DBA – what is it, why does it matter, and how it does it work?
There are many reasons why doing business under a DBA name is a good decision for your article. In this article we’ll discuss why a DBA is a fantastic idea, and what you’ll be required to do in the states where you use it. Every business has a true legal name. In the case of a sole prop, the legal name is the business owner or owners. In the case of a corporation, the LLC or statutory entity, the legal name is the one on the formation document.
If the person or company does business under another name, then it’s a DBA name. DBA also means assumed name, or fictitious name. There are no limits to the number of DBAs or assumed names you can use. Most states require that unless the DBA name is registered(done by making a filing in the state), a person can only do business under his/her own name, and corporations/llc’s can only do business under the name on their formation documents.
The point of registered a DBA is to tell the public that a specific person, or business entity, is doing business under a name other than its legal name. Registration is mandated so the public knows who the actual owner of the business is that they are dealing with.
What’s not a DBA
Registered and doing business under a DBA name isn’t the same as forming a business. If you register a DBA without first forming an LLC, corporation, or some other entity, the state you’re doing business will consider you a sole proprietorship. As a sole prop, you can conduct business in the state under a fictitious business name, but you won’t have any limited liability protection. IT means you’re responsible for the businesses’ debts and obligations.
When you form an LLC, or corporation, it grants the owner/owners of the business limited liability protection. The corporation, LLC, LP, owns the business and is responsible for the business’ debts. The shareholders, members, and partners, aren’t. After you form your corporation, if you want to do business under a name other than the one on your company’s formation document you have to file the appropriate documents to register the DBA name. If you’re planning on growing the business into additional states you’ll also need to foreign qualify in each of the various states. Every corporation/LLC is prohibited from doing business in a state without actually being qualified. There are penalties if you don’t actually comply with the state. IF you want to use a different name, you have to register your DBA name in the state by filing the various documents.
Why should you use a fictitious name
Below are some of the main reasons why businesses use a DBA name. For example, if you’re a sole prop – you don’t want to do business under your personal name. This is important. Unless you file a DBA, your business name / personal name will be the same and what you have to list on public records for your business name. For privacy reasons, you may want to give your business a different name.
Another benefit is you can get a more distinct name. A sole prop, or partner, may want the name to be more distinct. For example, if you are a John Smith, and have a gardening business, the name of the business is John Smith. But if you want to do business like John’s Flowers, then you will need to register for a DBA to allow you to do business under the fictitious name.
Your bank could also require a DBA to open a business bank account. Banks often require sole props, and partners to have a DBA before they can open a business bank account. Banks often require you to show them the DBA filing as proof you’ve registered it.
If your company is entering a new line of business, often – a DBA is used when a corporation/LLC wants to enter a new line of business, or to market new products/services which your current business name doesn’t accurately represent.
Another example where a DBA should be used is when you have a domain name and want to use it as a DBA. A DBA can be filed in order for a company to do business under the company’s domain name. This is helpful when your company name isn’t available. For example, you may want to operate a business/website in addition to your existing one. A DBA name can also provide additional credibility since your name is trustworthy.
Filing a DBA: Key Points
To do business under a DBA, you have to complete and file the appropriate DBA forms and pay the filing fee. After this, you get the DBA certificate. Depending on the state you’re in, you may be able to file it with the local county clerk’s office. In some states, filings are made in different offices for sole props and general partnerships than they are for corporations, LLC, etc. The forms can be different too. After successfully completing the filing, and getting the fictitious name certificate you can start using your DBA name.