What is a DBA in business? It stands for “doing business as.” This means that if you are the owner or proprietor of your own legal entity, you have to register it with the state government so they know who is allowed to charge sales tax and collect taxes from customers on behalf of the state.
There are numerous reasons why a business may benefit from operating under a DBA (Doing Business As) name. We’ll describe what a DBA name (or fictitious name) is and is not, discuss the primary reasons you would consider using one, and provide crucial suggestions for registering your DBA name – which is necessary for the states where you use it.
But before you can do this, there are some things you need to know about what a DBA is!
What is a DBA?
Each business must have a “legal” or “genuine” name. In the case of a sole proprietorship or a partnership, the legal name is the name of the company or the owners’ actual name.
The legal name of a corporation, limited liability company (LLC), or other statutory body is determined by the formation document (e.g., its articles of incorporation or articles of organization).
Due to the fact that the DBA is not a separate legal entity, it is not required to file its own taxes.
A DBA basically just tells people how to refer to your company when you handle business in order not to confuse them.
For example, if John Smith owns his own building contracting company called JSM Contracting LLC, but he does something separate like sell insurance at another job site or offsite location then he would want his other job site to not confuse you with the JSM Contracting LLC.
So, he would go ahead and file a DBA for the insurance company so that when his offsite job site sells insurance, you know they are separate from each other.
When someone does something as a sole proprietor or as a partnership, then there is no registered corporation type or a formal business structure. It’s basically just the person, or people in some cases, who own the business.
But with a corporation, you will need to file for articles of incorporation (or articles of organization depending on which state you are in). Then, once you have filed for your company type and received your official business filing number from the state, you can get a DBA filed.
What is NOT a DBA?
Using a DBA name to register and transact business is not the same as founding a business or a business organization.
If you register a DBA without first incorporating as an LLC, corporation, or another sort of legal company, the state in which you handle business considers your business a sole proprietorship.
As a sole owner, you may legally operate a business in that state under your fictitious name, but you will not be protected by limited liability. This implies you are personally liable for the debts and obligations of the company.
By forming an LLC, limited partnership (LP), limited liability partnership (LLP), or corporation (whether taxed as a C corporation or S corporation), the owner or owners of that business organization obtain limited liability protection.
The corporation, LLC, limited partnership, or LLP owns the company and is responsible for its debts. This is not the case for shareholders, members, or partners.
That is one of the primary advantages of registering a business. If you want to conduct a business entity under a name other than the one specified in your corporation, LLC, or other entity’s formation document, you must complete the necessary documents to register your DBA name.
Advantages of a DBA
Here are some of the most common reasons firms choose to operate under a DBA name. Take note that these reasons frequently differ according to the sort of business.
What motivates a sole proprietorship to use a fictitious name, for example, is different than what motivates a corporation or LLC to use an assumed name.
- You do not wish to operate a business under your own name. This is a critical decision for sole owners and general partnerships in general. If you don’t file a DBA, your business and personal names will automatically be identical whenever your company’s name is required to be listed on a public record. Therefore, you may wish to change the name to a fictitious business name for privacy reasons.
- To inform the public about your DBA and brand. By registering a DBA name, other businesses are notified that the name is in use, as the DBA name itself becomes public information. However, keep in mind that in some states, a DBA filing does not protect you from someone else registering the same name.
- To implement a more memorable moniker. The legal name may be lengthy, difficult to spell or verbalize, confusing, or otherwise unsuitable for search engines.
- Your company is planning to expand into a new line of business that is not reflected in its current name. Frequently, a Doing Business As name is used when a corporation or limited liability company wishes to enter a new line of business or market new products or services that are not represented by the current business name.
- To enhance the reputation of the business. With a DBA name, sole proprietorships and general partnerships can gain extra credibility.
- You desire a more distinguishing moniker. Additionally, a solo entrepreneur or partner may wish for a more unusual name or to indicate the type of business. If your name is John Doe and you own a truck business, your business will be called Jake Doe. However, you may wish to conduct business as Jake’s Trucks and Delivery. For general partnerships, the business name is identical to the names of the partners. By registering for a DBA, you can handle business under a fictitious name rather than your own.
- To open a business bank account, you usually have to have a DBA. Banks frequently demand sole proprietorships and general partnership partners to obtain a DBA in order to open a business bank account. Banks frequently require proof of registration in the form of a DBA filing or an assumed name certificate.
