If you’ve ever wondered, “What is a DBA?” This article is for you. The short answer is that a “do business as” is when the name under which a business operates is different from its legal and registered name. A DBA can also be called a business name.
Why would a business choose a DBA?
There are reasons a business would choose a fictitious name (another term for a DBA). A sole proprietor or partner can choose a DBA so that they can operate with a typical business name without the need to create a formal legal entity (such as an LLC or corporation). For example, John Smith, a plumber, might choose to operate under the name Eveready Plumbing. He would need a DBA to do it. If John wanted to run his business as John Smith’s Plumbing, he wouldn’t need it.
If your business was a corporation or limited liability company (LLC) and you wanted to operate the business under a different name from the name of the company or LLC, you would need a DBA. For example, if John Smith & Joe Bonanza LLC wanted to operate as Mount Olympus Real Estate Investment Company, they would need to.
Is a DBA a legal entity?
That’s a good question and the short answer is “No”.
When you create a corporation or LLC, for example, you are creating a separate legal business entity. If you compare a LLC vs sole proprietorship, when the entity (LLC or company) operates, it does so as a separate entity rather than as you personally. In other words, you can be an officer of the company or a member of the LLC, but it’s not you. An LLC will also require you to acquire an employer identification number or EIN, which is not required of a DBA.
On the other hand, as mentioned above, a DBA is always you. In fact, most states will not allow you to use words like “Company” or “LLC” in your DBA, as this will mislead anyone doing business with you.
Also, as a DBA, you do not have any personal liability protection afforded to an LLC or a corporation. For example, because an LLC is a separate legal entity, the personal assets of the members (or owners) of the LLC remain separate from the assets of the business. This provides members of the LLC with a level of liability protection against creditors or in the event of a lawsuit. Since you and the DBA are the same entity, there is no similar protection.
Registration of a business name
In most states, some sort of registration is required for a DBA. It may be mandatory to register your name with the state, county and city where you do business. Some states even require you to get name approval and then use it in a print publication and some have rules based on what type of business it is. The county clerk where you do business is a good place to start.
There is no easy answer to the question “Do I need to register my DBA?” But in addition to the county clerk, here are some guidelines that will help you determine the first place to start looking for an answer:
Alabama, Alaska, Arizona, Delaware, Florida, Hawaii, Kansas, Maryland, Mississippi, New Mexico, Nebraska, Ohio, Wisconsin and Wyoming don’t require you to register your name with the state.
There are 19 states that require you to register at the county level. Arkansas, Colorado, Delaware, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Nevada, New Jersey, New York, North Carolina, Tennessee, Texas, Virginia, West Virginia and California (if you business from State in California).
Maine, Massachusetts, and Rhode Island all require you to register at the city level. Alaska and North Dakota will grant a company exclusive rights to the DBA so that a new company cannot take your business name or something similar.
Once you’ve registered your name, you’ll want to make sure that you don’t need to renew your DBA every year. In other words, some states require you to update your DBA renewal on an annual basis.
Are there any advantages to registering a trade name?
The main benefit of a DBA is that it allows a sole proprietor or a general partnership to do business with a typical business name like Eveready Plumbing (above) without the need to create a separate legal entity. A business name could make it easier for potential customers to identify with the business and what it does.
A DBA does not necessarily protect your business name from use by someone else in your state (with the exception of Alaska and North Dakota (see above). You will need to apply for a DBA. trademark protection for that.
When it comes to LLCs or corporations, this allows the business to operate multiple businesses without creating separate legal entities for each business. If you have multiple websites or restaurants, for example, as an LLC, you can operate each as a separate DBA.
Nav’s final word: doing business as a DBA
While doing business with a business name does not offer any liability protection to the business owner, it does allow the business to operate with a business name that could help customers identify with the business and what it does, while allowing the owner to operate and pay taxes as a sole proprietor or a partnership.
For business owners who see a potential need for liability protection offered by a separate business entity like a corporation or LLC, setting up the separate entity might be a better option, even with record keeping and reporting. increases required for these legal entities.
Additionally, although it is not mandatory to qualify for a small business loan, some lenders give preference to corporations and LLCs when considering a loan application. This has been shown by many Sole Proprietorships who have had difficulty qualifying for a Paycheck Protection Program (P3) loan with many SBA lenders. The clear separation of business and personal entities makes a lot of sense to a lender when assessing the creditworthiness of a business.
This is especially true for start-ups looking for a business start-up loan. A separate legal entity will not guarantee that you will find the financing you are looking for, but it is one more clue to a lender that you have your financial and accountant ducks in a row and could increase the chances of success.
However, at the end of the day whether you operate with a business name or not is up to you and the nature of the business you want to start.
Rate this article
class = “blarg”>