Filing a DBA? Here’s What You Should Know FirstElise Moores
DBA stands for “doing business as.” Often called an “assumed name,” “trade name” or “fictitious name,” having a DBA allows you to conduct business under a name other than your legal name or registered business name.
Filing a DBA? Here’s What You Should Know First
Before you open your doors, take on clients or conduct your first business transaction, you must make many critical decisions. One of the first is deciding whether or not to file for a DBA.
In short, you need a DBA if you intend to conduct business under a name other than your legal name or registered business name.
That means if you’re a sole proprietor or part of a general partnership, registering for a DBA is pretty much a given. In fact, it’s likely mandated by the state, city or county in which you operate. But there are reasons beyond this for setting up a DBA (more on this below).
The easiest way to think of a DBA is as a fictitious name that points to or represents an actual person (sole proprietorship or general partnership) or legal entity (LLC or Corporation).
To better illustrate this point, let’s look at two examples.
DBA for a Sole Proprietorship or General Partnership
When you form a sole proprietorship or general partnership, the legal name of the business defaults to the name of the person or persons that own(s) the business. This means in the likely circumstance that you plan to conduct business under a name that is different than your own (or your partner’s), you will need to set up a DBA within the county or state in which you operate.
For example, if Pat Williams, a Sole Proprietor, wants to operate under the moniker, “Pat’s Hats,” he’ll need to register the DBA. By doing so, Pat is legally declaring “Pat’s Hats” and “Pat Williams” are one and the same.
DBA for an LLC or Corporation
Unlike sole proprietors and general partnerships, corporations and limited liability companies (LLC) have already registered their entities and a business name with the state. While your entity can file a DBA, it doesn’t have to.
When trying to determine if a DBA is needed or not, ask yourself the following:
- Will your entity operate and do business under its legal name?
- Or, will your entity operate and do business under a name that is different from what was registered?
If the latter, a DBA is required. For example, you might wish to develop a unique brand for specific lines of business without incurring the cost and time it takes to establish an additional LLC or corporation.
Common DBA Misconceptions: What It Is Not
Now that we’ve defined what a DBA is, it’s important to clarify what it is not.
- Separate Legal Entity: A DBA is not the same as a legal business entity and it does not give you the same limited liability or legal protections as an LLC or other corporate structure.
Using the example above, “Pat’s Hats” is Pat Williams, not a separate company. Therefore Pat Williams (and his assets) are directly subject to the risks and liabilities of doing business.
- Official Naming Rights: Registering a DBA does not give you official rights to your business name. This means anyone who registers a legal business entity can take your DBA name. And that goes for other DBAs too. If you file at just the county level, competitors can use the same DBA in neighboring locales.
To DBA or Not to DBA: A Quick Breakdown of the Business Pros and Cons
We now know what circumstances require a DBA. But what if you don’t necessarily need one?
We’ve broken down the business pros and cons to help you answer the ultimate question: “Should I file a DBA and is it worth it?”
- Banking: It’s a general best practice to establish a business bank account separate from your personal bank account. To do so, you’ll need a federal tax ID number (EIN) and herein lies the problem. Sole proprietorships and general partnerships not registered with the state lack an EIN number. But when you file a DBA, you’ll also get an EIN. Problem solved.
- Business Transactions: In some cases, a client or partnership might require you to have a DBA to go through with a deal. Some clients might require that you have a DBA to contract with you or some business lenders might require that you have a DBA before extending any small business funding to your business.
- Compliance: The primary benefit of establishing an LLC or incorporating your business is the legal benefits it affords. But if you operate your business under a name other than what’s on your incorporation documents–for instance dropping the “LLC”–those legal protections simply won’t hold.
- Adaptability: In today’s business landscape, adaptability is the new competitive advantage. And to continue to thrive, you must constantly evolve to fit the needs of the market and to outshine the competition. This means the business model you operate today likely looks different from the business model you started with. A DBA affords you the flexibility to refine your brand to match the products and services you now offer. You’ll also have the flexibility to establish multiple micro-brands under the same LLC or corporation umbrella to better reach your target market.
- Paperwork and Fees: The DBA is an additional filing, meaning extra paperwork and additional fees. DBA renewal processes compound this headache. And depending on your state’s DBA filing requirements, you may need to register your DBA in each county where you operate. All of this equates to multiple filing fees and renewal fees.
- Liability: As we mentioned previously, a DBA does not create a new entity; a DBA allows your company to operate under various names legally. In other words, your various ventures are all under one roof–and so is the liability.
Let’s say you incorporated “Pat’s Hats” and set up separate DBAs to market various lines of sports apparel. A fault in manufacturing lead a customer to trip and fall, and they decide to sue. A judgment against your business could end with assets seized not just for “Pat’s Shoes” (a DBA you registered), but from all your ventures under the “Pat’s Hats” umbrella–an unwelcome scenario for any business owner.
How to Register a DBA
When it comes down to it, filing a DBA is the easiest–and a relatively inexpensive way–to register a business name. So, how does one go about the process? The answer to that question is, it depends.
- Find out Your State’s Registration Requirements: Typically a DBA is filed with a local or county agency. However, some states require a filing with a state agency instead of or in addition to the county. So a good place to start is with a call to your Secretary of State or County Clerk’s office to get a clear picture of what’s required, including renewal terms.
- Locate and Complete the Required Forms: Once you’re familiar with your state’s DBA procedures and requirements, acquire and complete all of the necessary forms. Some states or counties may have the forms available online, which you can download and fill out.
- File Your DBA Forms: Once you’ve completed your forms, you must file it with the appropriate state or county agency and pay the required fees. Importantly, don’t wait to register a DBA a week before you intend to open for business. It can take anywhere from one to four weeks to receive approval, so it’s best to file 30 to 60 days before opening day.
- Publish Notice (if Required): Some states/counties require you to publish with a local newspaper, thereby creating a public record of the DBA filing.
Whether you’re a sole proprietor or LLC, proper use of a fictitious business name can be a powerful tool at minimal cost. But to keep yourself out of trouble, it’s important to be clear on what a DBA is and what it is not. We hope we made this task a bit easier with the above information. But if questions remain, check with your state or local government offices or consult with an attorney.