Disadvantages of a DBA
While a DBA enables the creation of fictitious business names in multiple geographical locations, it does not always prevent others from using the same business name. To obtain that protection, you would need to register your business name as a trademark.
While a DBA is a convenient and cost-effective way to start, grow, and market your business, it will not protect your personal assets in the event of a lawsuit brought against your business. If an individual brings a lawsuit against your sole proprietorship, your personal assets become subject to the lawsuit.
If a business owner wishes to limit his or her legal liability, he or she may wish to consider forming an LLC or corporation rather than a sole proprietorship. An LLC is a legal entity by itself and protects individual personal accounts from being considered company assets. Automobiles, homes, and personal checking accounts are all protected from a lawsuit brought against an LLC.
How to choose and preserve a DBA Name
Prior to selecting a DBA name, it is a good idea to verify that the name is not already in use at the state or local level. This is a simple step that may prevent future issues. For instance, if you choose a good name for marketing reasons but it is already in use, you likely do not want to compete with a similar name. By registering your distinctive name, you ensure that you are the sole person authorized to use it in the state.
The process of registering a business or a business name is distinct from that of registering a trademark. By registering your business name as a trademark, you ensure that no one else can use the name or logo in any state. Taking this extra step can help make sure that your company name remains distinguishable, allowing customers to find you rather than a competitor.
Bear in mind that DBAs have little or no legal protection. While this is an excellent way to obtain the right to use the name, it does not typically provide you with premium protection. Utilizing DBAs and trademarks in tandem provides the optimal level of marketing and protection under the law.
How to file a DBA?
To run a business under a DBA, you must complete and file the appropriate DBA forms, as well as pay a filing fee. Once completed and filed, you will receive a DBA certificate.
You can file with a local or county clerk’s office, a state agency, or both, depending on your state. As a result, ensure that you verify all applicable local governing authorities for DBA filings in the states in which you are or will conduct business. Then, confirm that your business or legal entity type meets all DBA filing requirements.
In some states, sole proprietors and general partnerships must file with a different office than corporations, limited liability companies, and other statutory entities. Additionally, the forms may vary. You may begin using your DBA name following the successful completion of the filing and receipt of a fictitious name certificate.
In order to get a DBA, you will need to go to the website for your state’s Secretary of State office. Each state has a different name for this department, but they are responsible for business filings and trademarks in each state. So if someone wants to do something like file a patent or a trademark, they would have to go through this business filing process.
So in Los Angeles, you would just go to Los Angeles County Clerk and search for it there. For example, if I was in Los Angeles I would go to: https://apps.lavote.gov/#/
Then it will walk you through the process of what information you need to file for a DBA and how much they would cost depending on where in the state you are filing it (i.e., in or out of a city, county, etc.).
Here’s a list of things to note:
- The time required to process a DBA filing by a county clerk’s office or a state office varies, so prepare in advance. In many states, the registration of fictitious names is only valid for a limited period of time and must be renewed or it will expire. Five years is a frequently used term. If the DBA name is critical to your business, register for renewal prior to the expiration date.
- Certain state/county filing requirements require that you notify the public of the DBA filing through a local newspaper or publication.
- DBA filings for corporations or corporate entities frequently require proof of good standing. This is typically in the form of a certificate of good standing, which you can obtain from the secretary of state.
- Most states also require new filings if the information contained in the initial fictitious name filing changes, such as the business address or legal name, or if officers (for corporations), partners (for general partnerships), or members change (for LLCs). Amendments can be filed in some states, while others require a complete re-registration. Take the initiative here.
- Explore accepted payment methods and filing procedures. Certain states and counties accept payment by debit or credit card; others require payment by money order or cashier’s check. While some agencies accept online submissions, others require notarized documents to be mailed in.
- If your existing business is not a corporation, you cannot use a corporate name for your DBA name. Similarly, if your business is not an LLC, you cannot use a name that implies ownership by an LLC.
- While you are legally required to identify your business with either your Social Security Number or an EIN (Employer Identification Number or Federal Tax Identification Number), advisors to small business owners regularly suggest applying for an EIN and use it instead of your SSN. Conducting business under an unregistered assumed name is illegal under state law. States impose harsh penalties, and these penalties may be both civil and criminal in nature.
And that’s all you need to know about what a DBA is in business! A DBA is just a formal name change from what you are used to calling your business. If you need to know more about how to file for a DBA from the state’s Secretary of State office then go ahead and look on their website where you can also file for trademarks or professional licenses.