A DBA stands for “doing business as,” and exists to inform customers about a company’s true ownership. Also called a “fictitious business name,” DBAs protect consumers from fraudulent or deceitful business practices. If you intend to operate your business under a name that is different from your own name as a sole proprietor or your legally incorporated LLC, you will likely need to file a DBA.
Understanding why a business may need a DBA, along with the steps involved in setting one up, is crucial to avoiding financial penalties and legal repercussions down the line.
Reasons to Form a DBA
There are various factors that can lead a business to file for a DBA or trade name. Here are some reasons that small business owners may want or need to submit a DBA request:
Sole Proprietorship Operating Under a Different Name
If you’re a sole proprietor or a member of a general partnership, you may need to set up a DBA if you wish to operate your business under a name other than your own. In some cases, it may be possible to avoid filing for a DBA if you include your name in the new title.
For example, a bakery owner named John Smith could call his business John Smith’s Cupcakery. But if your business name suggests a group of owners, or if it includes only your first name in the title (e.g. John’s Cupcakery), then a DBA will likely be required by law.
LLC Operating Under a Different Name
Sole proprietors aren’t the only owners who file fictitious business names. DBAs are also mandatory for businesses that have recently incorporated or formed LLCs and intend to operate under a different name. The government requires LLCs to file DBAs to ensure that they aren’t misleading the public in any way, and that all sales made by the business are on solid legal footing.
Company Operates Multiple Businesses or Websites
Additionally, you may need to file a DBA if you intend to expand your product or service lines and sell those items under an alternate title. If your organization operates multiple businesses, or sells goods on multiple websites, you will need to file a DBA for each new branch of the company.
Additionally, business owners may opt to set up a DBA to boost their standing among clients and investors or ease the process of opening a business bank account. In fact, sole proprietors may be unable to collect money or start a bank account under a business name that they have yet to claim.
Setting up a DBA
The first step in registering your DBA is choosing a business name. While there aren’t a lot of specific restrictions on trade names, most states prohibit businesses from choosing a name that too closely resembles that of an existing company. Additionally, businesses should avoid names that may confuse the public about their product and service offerings.
Once you’ve chosen a name, you can visit your county clerk’s office for a DBA statement form or print one online. The Small Business Administration offers specific instructions for business owners in different states and counties throughout the U.S. Fill out the form for your fictitious business name request and submit it along with your filing fee per the instructions. Additionally, some states require filers to publish notice in their local newspapers alerting customers to the change of business name.
Be sure to follow all the legal guidelines and requirements before opening a business with a DBA name. The last thing you want is to get dinged with penalties and fees as you’re trying to build your business.
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