Most of us have a nickname, right? So what’s wrong in having a fictitious business name that sounds more appropriate and casual?
Well, nothing is wrong and you can certainly run your business with a Doing Business As (DBA) name that is the assumed name, different from the legal business name.
All your loved ones call you or know a name that differs from the one that is printed on your birth certificate or passport. This doesn’t change your identity. DBA is exactly the commercial version of it.
If you are new to the world of business, you might be wondering why there is a need to have a fictitious name for your business? A company may need a DBA for various reasons and it is indeed a good decision to have a fictitious name for a company. In fact, it might work as a good business strategy.
To make it more clear if your business needs a DBA, here is a complete guidebook (the why, the what, the importance and the final thoughts).
What is a Doing Business As (DBA)?
If a company operates a business using another name rather than the legal or registered name, it is known as ‘Doing Business As’ and that’s DBA. Fictitious names come under consumer protection laws and most of the states also emphasize on registering the DBA name. Registration is also to notify the community about the business and who is actually behind the business.
The procedure for registering the DBA name may vary from state to state. However, not all companies require filing DBA. In most cases and states, a sole proprietorship needs to file a DBA while corporations don’t need to file an assumed name unless they wish to operate business under their own name.
Common DBA misunderstandings?
Although DBA is a fictitious name or an assumed name that allows one to operate business under this other than your legal business name, this is often misunderstood. Most budding entrepreneurs confuse this as a business structure and assume that they would get liability protection.
While registering a DBA, an entrepreneur is just creating a sole proprietorship with a DBA name which will help in banking and branding. The personal assets still remain completely exposed.
So, let’s now figure out what business or who needs to register DBA for better clarity!
Does your business need a DBA?
Who needs to file a DBA?
Any business who wishes to operate with any kind of alteration or variation to their original business name will require to register a DBA name.
A business (especially that operates in the US) needs to file a DBA under 2 circumstances:
If it’s a sole proprietorship or partnership
In case if it’s a sole proprietorship or partnership business, the company has to file a DBA name, different from that of the legal name. For example, if a solopreneur Sarah Taylor wishes to kick off with her business called ‘The Vintage Wardrobe’ then she would need to file DBA. Usually, a DBA can be the person’s name combined with the type of service or product offered or anything that best describes your line of work.
However, if Sarah Taylor starts a business called ‘Sarah Taylor’s Wardrobe’ then no DBA will be required. Again, if she just uses her first name like ‘Sarah’s Wardrobe’, DBA has to be filed as it does not contain her full legal name.
Sole proprietor or partner may also require to register DBA before they apply to a business bank account.
If it’s an incorporation or limited liability company (LLC)
When you are from a corporation or LLC, you already must have created a separate legal entity. However, if you are planning to run the business using a name that is different from the name already filed then you will need a DBA. In the case of LLC, even if you register a DBA, you will be responsible for the liabilities.
For example, if Sarah Taylor’s Wardrobe, LLC also wishes to operate under the name SarahsWardrobe.com, the LLC would need to file DBA for SarahsWardrobe.com. Similarly, if she wants to expand her fashion line up and offer jewellery, then Sarah Taylor’s Wardrobe, LLC would need to file a DBA to do business as Sarah Taylor’s Fashion Jewellery.
But if you research a bit more, then you could come to know that there are some places in the US where DBA is not required. Check this out!
Which states in the US do not need DBAs to operate under fictitious names?
Though it is recommended to file a DBA if one wants to conduct under a fictitious name as it has its own perks. But there are some places where filing DBA is not a compulsion and those are:
- Alabama: DBA not required for sole proprietors and general partnerships
- Arizona: DBA not required for unregistered fictitious names
- Delaware: DBA filing requirements vary from country to county
- Hawaii: DBA not required to operate under different names
- Kansas: DBAs are not required at the state level but needed at the local or county level
- Maryland: DBA should be filed to change the business name to an unused one in case the existing name is already taken.
- Mississippi: Not required to file a DBA to operate under a different name
- Nebraska: Not required to file a DBA to operate under a different name
- Wyoming: Not required to file a DBA to operate under a different name
So check out which state your business falls into and take the necessary steps accordingly. Let’s now proceed to learn how to file DBA!
