A “DBA” or “doing business as” is a way to operate your company under an assumed name. The purpose of a DBA is to operate the company without disclosing your personal name from which the company operates.
A DBA is filed with some state and local authorities, but it’s not filed with the federal government.
DBA stands for “doing business as”. The term is used to designate a business that does not wish to use its own name. It is organized under a trading name that was not registered with the state or federal government.
Having a dba can also help out if you wanted to do new business as a variation of your name, or a nickname.
Think of how many times you see Richard Jenkins doing business as “Rick Jenkins”. Or any number of variations, such as James Smith doing business as “Jamez Smith” or Ethel Waters doing business as “Ethel Waters DBA E W Waterworks”.
Who Needs a DBA?
All people who want to operate their business without their name being disclosed.
This includes any business that has a registered agent for corporate purposes, or anyone who can be sued personally.
How Do I Form a DBA?
Signing the Incorporation Certificate should be a requirement before operating a business under a name. The original Incorporation Certificate needs to have your full legal name on it.
Obviously, if you wish to operate your business under the dba string, you will need the dba on the certificate too.
The Certificate will be used to show you are an authorized agent of the business and will state the name under which you will be operating.
How to File a DBA?
Each state may have its own requirements when it comes to filing a dba. The main requirement is that you file it with the Secretary of State or some other authority in your state. There are two ways that you can file a dba.
- You can register a DBA online. You will need the incorporation certificate for your business to do this.
- You can go to the filing office and submit your dba application by hand. You will also be required to pay a fee for this service. It may take as little as several days or up to a year or more before they process your dba request and send you back the information.
How Do I Make Sure My DBA is Valid?
To make sure your dba is valid, you will need to see if it matches the type of business you are operating. If your business is a sole proprietorship or a partnership, then you will need a DBA for an individual.
But if your business is a corporation, then you will need another DBA specifically for the business.
The State will provide this information specifying that type of LLC (Limited Liability Company) or C-Corporation status.
Other Legal Issues of Forming a DBA
Some states specifically state that registering a dba may be challenged if it’s not filed properly. Therefore, it is best to get your state form dba and make sure it is properly formatted before you try to use it.
The state will provide specific instructions for DBA filing, but many times they are not very clear.
It is common for the State to require that you submit an additional affidavit along with the original form application. This will help to verify that you know the legal issues at stake when you file your dba.
The State will also require that you submit a separate form to show that you are the authorized agent of the business entity. The process can be cumbersome and confusing, and a person with no knowledge of how the state filing offices work may be better off hiring a professional to do this for them.
Common DBA Misunderstanding
There is a common misconception that a trade name is the same as a DBA. A trade name will lead to confusion later on if the business ever goes through bankruptcy or becomes involved in any other kind of legal action. To avoid these problems, it is best to form and operate your business under a dba.
Here’s another common misconception: “What if I need to do something with the county or state, such as get licensed? Do I need to use my DBA, instead of my real name?”. This is not true, you can still use your DBA and sign forms with your name at the same time. You simply must consult the state-specific requirements to know where to put your DBA and which forms to use as well.
They are common, but they are not required by law. They are also often used by a sole proprietor who wants to operate their business as sole proprietorships or partnerships but does not wish to disclose their names. This is legal in most states. But if you use your name as the trade name for your business, then your dba must be used.
WHAT ARE THE ADVANTAGES OF A DBA?
There are a number of advantages to forming a DBA or trade name.
- First, you are not personally liable for any debts that your business may accrue. If the business fails, then your personal assets will not be affected. However, there are certain circumstances where creditors can sue you personally if they want to.
- Second, you can operate under an assumed name without the need to register it for $50-$100 with the Secretary of State in each state that you wish to do business in. You can also use an assumed name on all your business correspondence and forms, without appearing to be impersonating anyone.
- Third, if you ever wanted to incorporate your company without revealing your name, then you would need a registered agent for corporate purposes. The trouble with this is the cost that it is going to take to qualify for a registered agent. You can avoid this by choosing the more inexpensive option of forming under a dba. In certain states, you can form a corporation or register a fictitious name for as little as $50-$100. Some states will even have an online service that you can use to register your business.
- Fourth, you are not legally required to disclose your name when operating under a trade name. Therefore, it is a good option for anyone who wishes to remain anonymous in their business dealings.
- Lastly, you can use your dba for 5 years as opposed to 3 months when operating under a business name. You can also incorporate the dba into your company name.
- You must be careful to follow the state-specific rules and regulations when forming a dba.
- You should also take into account any legal fees you are going to have to pay, as well as any other costs to form this type of business.
- There is a misconception that you only need to spend $50-$100 and file your documents with the Secretary of State. Many times, it is cheaper to simply incorporate your business with the assistance of an attorney who can help you through the entire process.
There are some cases where it might be better to change the name of your business to a branding name. The main reason for this is that you will be able to protect your company’s reputation in the future.
If you have a dba and later decide to incorporate, you can then choose a trademark or service mark and apply for this type of protection. This will allow people who use your trade name or slogan in the future to know that it comes from you and not some other legal entity.
You may want to consider using a trade name if you want to protect your privacy. There are many people who are uncomfortable with the thought of putting their own personal name on a business, either due to fear of failure or because they have had bad experiences in the past.
In this case, you would not need a registered agent or other corporate services. Basically, a dba is all that is needed in order to operate your business.
