers is $10.30 per hour, and the employer must make up any shortfall if tips don’t bring pay to $18.40. Both rates adjust each July 1.
Do LLCs pay franchise tax in DC?
Often, yes. An LLC taxed as a partnership generally pays DC’s unincorporated business franchise tax once its DC gross receipts exceed $12,000. The rate is 8.25%, with a $250 or $1,000 minimum depending on gross receipts. Some professional-services businesses qualify for an exemption.
How much do DC employers pay for paid family leave?
DC employers pay 0.75% of each covered employee’s wages into the Universal Paid Leave program. It’s an employer-only tax, paid quarterly to DOES. You can’t deduct it from employee paychecks.