How to file a DBA name?
The steps to file a DBA is quite simple. Here are some of them:
- Get the paperwork done from the government office or county clerk’s office depending upon your business structure and state in which you are located.
- Give a fictitious name to a local newspaper to help people know about your business.
- Your “doing business as” cannot end with LLC, Inc or Corp. As these give corporate status and may bring about legal implications.
- Provide all the required documents to prove your business standing to file for DBA.
- Filing papers and paying the fees can be done both online or offline depending upon the process followed by a particular state where you are located.
- You need to register your business name. If you work under an assumed name then you suffer big fines from the state regulatory agency.
- Make sure you renew your DBA after a specific time. Letting it lapse will result in a severe impact on your marketing perspective that would bring about further economic loss.
- You need to file a new DBA in case of any change like a change in partner, officers or members.
- You can seek professional help for filing DBA. But it can be done by business owners themselves as the process does not involve many complexities.
Important reasons to get your DBA
Doing Business As is definitely a good business strategy due to many important reasons:
An easy and affordable way to create a separate business
Without forming an LLC or corporation, small businesses and sole proprietors can easily and affordably create a separate professional identity by registering a DBA.
Run multiple businesses, efficiently
You just need to file a DBA name and run multiple businesses without any trouble or legal problems. You can manage multiple projects at a time by spending very less expenses and cutting down the paperwork.
Do business with legal protections
Remember you cannot conduct any business or agree to any deals or contracts with a different name, without filing DBA. you can be held in court. However, if you register as a DBA, your business will stay compliant and you can enjoy legal protections.
Operate business without your personal name
Some sole proprietors are not much fond of using their personal names as business names. They prefer maintaining a distinct identity. For them DBA works as a good option as they can use a different name without having their name on a public record where their business already exists.
DBA for business account
Many renowned banks demand DBA from sole proprietors and partners for opening a business bank account. A fictitious name serves as a proof of registration of the name to the bank.
Capture a new market with a new domain name
Online platform are a profit-making platform for almost every business under the sun, these days. You can mark your presence in the online market by filing a DBA name and offering dedicated products and services to a dedicated audience. You can have many fictitious names, many websites for each subset of product and service.
So now as you have a complete idea about DBA and how to file it, let’s also discuss both sides of the coin!
The benefits of DBA
- It is relatively an inexpensive way to set your business under a fictitious name.
- It provides immense versatility by establishing a single entity as LLC and then registering fictitious names for each new business for creating new ones.
- It ensures the protection of privacy for sole proprietors and partnership enterprises.
- Registering by fictitious names provides flexibility that allows expansion into the market without causing confusion of distinguishable business names within the state’s boundaries.
- It becomes easier to set up a bank account in a business name.
- It is easy and affordable to file DBA for start-ups and enables the use of the business name legally without incorporating it as an LLC or corporation.
- Also helps in brand awareness that makes it easier to market products under DBA without losing the name rights of your business.
The drawbacks of DBA
Just like there are good reasons to file a DBA, it is also important to weigh the disadvantages. Some of the drawbacks of DBA are:
- It does not offer much tax benefits to businesses
- Very limited liability protections
- The business name does not get any exclusive rights
- Maintaining multiple business can get complicated especially for sole proprietors
FAQs related to DBA
DBA is not a legal entity, rather you need to register your business as a legal entity first to become a DBA. Otherwise, the state recognizes you as a sole proprietor.
To apply for DBA one needs to complete the paperwork either in a county clerk’s office or state government office. Depending upon the business structure, state, or the city where the business is established, one needs to apply for DBA to the concerned authority.
You must file taxes for your business no matter whether you filed DBA or not, as DBA is not a legal entity. Depending upon your business structure it will be determined how often you will need to file taxes, either quarterly or annually.
The price varies depending upon the state, city or business structure. But generally, the prices range between $10 to $100.
If you are still not sure if DBA is good for your business or not then better consult an attorney. You’ll understand how effective or ineffective an assumed name could be. Qualified legal advice will also help you to know how to formalize and register DBA.