It is not unusual to see the acronym DBA listed in conjunction with the name of a company. One of the most common questions people ask when they see this is, what is a DBA? The acronym DBA stands for the term ‘doing business as,’ and simply put, it’s operating under a legal fictitious business name.
Using the DBA designation is an easy, cost-effective way for a small business or sole proprietorship to do business under a new name without having to go through the paperwork and hassle associated with registering an entirely new company. By establishing a DBA, an already existing business entity can run a new business, open a separate business account, and even accept payments under another name.
What is a DBA?
In essence, ‘doing business as’ is when a small business, sole proprietorship, LLC, or corporation legally conducts business under a fictitious business name, also known as a DBA name. Many entities use DBAs when they are venturing into a new industry to do business and don’t think their current name adequately reflects the work which their new enterprise is undertaking.
For many small business owners, using a DBA name is a simple, yet effective way to launch a new company when they already have one. That’s because all you have to do to establish a DBA is to file the new DBA name with your state, county, or local government and pay the appropriate fees and taxes. The process is fast, easy, and relatively inexpensive.
If you need a DBA for your sole proprietorship, LLC, or corporation, contact the professionals at LLC Formations so we can help you get the process started.
Why Should You Create a DBA?
Business owners have many different reasons for why they might need a DBA. Those reasons often vary by the type of business they already have or would like to continue with without having to start a new business and deal with all of the filings.
Some of the most common reasons people create a DBA include:
1. Sole Proprietors Wanting A Business Name
Many sole proprietors would rather not use their personal name so they prefer to choose a different name. By registering a DBA business name, the sole proprietorship can create a new name to conduct business under while keeping their personal name private for privacy protection.
2. It Is Required By A Bank
Sometimes a person operating as a sole proprietor may have trouble opening a business bank account and may have to use a DBA for their small business. ‘Doing business as’ allows the account to list the name as the assumed business name on checks and other documents and transactions.
The name or assumed name will then be the name represented on legal filings and accounts without the need to file for a new business structure or form an LLC from scratch.
3. A Prospective Client Requests It
Some clients require a person to have a business name in order to sign a contract so you will then need to file a DBA. Freelancers sometimes run into this problem when they bid for jobs with some major corporations. Instead of being listed as ‘John Smith’ or ‘Jane Smith,’ you will be doing business under a name that reflects the nature of your services.
Filing a DBA is a fast, simple, and cost-effective way around this stipulation and can provide freelancers with a different name for their legal business across states. In some cases, the client may request that the freelancer form an LLC.
4. Entering A New Industry or Offering Specialized Services
When a company decides to expand their services, their old business name no longer covers what they offer. For example, if ‘Mike’s Landscaping’ expands into power washing, they can simply register the DBA as Mike’s Power Washing And More. This allows them to use their old name for landscaping clients and the new name to attract clients who need power washing services.
A seamstress who makes clothing for people of all ages may want to take advantage of the booming market for children’s clothing, so she will file a DBA for ‘Sue’s Children’s Clothing.’ This allows her to promote both her general seamstress services and her specialty children’s clothing simultaneously. Filing the DBA is cheaper and easier than establishing an entirely new company and allows her to use her reputation in her marketing without having to start an LLC or corporation.
Let’s get to it.
Who Can Register a DBA?
The nature of your primary business does not matter when it comes to filing a DBA. Sole proprietorships, general partnerships, LLCs, or standard corporations can all file a DBA. Often the DBA also called a trade-name, is a name that reflects the new line of products or services the company now offers.
The important point is that the DBA is not a business in and of itself when you acquire the new trade name. It has to belong to a legally registered and separate legal entity. The DBA is simply an alias that describes another group of services that the primary limited liability company or corporation offers once they open a business.
What are the Advantages of Filing a DBA Name?
The DBA name benefits business entities with a small budget.
Registering a DBA eliminates the initial costs commonly associated with creating an LLC or a corporation. Once the DBA becomes profitable, it can easily be converted into an s-corporation for doing business.
The DBA name helps sole proprietorships.
