Does your business need a DBA? What are the advantages that come with it and how do you actually get one? Before answering those questions, let us first define what a DBA is. We’re sure that by the end of the article, you’ll know whether or not this is something you want for your business.
What is a DBA
First and foremost, DBA is short for “doing business as.” According to a definition shared by Entrepreneur.com:
A DBA is “the operating name of a company, as opposed to the legal name of the company.”
Alternatively, DBA is also known as:
- assumed business name
- fictitious business name
- trade name
To explain further, the DBA is a nickname for your business or the name most people know it by. It is the name on your store sign and product packaging – not the legal name you used during company registration. A DBA typically does not include the following words:
- corp.
- corporation
- inc.
- incorporation
In some states, information about companies that file for DBAs are shared in the local newspaper. That way, the general public are aware about who runs which businesses.
Who needs to file a DBA
Generally, there are two instances when filing a DBA is a must for a business, namely:
1. Sole proprietors and general partnerships
A sole proprietor or general partnership business that uses a different name from their own name will need a DBA.
An example for this would be if a certain James Smith is planning to open a restaurant. If he’s using the name James Smith’s Diner, he will not need a DBA name. However, he will need to file for one if he’s naming it James’ Diner, Smith’s Diner, Awesome Diner, or other names.
Besides, sole proprietorship and general partnership companies are unincorporated businesses. As such, they do not have to file legal entity formation or a business entity name. They only have to comply with the other licensing and registration requirements.
2. Corporation and limited liability company (LLC)
A corporation or a limited liability company (LLC) that conducts business using a different name from the company or LLC name will also need to file a DBA. Otherwise, a DBA will not be necessary if you are using the same name for your business as your corporation or LLC.
So, if James Smith incorporated his business as Awesome Diner, he will only need to file a DBA if he also wants to operate or open another diner as, say, Amazing Restaurant.
Unlike a sole proprietorship or general partnership, a corporation or an LLC is a legal entity separate from its owners.
Advantages of having a DBA
Although it may require additional paperwork and minimal cost, the possible advantages make it all worthwhile. To simplify the process, you can opt to hire a registered agent who can help you along the way.
There are numerous benefits of filing for a DBA, including:
An easier way for registering a business name
For a sole proprietor, a DBA is a cheaper way of using a business name. It can help you avoid the requirements and expenses that come with forming a corporation or LLC.
You can open a bank account – and receive payment – under your business name
In most cases, banks require sole proprietors and partnerships to submit a DBA copy when opening a business bank account. This type of account lets you receive payment under your business name, as opposed to your personal name.
You can protect your privacy
A DBA likewise allows you to maintain privacy as a sole proprietor. With a DBA, you can simply list your business name on public records – not your personal name.
You can operate several businesses
A DBA allows corporation and LLC owners to operate multiple businesses. This means you will not need to form a separate legal entity (corporation or LLC) for each business. You can introduce new brands, products or services apart from those you offer in your main business. You can also launch a number of websites with different domain names based on your DBAs.
You get to use a fresh name for your business
As Forbes reminds business owners:
“If you end up with a complicated legal business name, finding a trade name that is simpler and catchier to customers could be the right move.”
Their article adds:
“To ensure you have the exclusive right to use your trade name, you may have to apply for a trademark for it.”
You will be able to avoid penalties
More often than not, it is illegal to operate under an unregistered assumed name. Some states even impose civil and criminal penalties for businesses that fail to file for a proper DBA name.
It definitely makes better sense to get a DBA if you fall under the two conditions mentioned earlier. With that, your business will remain in good standing with the state as you continue to expand and tap a wider market.
How (and when) to file a DBA
It must be pointed out, DBA filing requirements usually vary from one state to another. For example, some states require sole proprietors and general partnerships to file a DBA with the county clerk’s office while others do not. Fees, forms, and processing time may also be different. You can consult with your state or county website to find out information specific to your area. Other than that, you can seek assistance from a registered agent.
As for the when, it is advisable that you file for a DBA before conducting any business transactions under the name. It’s also best to do a quick check to see if the name you have in mind is still available. You probably want to avoid a name that’s already being used by another business in your state. It will only lead to potential problems. Your customers and theirs may become confused, and you run the risk of unfairly gaining a bad reputation if your namesake is sub-par.
Final thoughts
Still not sure whether getting a DBA is best for you? Again, it’s best to consult with a registered agent. With their expertise, you will get all the help you need, and you’ll be able to make the right decision.
