What is a DBA? Pros and Cons of “Doing Business As” 2022
In today’s business world, things are not as they seem to be. Several businesses are bearing names that are different from the names that belong on their owners’ passports or certificates. The commercial version of this practice is what is described as registering a DBA name.
So, what is a DBA?
Many entrepreneurs who have heard the phrase “doing business as” (DBA) always confuse it with a type of business structure. Whenever you mention filing a doing business as name, many organization owners visualize it as creating a formal business structure with limited liability protection. At the same time, some business owners are hesitant to give it a try because they don’t see the benefits. Well, we are here to open books on this program and take you through a step-by-step guide on what it means and what you should expect with this program.
Let’s jump right in…
DBA Meaning – What Is DBA?
DBA in full stands for “doing Business As”, and registering a DBA name is the same as filing for a trade name or assumed name or fictitious name. A ‘Doing Business As’ (DBA) name is registered to confirm to the public that a particular organization or person is conducting business under a different name from its legal entity.
One of the major benefits of this program is to keep in compliance with the state. In other words, it enables you to operate under an assumed name without incorporating it as an LLC or corporation.
For instance, an entrepreneur operating a business as “John Smith Food Services, Inc” can file a DBA as “Smith Smart Meals”. However, it is not limited to a sole proprietorship; all businesses including general partnerships, LLCs and corporations can use a DBA name.
For instance, a limited liability company or a corporate can use DBA to create multiple brands or rebrand the company rather than changing the legal name. If John Doe and Co. Hardware wanted to expand into roofing sales, the owner might name doing business as as “John And Co. Roofing LTD”.
However, a DBA is not a formal business structure and doesn’t protect your assumed business name from being used by someone else. A sole proprietorship with an assumed name still remains a sole proprietorship.
In addition, your personal assets are still completely exposed to creditors or lawsuits when operating under a DBA. If you want limited liability protection, you can change your Doing Business As name to an LLC name.
Advantages of Using a DBA
For sole proprietors
As a sole proprietor, you may benefit from your ‘doing business a’s name in various ways, including:
Access to a business account: One of the main benefits of a DBA to sole proprietors is that it allows you to get a bank account under the assumed name. Generally, banks require that when operating your business as a sole proprietor, you need to file a DBA if you want to use a business bank account.
Expanding branding: DBA allows you to introduce businesses under a name other than your legal organization name. This enables you to branch out as your brand expands.
Increased Privacy: Filing a Doing Business As will only expose your assumed name to the general public. No one will be seeing your surname.
For corporations and limited liability companies (LLC)
Unlike a sole proprietorship, LLC and corporation don’t need to file a DBA in order to create a bank account in an LLC/corporation name, use a brand, or for privacy purposes. All these are standard parts of the business structure. For that reason, the only unique benefit of a DBA to a corporation and an LLC owner is that it allows you to create multiple brands and rebrand the existing one.
A DBA allows formal business structures like LLCs or corporations to create lines of business under one business that act as an anchor. In addition, an assumed name can be used to rebrand an LLC or a corporation instead of changing the main legal business name.
With that being clarified, here are the general benefits of a Doing Business As to every business structure:
Filing a DBA is cost-effective and only requires two fees; registration fees and renewal fees. For that reason, compared to entirely creating a new business entity, DBA names set up your business inexpensively. The cost generally varies by state, city, county, and organizational structure. For instance, LLCs and corporations may be complex and involve a lot of paperwork, making it cost a little higher.
If you have an established limited liability company, corporation, or proprietorship, you can use a DBA name instead of creating a separate business identity. As your organization expands and grows, you simply register a Doing Business As name for each of the new businesses you create. The original company always acts as the anchor for the satellite businesses as the company expands.
Protection of Privacy
A DBA name also adds some level of privacy to an informal business entity. Given that Doing Business As allows you to use an assumed name, you will not use your full name publicly more often. So for someone who is hesitant to put their real name on websites, signage, or business cards, DBA can give you a little more privacy.
For instance, Jane Smith, operating a Java under a DBA name, “Jane Java”, may decide to advertise his business as “Jane Java” instead of Jane Smith Java.
Even though Doing Business As is restricted to a city, country, or state in which it is filed, the program is still flexible in many other aspects. For instance, you can easily change your DBA name to LLC. You can do this by yourself or have an attorney do the paperwork for you. However, the best is to seek the help of online filling providers. Either way, changing your DBA to LLC allows you to separate personal assets from your company assets.
DBA guarantees simplicity. In essence, the program enables you to start up, shut down, or rebrand the operating name of your original business with minimal paperwork. In addition, you get DBA services in the most inexpensive way.
The main reason for filing a DBA is to keep you compliant with the law. It is a way of notifying the public that your organization operates under a particular name different from the name it was created with.