Many states require certain documents and qualifications in order to open a business bank account for a corporation or LLC. Although the requirements vary from state to state, a dba won’t require any of these things.
You can simply open a business account with the bank of your choice without having to worry about it at all. The main benefit of this is that it allows you to maintain your privacy.
It will also save you money by not having to register as a corporation or LLC with the Secretary of State in each state where you plan on doing business.
How much does it cost to start a DBA?
The cost to form a dba is actually very inexpensive. In many cases, you can form a dba for less than $50 and have it filed with the proper authorities in your state.
The only thing you should be aware of is that if you are going to be operating more than one business, then the fees are going to be higher. If you do not wish to incorporate your business, then there is no need to spend any money on a dba at all.
However, if you are only going to be operating a single business and do not need any type of protection, then the fees may seem like a small price to pay for peace of mind.
Difference Between a DBA and an LLC
An LLC is a business structure that you can choose to form if you are going to be operating across state lines. If this is the case and you decide to incorporate, then you will need a separate LLC registered in each state where your business operates.
An LLC also requires additional documents such as articles of organization. Many people choose to form an LLC because it has more flexibility than a corporation or an S-Corp.
While there are many advantages to using either an LLC or DBA, they do have their own set of disadvantages as well. The first disadvantage to an LLC is that there are some states that do not allow you to form one.
It is also a disadvantage if you plan on having just one business because the fees are going to be higher than what it would cost for a dba. This means that if you have multiple businesses or choose to incorporate them in the future, then an LLC may not be the best choice for you.
The main disadvantage with a dba is that it can be subject to confusion by potential customers and other businesses.
Many business owners choose to form an LLC because it offers more flexibility than other types of corporations or limited liability companies. You are able to make many decisions and control more aspects of your business from the ground up.
Things a DBA Won’t Do
One thing that many business owners do not realize is that a dba cannot protect them from anything other than confusion or not knowing who they are doing business with.
A dba will not help to protect you if your business becomes involved in a lawsuit. It does not provide any type of liability protection for your customers, it does not state that you have to be licensed to operate your business, and it does not enable you to open a separate type of bank account.
Reduce Personal Liability
One thing to keep in mind with either a DBA or LLC is that if you as the owner of a business do commit a crime, then you are still personally liable for everything that is happening in your business.
A company violates certain laws and literally all of their merchandise is seized by authorities. If the people involved in this lawsuit happen to work at the company, then they are also held responsible for what has happened since they were employees of the business.
Does a DBA have to file taxes?
A dba by definition is a company that does not have to file taxes on its own. If you choose to incorporate, then the money earned by your company will be taxed.
It is also important to keep in mind that your corporation has members who are liable for what happens within the company. After forming an LLC or corporation, you will need to decide how you are going to handle things like corporate profits and losses.
Do you need a separate bank account for a DBA?
Many people choose to go ahead and form a separate bank account for their dba. This is not always absolutely necessary, but it can help you keep your personal finances separate from the business.
It would also be easier to keep track of what is going on with your business by having all of your expenses, revenue, and transactions in one place.
How do you write a DBA name?
If you are going to operate a business with a dba, then you will need to give it a name that is different from the rest of your personal names or company names.
When writing out the name of your dba, you will need to include:
- Include the word “dba” in front of your business. Name, for example, DBA-Yogi’s Yogurt
In this case, “dba” is in front of your business’s name. Many people choose to write their dba in this way because it is simple and straight to the point.
- Another key thing to note is that if you are writing out the name of your company and using initials, then it is going to read as a corporation. This will give potential customers the impression that you have a larger business than what you actually do.
The Dangers of a DBA Name
In California, many people have chosen to write their dba name as “dba” and their actual company name in parentheses. This can be very dangerous if you are using a domain name or social media as part of your marketing strategy.
The reason for this is that when you search for your business on Google or any other search engine, it will first show your domain name. When the customer clicks on it, they will then be able to see your full company name which is not always the same thing.
Do you need an EIN or ITIN to file a DBA name?
In order to form a dba name, you will need an Employer Identification Number (EIN). This is essentially the Social Security Number for your business. You will also need to have an Individual Taxpayer Identification Number (ITIN) if you are filing taxes.
Are There Other Ways to Protect Your Business?
If you are still worried about your company’s name, then you have the option to register a fictitious business name. This can be done through your county clerk by filing paperwork that includes your business name and how you will identify yourself professionally.
This is good for one year and in some cases, it can be renewed automatically if certain requirements are met on an annual basis.
Still Not Sure If “Doing Business As” Is Right for You?
If you are still not sure if doing business as or forming an LLC is right for you, then there are some questions that you need to ask yourself. Keep in mind that this does not apply to everyone, but it will give you an idea of the type of questions that come to mind when people start their own businesses.
If your business is a small startup and does not have a large amount of money to get started, then it is very easy for you to try out your business idea on a smaller scale. It also means that you can gain a sense of your business’s clientele so that you can understand how they are going to help your business grow.
Final Thoughts on DBA
Forming a dba is one of the easiest business structures to create. However, it is important to note that it is not going to protect you from liability or any other legal troubles that may come your way.
Choosing the proper structure for your business will help you keep more control over what happens within your company and how you are compensated. This can help avoid situations like lawsuits and other disputes that could cause harm to the business or its owners.