What Is a DBA?
DBA stands for “doing business as” and represents any business identity operating under a different name than its legal business name. A DBA is also known as a trade name, fictitious name, or assumed name.
Every business will have a “legal” or “true” name that it formed itself under. For sole proprietorships, the legal name is the name of the business owner or owners. For LLCs or corporations, the legal name is listed on the formation document, like the articles of incorporation or articles of organization.
Registering a DBA enables a business to operate on a different name than its legal name. But having a DBA is not the same thing as forming a company or business entity.
Do I Need a DBA?
Not necessarily. It depends on the type of business you’re forming or are currently running. Having a DBA is all about providing clarity in an overall brand image, and sometimes your business name is all you need to market your brand.
DBAs are recommended for those who are:
- Looking to expand into a new industry segment or location
- Currently operating under a sole proprietorship or general partnership and don’t want to use their personal name for business
What Does a DBA Allow You to Do?
For Sole Proprietors and General Partnerships
A DBA allows sole proprietors and general partnerships to maintain privacy. If a business owner doesn’t want to put down their names on a public record, they can use a DBA to list their business publicly.
Additionally, sometimes sole proprietors or general partnerships will want a business name that reflects the time of business they conduct. For example, if a person registered a company under their name (Penelope Smith) so they could sell plants online, and they choose to expand to have a physical storefront, they may adopt a DBA to call their business “Penelope’s Plants.”
Some banks require sole proprietors and general partnerships to have a DBA to open a business account. Filing a DBA grants sole proprietorships and general partnerships an Employer Identification Number (EIN). Additionally, DBA names can give sole proprietorships and general partnerships more business credibility.
For LLCs and Corporations
If an LLC or corporation is entering a new market that isn’t reflected by their registered name, they may file a DBA to reflect their transition into another industry. This way, multiple entities can exist under one corporation but clearly mark the different services offered.
Alternatively, some LLCs and corporations want to create a DBA to conduct business through a separate website that’s branded toward a different audience, or the best URL for their registered name isn’t available.
For All Types of Businesses
Sometimes a DBA can simplify things for a company, like if the legal name is too long, hard to spell, not great for SEO, or isn’t catchy. The DBA lets other business entities in the state recognize that a legitimate business has claimed a specific name.
What Is the Benefit of a DBA?
Benefits of filing a DBA include:
- Streamlining the Business Banking Process: Business owners need to separate their personal and business finances to protect their personal credit score and keep the accounting process as simple as possible. Because DBAs give unincorporated companies an EIN, it makes opening a business account significantly easier.
- Maintaining Compliance: To cover all of your bases, any name you’d use for your business on any legally binding contract should be registered as a DBA to prevent the deal from falling through. While a DBA doesn’t automatically come with legal protections, having a DBA can help delineate your business and personal assets if your business is sued.
- You Can Change Your Name to Better Fit Your Brand: Let’s say Penelope Smith, from our above example, initially started her business as a sole proprietor before she decided what she wanted to name her shop officially. A DBA lets her refocus her brand. If you’re walking down the street and see a building with a sign that says “Penelope Smith,” then you won’t immediately know what Penelope is all about. But if you pass a building that heralds “Penelope’s Plants,” you’ll expect to find lush greenery and ceramic pots.
- Enables Easy Expansion: You can easily set up DBAs for your subsidiaries if you expand your business. This helps you create new entities and expand into new states without having to form separate business entities.
Is a DBA Better Than an LLC?
It depends on your needs. If your business is associated with any sort of risk, you should form an LLC because it comes with liability protection. But if you’re looking for an official name or want to open a business banking account, then you might be able to register a DBA under a sole proprietorship. And DBAs are much more cost-efficient than LLCs.
At the same time, it doesn’t necessarily need to be an either/or situation. You could have an LLC with a DBA if you want to segment your product and service offerings.
