Starting a business can be one of the most monumental decisions you will make in your life. There are many important and complex decisions that come with starting your business and getting off on the right foot. One of these decisions is to use a DBA.
What is a DBA?
A DBA, or Doing Business As, is essentially the operating name of a company. Companies use a DBA when they wish to operate under a different name than the one their company is legally registered as. DBA is often called an assumed name, a fictitious name, or a trade name, and some states require that DBA or fictitious business name filings are made for the protection of consumers conducting business with the entity.
Different states have different DBA requirements, so it’s critical to understand your local guidelines. For example, most states require that you file for a DBA to some degree, but some states, such as Arizona, Florida, and Wisconsin, require no filing whatsoever.
When to Use a DBA
There are many reasons why businesses file a DBA and the decision to file for a DBA typically comes down to a combination of the business owner’s preference, local requirements, and the business’s legal entity. Because of this, there are a few corporate structures that tend to file for a DBA most frequently: franchises, sole proprietorships, and corporations/limited partnerships/LLCs.
Many file for a DBA because they don’t want their business to contain their personal name. Others may want to expand their business, or maybe their business has changed scope as it established itself in the market. Below, we outline the main reasons why businesses choose to operate under a different name than their legal business name for each entity type.
While franchise owners do not need a DBA, they commonly file one to establish the identity of their local business. For example, if you purchased a local Taco Bell franchise under Business X LLC, it would be beneficial to let your state know that you are doing business as the franchise you joined: Taco Bell.
Sole proprietorships (and general partnerships) often file a DBA so they do not have to use their full legal name (or their partner’s) for their business name This is due to the fact that sole proprietorships and general partnerships are unincorporated, so they don’t need to file entity formation documents or a business entity name with their state.
For example, if John Smith operates a business as a marketing consultant and he wants to make the brand sound like a larger business, he could file a DBA to use a business name like “Level Up Marketing Solutions” rather than “John Smith”.
Corporations, Limited Partnerships, and LLCs
Unless their state, city, or county specifically requires them to, corporations, limited partnerships, and limited liability companies (LLCs) are not required to file for a DBA. This is because these entity types have already registered their entities and a business name with their state.
That said, corporations, limited partnerships, and LLCs often consider filing a DBA when they want to expand a specific line of business under a different name. By filing a name for a new branch the corporation does not have to fully form a new business in order to operate under a different name. For example, if Bill owns a company called Bill’s Tennis Training where he sells tennis lessons and wants to expand into selling his own products, he can save the time and money it would take to create a second business under an additional LLC or corporation by filing for a DBA name.
How to File a DBA
The process for filing a DBA varies by state, county, city, and business structure. In general, the process of registering a DBA requires paperwork and filing fees from $10 to $100 and meeting with your county clerk’s office or filing with your state government. Some areas may also require you to place a fictitious name ad in a local newspaper for a specified period of time. We recommend looking at the Small Business Administration’s chart to look at your state’s specific guidelines.
In general, you will want to find your area’s requirements, do a DBA name search to check availability, and then register it in your state/county. Understand that there are also some specific requirements you must follow. For example, a DBA cannot have “Inc”, “LLC”, or “Corp” in the name.
Is a DBA Right For Your Business?
There are a few things you should consider when deciding whether or no to file a DBA, assumed name, fictitious name, or a trading name. The following sections outline some of the most important considerations.
While a DBA allows you to use your trade name when beneficial for marketing purposes, it does not give you official rights to your business name. If you have not incorporated a business and assigned it the name of the DBA, others can register a legal business entity with the same name, ultimately taking your DBA name. Using the DBA name for a long time does not give you any permanent rights to that business name.
Additionally, using a DBA does not give you the same legal protections and limited liability as an LLC or other corporate structure. With a DBA, you have a name to put on your business cards but you don’t have the “corporate shield” to protect your personal assets from your business liabilities or the various tax benefits that are available from setting up a legal business entity.
Doing business as names can be a great branding and awareness opportunity. For example, for sole proprietorships, employing a trade name will allow you to use a more traditional business name without having to form a corporation or LLC, which is usually much more expensive and time-consuming to establish. Rather than tying your company’s brand to your personal brand, you can focus on growing your business’s presence.
Establishing a DBA simplifies expanding your business with new product lines or offerings allowing you to use a brand name that is more aligned with the products or services you plan to sell. Doing so allows you to create a new line of offerings but without needing to file a separate corporation or LLC.
A DBA can also greatly benefit your digital presence by allowing you to register a domain name and social media account related to your company’s brand. Without the need to worry about diluting your brand or personal account, you can curate and create content that resonates with your audience to drive business growth.
Business Bank Account & Financing
Opening a business bank account requires an EIN, which a business can automatically obtain by filing a DBA. Establishing a business bank account is often a necessary first step in applying for business loans and financing as it separates your business and personal finance, opening up your business to more credit options.