A DBA is an advantage for a sole proprietor because they don’t have to use their personal name as the assumed name. This gives the sole proprietor a measure of anonymity and lends business credibility through the business name.
The DBA name benefits organized entities.
Using trade names or DBAs provides advantages for a corporation or any other business entity. Filing DBAs enables one legal business entity to operate several companies without creating a new legal business entity for each.
Is a DBA Geographically Limited?
A DBA certificate enables a commercial business to do business legally under a specific business name. The DBA name also enables the business owner to open a bank account under the name of the DBA and apply for an employer identification number.
However, the DBA can only legally do business in the jurisdiction in which it was filed. That means in order to operate the business in other states, cities, or counties, the business owner must file a separate DBA in each one.
Get professional help throughout every step of the process.
Get professional help throughout every step of the process.
How Do You Register a DBA?
It is relatively easy to register a DBA. However, the process may be different per jurisdiction. In most places, you simply must fill out an application listing the name of the linked entity.
Many municipal jurisdictions require the DBA application to be completed in front of a notary public. In some jurisdictions, the primary business must publish the linked businesses in a local newspaper.
Filing By Mail or Online
Some state jurisdictions require the application process to be handled in person, while in others the notarized application can be mailed. The applicant will be notified once the DBA has been successfully registered as the fictitious business name of the LLC or Corporation.
What are the Risks Associated With DBAs?
There are a number of risks associated with operating a business using a DBA. Those risks involve issues such as:
Lack of Naming Rights
Even when a business files for a DBA, it does not have any official rights or ownership of the business name. Unless the entity incorporates the DBA as an LLC and has the legal name assigned to it, there is nothing to prevent someone from incorporating under that legal name in the state or in other states.
Lack Of Legal Protection
When you incorporate a business or create an LLC, you are provided a ‘corporate shield’ that offers some legal protections as well as limits your liability if you are sued.
A DBA does not offer any of that. You will have to face the full brunt of any legal action personally, and you miss out on diverse tax benefits available to corporations. Doing business under a DBA leaves you virtually unprotected when it comes to risks and liabilities.
State Versus County Registration
People can register DBA names at the state or county level. State registration means the company can use the DBA anywhere in the state, meanwhile, county registration only allows the use of the legal name within the county.
However, if the business is not incorporated as an LLC, it is possible and legal for another business to register and incorporate an LLC under the same name. You will have no legal rights to your business names once they have been legally taken by other business structures.
DBA vs. LLC
It’s much more convenient and cost-effective to register a DBA instead of an LLC. However, it’s important to keep in mind that the LLC business structure offers personal liability protection, and this liability protection and asset protection can come in handy as your business grows.
Additionally, if you earn a large customer base under the DBA name, you will want to use this name so you can grow your business. If the name is not legally registered as an LLC, another company can file for an LLC with that name and the rights will then belong to them.
What is the DBA Filing Costs?
The DBA filing cost can vary widely between states. In some jurisdictions, it can cost a business as little as $10 to file a DBA, while other jurisdictions charge as much as $100. There are even states where the Secretary of State charges people $25 while the county clerk charges only $15.
Some people find navigating the state, city, and county DBA filing procedures to be too complex and time-consuming. Fortunately, there are companies that can handle the entire DBA filing process and all it entails quickly, easily, and for an affordable price. Contact LLC Formations if you need a DBA.
Which Type of Businesses Can Benefit from a DBA?
Almost any type of business structure can benefit from creating a DBA. If you want to operate under a different name, a DBA name is the most efficient way to do so. Some types of businesses that have benefited from DBAs include:
- Brick and Mortar Businesses
- Online Businesses
- Service Businesses
- Consumer Product Businesses
How Can LLC Formations Help You?
For businesses of all types, being able to use a DBA to attract new customers makes filing a DBA a valuable business tool. Instead of scrambling to open up a new limited liability company or other legal entity, you can name a DBA that you want to use to represent your services.
Contact the professionals at LLC Formations so we can help you obtain your new business name.