Everything You Need to Know About DBAs
As a limited liability company (LLC) business owner, your initial concern is to ensure that your business name is in compliance with the rules and regulations of your state. These are usually standard formalities, such as ensuring that the name of your LLC isn’t too similar to another registered business.
However, there may be times when you would like to conduct business under a name other than your LLC’s official name. If this is the case, you’ll need to file a DBA (Doing Business As).
In this article, we’ll discuss what a DBA is and how it works in order to help you decide whether or not you need one for your LLC.
What is a DBA (doing business as)?
A DBA (doing business as) is a name that a person or entity uses to conduct business that isn’t their legal, registered name. It’s an assumed name or fictitious name. The person or entity named in the DBA isn’t doing business under any other name.
It is a legal term for any trade name, fictitious name or assumed name a business may use that’s different from its legal, registered name.
Sometimes, a DBA lets you operate under a name that better describes what your business does than its official registered name does; other times, it lets you operate under a completely different name.
A DBA might be used by a small business like a sole proprietorship or a general partnership. A corporation or limited liability company (LLC) can also have a DBA.
In some states, corporations and LLCs that use trade names may need to register each one with the state.
Who needs a DBA?
A DBA isn’t compulsory by law, but it can be useful in certain circumstances.
Growing your product or service offerings
A DBA is most often used if you want to branch out into new products or services. For example, if you started a business making custom suits, but now you want to expand into shirts and shoes, you can use a DBA to easily brand those new products under your existing company name.
If you want to branch out into new products or services and don’t want to register a separate business for each one. This can be useful especially if you are an entrepreneur just getting started, but expect to add more products or services as your brand grows.
A sole proprietor or partnership that wants to operate under a different legal name
A DBA is also useful if you have an unregistered business that you want to operate under a name other than your personal name. You can’t legally misrepresent yourself as an incorporated or registered business to customers, but if you’re just starting out and don’t have the money or desire to register as a corporation or LLC yet, a DBA lets you conduct business under a separate name.
This should be reserved for businesses with low risk. Business owners might confuse a DBA by thinking having a DBA means it absolves an unlimited liability type of business from their obligations. Keep in mind though that sole proprietors will still have personal liability stakes, no matter the assumed business name. A DBA filing does not provide liability protection for your personal assets.
All it does is give your business a new name to be recognized by.
To have a catchier business entity name for branding purposes
For example, let’s say that you are a startup and you have an unregistered tutoring business that primarily serves elementary school students. You may want to consider using a name like “Fun with Math Tutoring.”
This is more likely to catch the attention of parents than “Jane Smith Tutoring,” which could be interpreted as just another tutoring service.
Why do you need a DBA?
The benefits of having a DBA vary depending on the nature of your legal entity and its business structure.
Benefits for sole proprietors
#1. Branding benefits
When a business is registered with a DBA name, this name is used for all the business transactions, marketing and branding. The customers are aware that the business has a DBA company name, but this does not change the actual legal name of the company.
A DBA allows you to brand multiple products and services under a single umbrella company.
Say you start out selling homemade all-natural dog treats at local markets and pet stores, and have great success with your first product line. Later on, you decide to expand into other pet products such as catnip toys and canned food.
With a DBA, you can create unique brand names for each new product line while keeping all sales under one company name.
A DBA also gives the illusion of having more than one location. This can be beneficial for businesses such as law firms, restaurants and retail stores who may wish to have more than one location but do not wish to incorporate each location as its own entity.
Second, registering a DBA allows you to maintain more privacy when it comes to running your business. When you register a DBA all of the records remain public but they do not include any information about who owns the company or who the partners are.
This means that only those who need to know who owns the company will have access to this information (e.g., the IRS or creditors).
#3. Access to small business bank accounts
When you have a DBA registration on file with the state, you have an easier time opening up small business banking accounts.
Most banks require that all businesses register their DBA before allowing them to create a new account. This provides protection for the bank, because if anything goes wrong with the new account it will be easier for them to track down exactly who is responsible for the issues.
By registering a DBA for your business, you may find it easier to obtain financing and credit for your business as it boosts business branding and credibility in comparison to providing just the small business owners names for the bank business account.
Benefits for LLCs
If you’re forming an LLC, the benefits of privacy and having easier access to a business banking account are a given as they come under the structure of the separate legal entity itself.
