Starting a business can be an exciting venture, but it also comes with many challenges. One of those challenges can be determining the best way to set up and register your business. One critical step in the business startup checklist is registering a DBA (Doing Business As). In this article, we’ll cover what a DBA is and how to register one. Let’s get started!
What is a DBA?
A DBA, or Doing Business As, is an alternative name for a business that may be different from the legal name of the registered owner.
This allows businesses to operate under multiple names without having to register a completely new business entity.
A DBA can also be used to protect the identity of a company’s owners or provide extra privacy in business operations.
When registering a DBA, you will need to take care to ensure the name isn’t infringing on any existing copyright laws or brand names.
What a DBA is Not When You Conduct Business
It’s important to understand that a DBA is not the same as other legal business entities, such as a corporation or LLC. A DBA is simply an alternate name for conducting business and does not guarantee protection from personal liabilities.
As you learn how to start a business, here are five key points to keep in mind with regard to DBAs:
- Tax Identifier: A DBA does not provide a unique tax identifier like an Employer Identification Number (EIN).
- Legal Structure: A DBA cannot change the legal structure of the underlying business entity.
- Ownership: A DBA does not establish ownership of the company or trademark any products or services.
- Filing Papers: A DBA registration is often filed without needing extensive paperwork.
- LLC Protection: Filing a DBA will not protect the owner from personal liabilities in the way an LLC can.
Do I Need a DBA?
A DBA, or fictitious business name, is an option for businesses to operate under an alternate name, but the question remains, when do you need to use one?
Businesses that are either sole proprietorships or partnerships, as well as certain types of companies such as franchises and LLCs, may benefit from registering a DBA. This DBA quiz may provide more insights for your business.
Here’s a breakdown of which type of businesses usually need to file a DBA:
Sole Proprietorship
Sole proprietorships are unincorporated businesses that are owned and managed by a single individual. If your business falls into this category, then you will likely need to register a DBA in order to open bank accounts or enter contracts in the chosen business name.
Partnerships
Partnerships should consider using a DBA for the same reasons as sole proprietorships. A DBA provides an alternate business name that can be used to open bank accounts, enter into contracts and manage other administrative tasks.
Franchise
If you’re running a franchise and want to use the same name across multiple locations, then it is generally recommended that you register a DBA in each state where you decide to open up shop. This protects your trademarked brand name from being infringed upon by other companies outside of your network.
LLC
Although filing for Limited Liability Company (LLC) status provides some protection from personal liabilities, having a separate legal entity like a DBA can give your business added legitimacy while also providing extra protection when it comes to taxes, contracts, and other routine aspects of operating within the respective jurisdictions.
Pros of DBA
A Doing Business As (DBA) registration offers several advantages for businesses and can be beneficial in many areas. Here are some of the main benefits of registering a DBA:
- Establish Credibility – When you register a DBA, your company is legally recognized by the state. This adds an extra layer of credibility to your business that can help you attract customers, investors, or creditors compared to operating under a sole proprietorship or partnership.
- Brand Protection – Using a DBA helps protect your trademarked brand name from being infringed upon by other companies outside of your network.
- Separate Identity – Although filing as an LLC provides protection from personal liabilities, having separate legal entities like DBAs give businesses added legitimacy while also providing extra protection in taxes, contracts, and other aspects of operating within their respective jurisdictions.
- Add Flexibility – Perhaps the most obvious advantage of using a DBA is the flexibility it provides for those who want to operate under an alternate name without forming a new corporation or LLC.
- Cost Savings – Registering a DBA is usually much cheaper than forming a corporation or LLC, so if your goal is simply to operate under an alternate name without incurring additional expenses then setting up a DBA might be the way to go.
Cons of DBA
Although there are numerous advantages to registering a DBA, there are also some drawbacks that are important to consider. Here are a few of the most common disadvantages of setting up a DBA:
- Limited Liability Protection – As mentioned earlier, DBAs provide some protection from personal liabilities but it is not as comprehensive as what you would get by forming an LLC or corporation.
- Restricted Trading and Transferring – Depending on the state in which your business is registered, using a DBA may limit you from trading stocks, transferring interest, and engaging in other activities usually reserved for incorporated entities.
- Confusion for Consumers – The use of multiple DBA names may confuse potential customers and impact your ability to build brand recognition within a given market.
How to Get a DBA: Your Complete Guide as a Business Owner
Getting a Doing Business As (DBA) registration for your business can be rewarding and beneficial in several areas, including the protection of your brand and additional recognition as a legal entity. Here is a complete guide on how to get a DBA:
Step 1: Research Whether You Need One
The first step in the process of setting up a DBA is to do some research and determine whether it’s necessary or not. Depending on the type of business you’re running or the activities you plan to undertake, registering as an LLC or corporation may provide better protection than simply filing a DBA.
Step 2: Choose Your Name Carefully
When selecting your name for the DBA, make sure it isn’t too similar to any current businesses in your state so as to avoid potential trademark infringement issues. Also, ensure that your proposed name complies with all federal, state, and local rules and regulations pertaining to “doing business as” names.
Step 3: Check For State Registration
Check with the Secretary of State or county clerk’s office in the state you are operating in for information about registering for a DBA. Many states require you to register before you may begin operations under that name. This helps protect your brand from other businesses in your area that could potentially use the same name.
Step 4: Fill Out the Necessary Forms
Once you have done some research and decided on your preferred name, proceed by filling out forms provided by the Secretary of State’s office. Make sure all form data provided is accurate so as not to risk rejection during processing. Also, pay attention to any fees attached to registering a DBA before submitting it for consideration.
