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Registering for a “Doing Business As” or a “DBA” allows businesses to transact business under a fictitious business name or trade name—instead of using a personal name. Simply put, DBAs allow businesses to operate under any chosen name.
The most common example of a DBA is when a sole proprietor or a general partnership chooses to run a business under a different name—either to protect his/her privacy or to obtain a better business name.
For example, assume you are a sole proprietor working as a dog groomer. If you don’t think that doing business with your own name as “Ellen White” will give you a marketing edge, you can set up your DBA to operate as “Fluffy White Dog Grooming” or “Squeaky Clean Pooch” because these business-like names sound better than the legal name of Ellen White’s sole proprietorship.
It’s very important to keep in mind that DBAs are different from LLCs or other legal business entities (limited liability companies). DBAs do not separate you and your personal assets from your new business like an LLC does. Instead, a DBA just allows you to legally operate and conduct business under a different name. While DBAs offer you privacy, as well as greater marketing power, they do not offer you any type of legal protection.
In most states, you can’t just call your business whatever company name you want without filing the correct paperwork for a DBA. Most states require a DBA registration, so consumers are not misled by a fictitious or alternative business name.
A DBA filing in most states is quite easy. All you need to do is contact the county clerk’s office and pay a small filing fee of $100 or less. If you’re not sure how to find your county clerk office you can check your secretary of state website. Some states also require you to place an advertisement in a local newspaper that gives notice of your DBA.
In addition, DBAs allow you to open a business checking account and list your business on directories, such as Google and Yelp. And some banks require a fictitious name or assumed name certificate in order to open a business bank account.
The Pros and Cons of DBAs
It is important to be aware of the pros and cons of having a DBA. The benefits of having a DBA in place include flexibility, privacy protection, and brand value. Let’s take a closer look:
Flexibility
If you own a small business and choose to expand your business into other areas, DBAs can facilitate that expansion geographically, as well as opening a new line of business. For example, if you own a company named “Book Stores Incorporated,” obtaining a DBA allows you to open several bookstores under different names because “Bookies” and “The Book Nook” sound much better than “Book Stores Incorporated.” Having a DBA allows you the small business owner to open these different branches of your operation using a variety of memorable names.
Privacy Protection
If you are operating your business as a private individual—as a sole proprietor or part of a partnership—DBAs can protect your privacy. Because advertising your real name tends to result in many people trying to sell you numerous things, business owners prefer to have a DBA. On the other hand, some businesses, such as real estate agents, do not want the privacy protection of a DBA because they actually want their name in the public eye for marketing purposes.
Branding
DBAs provide business owners with the potential for branding in different target markets. For example, if your company has different lines of business, DBAs can be used to create various brand names that target specific clients. This allows you to develop unique websites and brand names for your goods and services.
In addition to the benefits of DBAs, there are also several cons to keep in mind. These include fewer tax benefits, fewer liability protections, and the need for routine maintenance.
Fewer Tax Benefits
While a DBA creates an operable name, it does not actually create a business incorporation. As a result, you can’t use “LLC” or “Corporation” in your DBA, which means that your personal liability is still at stake. A DBA does not provide the tax strategy offered by other business types.
Fewer Liability Protections
DBAs allow you to operate your business under an alias, but is not a legal entity that separates you from your business or protects you from any type of lawsuits. On the other hand, business structures, such as LLCs, provide you with more protection and security since it is a separate legal entity.
Maintenance
Routine maintenance is required on a DBA because some states make it mandatory to register your DBA name in every county in which you do business. It is important to note that this can be time- consuming, even if your state offers an online business portal. In addition, business owners must renew a DBA every few years, so the process of registering your DBA in every county you serve has to be done continuously.
Deciding on whether a DBA is right for your business depends on a number of different factors, including the type of business you own and your specific business goals. Without a legal background, it can be challenging to navigate filings and regulations, which is where Inc Authority comes in.
The experts here at Inc Authority can help you make the best decision for your business.
Incorporating is the most powerful thing you can do to legitimize your startup. And at IncAuthority.com, our setup LLC services are 100% free. Always. So, don’t wait. Form your new LLC today and enjoy the protection due to you and your business under the law.
Incorporating is the most powerful thing you can do to legitimize your startup. And at IncAuthority.com, our setup LLC services are 100% free. Always. So, don’t wait. Form your new LLC today and enjoy the protection due to you and your business under the law.
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