The main benefit for LLCs thus comes in the form of creating multiple brand names instead of sticking to one during company expansion. Also, if you want to operate under a fictitious business name that’s different from your main legal business name.
How to set up a DBA
The specific steps to file a DBA, as well as the filing fees, vary on the state level. However, the general process remains the same. There are three essential steps to keep in mind when you file a DBA.
#1. Trade Name Search
For a new business, the name is one of the most important and defining elements. It’s only natural you will want to make yours stand out.
If you’ve chosen a name that is different from your personal name or the business’s legal name, you’ll need to check whether it is available in your state. Most states require that DBAs are distinguishable from any other business names already registered in that state.
Name searches can be performed by visiting your Secretary of State’s website. Many states also provide an online tool for searching for the availability of a particular business name.
You can do a quick trade name search online to make sure your business name isn’t taken. If you don’t find another business with a similar name, you can proceed with registration.
Pro-tip: Also register your domain name once you’ve decided the company name as “www.companyname.com.” You want to snag it before anyone else does and it’s crucial for online marketing.
#2. Gather Documents
The second step is to gather your required documents.
Key information you should keep handy includes:
- Your business identifying number, like an employer identification number or tax ID
- A ready draft to submit to the local newspaper in states like California that require a published notice
If you want to open up a bank account under your DBA name, the bank will request a copy of this certificate as proof that you are licensed to do business under this trade name.
#3. Register Your DBA
The final step is to register your DBA. You will need to file the appropriate forms with the county clerk in each county where you plan to do business.
The actual procedure for filing as a DBA depends on which state you’re in. In most states, you need only go to the nearest county clerk’s office and fill out a form that lists your chosen trade name.
Some states also require that you publish a notice in the newspaper announcing that you will be doing business under this new name. This simply serves as an extra way of alerting people that someone else may be trading under the same name.
Also if you are applying in person, you may not need to have your application notarized but if you’re registering your DBA online, a Notarized Affidavit or Identity Form may be required. This varies, also, depending on the state.
DBA Name Restrictions
Sole proprietorships and general partnerships are barred from using certain terms and keywords in the naming of their DBAs.
For example, a sole proprietorship or general partnership cannot use the terms “Inc.”, “LLC”, or “Corp.” The distinction here is that when a business is incorporated, it becomes its own entity and is no longer wholly owned by its creator(s). In this case, the business owner(s) can sue or be sued and can enter into contracts. In the case of non-incorporated businesses, the owners cannot. This is why it’s so important to be careful about how you name your business if you have not been fully incorporated.
Also, you cannot use a term that implies it is anything other than a DBA. For example, if you operate an LLC focused on selling retail services but brand yourself as Arnie’s Healthcare, that won’t be permitted. It must be relevant to your business services.
In addition, words like “Bank,” “University,” or “Attorney” may not be used unless the proper licensure has already been granted and maintained.
What is the cost of a DBA?
The cost of DBA varies depending on your state.
If you want to operate as a sole proprietor or partnership, filing a DBA is a relatively inexpensive way to protect your business privacy and also provide opportunities for growth. You can file a DBA even if you’ve already incorporated your company.
In some states, you must publish a notice in a local newspaper announcing that you have filed for a DBA. This ensures that creditors, customers and other businesses are aware of your new business name. If you fail to notify the public, your application may be denied. Publication costs are often more expensive in certain states, such as New York.
The mode of filing also affects the cost. Filing in person or by mail generally costs less than the online process.
On average, a DBA business license usually ranges from $10 to $100.
What can I do with a DBA?
A DBA (doing business as) allows your business to operate under a fictitious name different from the legal name from formation or incorporation.
What is the benefit of filing a DBA?
A DBA allows business owners to operate under names different from their owner’s legal name. For example, instead of naming the business John Smith, you can name it Smith’s Tutoring Services or anything relevant to your brand. DBAs are also useful during times of business expansion without having the need to create a new legal entity.
DBA vs. LLC: Which is better?
If you are a sole proprietor and you are unsure about getting a DBA or forming an LLC, it depends on your company structure and your business goals. Operating a sole proprietorship using a DBA to conduct business through a name differing from your own name is more cost-efficient. But LLC provides benefits of liability and legal protection that a DBA cannot.