Step 5: File Your Fictitious Name Statement
After completing your forms with accurate information and paying associated fees, submit them together with any necessary documents required by your state law such as proof of identity or the existence of the company. Once this process has been completed successfully, you should receive confirmation from your state’s Secretary of State Office that your registration was approved and accepted. At this point, you will officially become part of their registration database with an approved DBA name.
The DBA Filing Deadline
The DBA filing deadline varies from state to state but in general, you should submit your application as soon as possible to ensure your business is properly registered.
To ensure no delays or potential fines, make sure to check the exact requirements for your state before submitting a DBA filing.
Depending on the state law you may have to submit it within days of establishment or not at all. Some states allow a certain period after which DBAs expire if not renewed.
Each county may also require separate filings and regulations pertaining to DBAs, so be sure to research this ahead of time in order to comply with all applicable laws.
Tips for Filing a DBA
Filing a DBA can be an intimidating process. But it doesn’t have to be! Here are six tips to help make the process less daunting and more successful:
- Know Your State Requirements – Make sure you understand all of your state’s filing requirements so that your paperwork is filed correctly.
- Gather All The Necessary Documents – Put together all the necessary documents for the filing process such as identification, proof of business address, and any other paperwork required by the state.
- Choose A Name For Your Business – Ensure that your chosen name is unique and hasn’t already been taken in your state by searching local business databases.
- File The Appropriate Forms With The Secretary Of State’s Office – Submit all forms with payment to the appropriate office depending on where you live and operate the business.
- Create An Operating Agreement For Your Business – This document outlines important information, including ownership rights and responsibilities of each member or owner within the business entity type.
- Submit A Registered Agent Notification To Your State Government – This is typically done when you file initial paperwork with your secretary of state’s office, but keep in mind that this notification needs to be updated every time there is a change in registered agent details or contact information for the business owners or principals involved in the business operations.
The Bottom Line
A DBA provides business owners with an alternative name for their entity that is distinct from the legal name registered with the state. By properly registering a DBA, businesses can operate under a different name and establish a valid public identity for their operations.
It is important to follow the correct process for setting up and registering your DBA in order to use it legally. Having a business startup checklist handy could help.
Following the right steps will ensure that your business is compliant with applicable laws and able to take full advantage of the benefits associated with its new name.
Am I legally required to have a DBA to operate under a different name?
Generally speaking, you are not legally required to register a DBA in order to operate under a different name than your legal name.
That said, it’s important to check the local rules and regulations of your state or jurisdiction as they may require some businesses to register their DBAs and/or obtain a small business license.
How long does a DBA (Doing Business As) Last?
A DBA typically lasts as long as the business is in operation, but it can be renewed at any time if needed. Generally, a DBA will remain in effect until the business owner decides to close an inactive business or until there are changes made to the name or the state laws that require a renewal of registration.
How do taxes work with a DBA?
Taxes for a DBA can vary depending on the type of entity or if you’re operating your business in multiple states.
Generally, DBAs registered as sole proprietorships are subject to self-employment taxes, while DBAs that are corporations or limited liability companies (LLCs) may be eligible for different tax treatments.
It is important to consult with a tax professional to determine the best option for filing any taxes associated with a DBA.
Can I use the same DBA as someone else?
No, it is not possible to have two businesses with the same DBA. The name chosen must be available and not infringe on any other existing businesses’ names. Before registering a DBA, it is important to check with the Secretary of State in your state that the name you desire has not been taken. The secretary of state’s website will also typically provide guidelines for completing the registration process.
What is the difference between DBA and LLC?
The main difference between a DBA and an LLC is the type of legal structure they provide. A DBA is used to register a business name under an individual, allowing them to use that name for their business.
An LLC provides more formal legal protection and structure than a DBA does. With an LLC, liability is limited to the assets of the business and not the personal assets of its owners, while DBAs provide no such protection.
Do you need a business bank account to apply for a DBA?
No, you do not need a business bank account to apply for a DBA. The registration process can be done online and will typically require providing proof that the name is available in your state. Once the paperwork is approved, you may open a business bank account if necessary.
Is LLC better than DBA?
It depends on the individual’s needs and goals. An LLC provides more formal legal protection and structure than a DBA, while liabilities are limited to the assets of the business rather than personal ones.
LLCs must also file annual reports and pay taxes in most states, while DBAs typically do not have such obligations. Therefore, an LLC may be better for certain types of businesses compared to a DBA.
Either way, make sure to close an inactive business to avoid any potential confusion or legal issues.
What is a DBA example?
If your company’s official legal business name is XYZ Enterprises LLC but you want to open a liquor store under the name ABC Liquor Store, you can register the DBA ABC Liquor Store. This would allow you to use the DBA for business transactions and documents without having to change your legal business entity name.
How do I transfer my DBA to an EIN?
Once a business has a tax ID, the small business owners may decide to operate under one or several DBAs (Doing Business As). Regardless of whether taxes are paid through an SSN or EIN (Employer Identification Number), these DBAs are essentially nicknames for the existing business and therefore don’t require separate tax IDs.
How much does a DBA cost?
The cost of registering a DBA varies from state to state but is typically less than $100. Some states may also require additional fees for registering at the county level, so be sure to research your own state before beginning the registration process.
Make sure to also do proper research if you’re planning to register your business in another state. Having a small small business compliance checklist may be helpful.
Is a DBA a business entity?
No, a DBA is not its own legal business structure or entity. It simply allows the owner to conduct business under a name that is different from the one they would normally operate with. For example, getting certified as a woman owned business or applying for certain grants may require a DBA, as many of these programs have specific criteria that must be met.
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This article, "What is a DBA (Doing Business As) and How to Register One" was first published on Small Business Trends
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