Essentially, a DBA sole proprietorship or partnership sounds more official and thus instills more confidence among the general public. For instance, consumers are more willing to write a check to “Titus’ Java ” than to an individual name like Titus Anns. That is to say, registering a DBA is a great way to change how your company is perceived.
Banks always require that you get a DBA in order to get a bank account whether you are operating your business as a partnership or a sole proprietorship. For instance, the bank will not give an account to John Smith to use as his Hardware account. However, if John Smith’s business name is a DBA “Smith’s Roofings” the bank will issue an account.
Affordability and Ease
DBA is not only the easiest way to register an assumed business name but the most affordable way to file a DBA name. In essence, you are able to file a DBA for your business without having to form an LLC or corporation.
Who Needs a DBA?
Both large and small business owners need to file a doing business as to operate under different names from their legal entities. However, in a case where your business name is a combination of your name and the name of your product, you wouldn’t need a DBA name. In order to be certain as to whether you need to file for a DBA or not, consult with experts.
An LLC or corporation also needs a Doing Business As. Ideally, if you file your business as an LLC or corporation, that will serve as a legal business entity and doesn’t need a DBA name. However, you have to get a DBA if you want to operate under a name different from the name filed with your LLC or corporation.
In a nutshell, all business structures will need a DBA to operate under a different name from their legal entity.
How to Register a DBA
The rules, forms, requirements, and DBA filing fees vary from state to state. For instance, some states require that sole proprietors and general partnerships need to file in different offices from LLCs, corporations, and other statutory entities. Even the time it takes to file the documents may also differ.
For that reason, it is prudent to consult with state attorneys before venturing into the program. Attorneys may help shine more light on your state order form requirements and why your state or county agency would need details like contact information, employer identification number, among others.
In general, filing for a fictitious name is very simple and only involves specific paperwork and some payments depending on your state. You may do this with a local or county clerk. However, some states will compel you to file with a state agency or both. In other states like California, Georgia, Florida, etc, you may be required to publish it in an authorized newspaper to notify the public what your assumed name is.
What Good Is an Unregistered Trade Name?
Though businesses with unregistered trade names don’t possess legal benefits, they can still be protected by means of a Common law trademark. Under the common law, no act of infringement is accepted for an unregistered trade name in your state.
Besides, operating an unregistered trade name is simple and less expensive. There is no spending on federal or state filings or intellectual property attorneys.
Disadvantages of Using a DBA
Just as nothing is perfect under the sun, filing for a DBA has its bad side of the coin as well. Some of the limitations you will encounter with this program include:
Geographical restriction: Doing business as a registered company name is limited to the city, county, or state in which it is filed. In that case, you have to file a Doing Business As in every city or state whenever you are starting a new business.
Lack of naming rights: You often hear stories from some entrepreneurs like, ‘I have had this business name for over ten years as a Doing Business As, how is it registered to someone else?” To answer this, just because you have been using the DBA name doesn’t give you a permanent right to the business name. The best option is to file an LLC or incorporate a business with that name.
Final Thoughts on DBA
DBA filing allows you to operate under a name that is different from your legally registered business name. That way, you can rebrand your business, branch out, secure a business account among many others.
This article was crafted to offer a step-by-step guide on the Doing Business As meaning, benefits, drawbacks, DBA filing in different states, among other aspects. Hopefully, you are now capable of making an informed decision as to whether you need to file a Doing Business As or not. You can browse through many other resources on this program within our website including the best online DBA services. We are ready to hear your stories concerning your experience with this program, please share in the comment section below.
Frequently Asked Questions
You file a DBA to inform the public that a business entity or a particular person is operating under a name that is different from its legal business name.
A DBA enables you to conduct business under a name other than your business legal name but does not legally protect your business name. Meaning, someone else can still use a name similar to your assumed name without legal actions.
A DBA is a program that allows an entrepreneur to operate under a fictitious name different from their legal name, while LLC is a business entity that is completely separated from the business owner.
The county clerk or the secretary of state agency will return all the copies to the registrar, retaining the original. In not more than 30 days after registering for a DBA name statement, the registrar is instructed to publish it in a newspaper for general circulation within the country to notify the public that a business is operating under a particular assumed name.
Sole proprietors and any other business owner require fictitious business names different from their legal names for the sake of business development. For instance, a sole proprietor may file a DBA in order to get a business bank account.
An LLC is not a mandatory requirement to start a business, but it is a great option. In essence, the benefits of forming an LLC far much outweigh the hassle and the cost of starting one on your own.
+ 1 sources
- Choose your business name. (2021). Choose your business name. [online] Available at: https://www.sba.gov/business-guide/launch-your-business/choose-your-business-name [Accessed 7 Aug. 2021].