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 name 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.
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 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.
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 filed 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 is 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.
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
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.