What Is the Difference Between a DBA and an LLC?
|No Liability Protection Unless Attached to an LLC||Personal Asset Protection|
|Expanded Branding||Expanded Branding|
|Pass-Through Taxation||Pass-Through Taxation|
|Makes it Easy for Small Businesses to Open Bank Accounts because it delivers an EIN||Comes with an EIN|
|Increased Privacy||Can be Taxed as an S Corporation|
|Most Cost-Effective than an LLC||More Expensive|
The most crucial difference between an LLC and a DBA is the personal liability protection guaranteed through an LLC. If your business carries any risk or earns a profit, you should form an official LLC to protect your personal assets.
Now, if you want to expand in a few years, you may want a DBA to rebrand or add a new name to your LLC.
What Is an Example of a DBA?
For a Sole Proprietorship or General Partnership
Esther Gould formed a sole proprietorship so she could work as a freelance writer and editor. After a while, she realizes she loves editing more than copywriting, and she wants to focus on her editing career. As she generates more income, she decides to open up a separate bank account for her business. She files a DBA for “Editing by Esther,” opens a business bank account, and keeps growing her client base.
For an LLC or Corporation
Let’s say that Harry owns a store called Harry’s Hardware, LLC. After a while, he decides to expand and open up a second store that sells appliances. Under Harry’s Hardware, LLC, he files a DBA for Harry’s Home Appliances and opens his second store under that name. If he continues to grow, he may want to open a third store and a second DBA so that he can own Harry’s Home Furniture.
Do I Need a DBA For My LLC?
Possibly. If you’re entering a new market segment or you want to rebrand, it will be easier and more cost-efficient to add a DBA to your LLC. You’ll still have personal asset protection, but it will allow you to conduct business under a different name legally.
Does a DBA Offer Any Legal Protections?
A DBA isn’t a business structure, and because of that, it doesn’t provide asset protection like an LLC or a corporation.
How to Get a DBA
It’s essential to accurately fill out all the necessary paperwork to do business under a DBA. You may want to consult a legal professional to make sure you have everything you need in order.
Once you submit the paperwork and pay the filing fee required by the state you live in, you’ll get a DBA certificate and can start using your new name in official documents.
Depending on the state you live in, you’ll file your request through a local or county clerk’s office or a state agency. In some states, the difference of where you file will hinge on whether you’re filing as a sole proprietorship, general partnership, corporation, or LLC.
Other things to keep in mind include:
- To get a DBA as a corporation or LLC, you need to prove that your business is in good standing. You can get a good standing certificate from your secretary of state.
- If you’re forming a DBA as an unincorporated entity, you can’t use “LLC,” “Inc,” or “Corp” with the new name.
- Some states require businesses to make a public statement or press release announcing the adoption of the new name.
- It’s a good idea to check the accepted payment methods for your states, as some will let you pay by a credit card, and some still require a cashier’s check or money order.
- Some states will let you file for a DBA online, while others require you to mail in your documents with a notary signature.
- Operating under an assumed name that hasn’t been registered can lead to civil and criminal penalties in some states, but it isn’t illegal in all fifty US states.
- Don’t expect your DBA certificate to arrive overnight because it still takes the state time to process your application.
- Most DBAs will expire five years after filing if you don’t renew the name, so be sure to stay on top of your renewals if you want to keep using the DBA.
- When you file, check your state’s laws on amendments to DBAs. If you have a significant change in your company (i.e., address change, new partner, legal name), it’s crucial to inquire whether you need to file a completely new DBA or make an amendment.
File a DBA with LegalZone
Make filing a DBA a breeze by consulting with one of LegalZone customer support specialists. We have plenty of experience guiding companies like you through times of growth. Our goal is to help you get everything you need to protect your business without paying an arm and a leg for legal expenses.
We always do our best to leave the legal jargon to our breakroom, so we explain things to you in a way you’ll actually understand. We consider ourselves your teammates, so we aren’t trying to pull a fast one on you. You’ll never have to worry about unnecessary paperwork when you’re in the LegalZone.
Talk to one of LegalZone customer support specialists today about the right next steps for your business.
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