Running a business

What is a DBA? Everything small business owners need to know

As a small business owner registering your company for the first time, you’ll first choose a structure for your entity from options like LLCs and corporations. During this process, you may come across one form in your secretary of state’s office for a “DBA.”

A DBA, otherwise known as “Doing Business As” is the name under which you operate and market. Business owners can use DBAs if the name they operate with is different than their legal name on file with the state.

Unfortunately, many business owners are confused about DBAs and how they compare to the legal name they provide on their registration forms.

In this article, we’ll provide everything you need to know about DBAs including how to get a DBA and the pros and cons of doing so. After reading this article, you should have a much clearer understanding of whether you need a DBA for your small business.

What is a DBA?

A DBA allows your business to operate under a name other than your legal, registered name. If you are “doing business as” under a different name than the one on file with your respective state, you need to complete one of these forms.

Let’s say, for instance, you are in the restaurant business and form an LLC called “John Smith Restaurant Services.” Your first goal is to open an American bistro. Few customers want to eat at “John Smith Restaurant Services.”

So, you elect to use a trendier name: All-American Sports Pub. You would need to file a DBA with your respective state to indicate you are doing business as “All-American Sports Pub.”

However, bank accountsEmployer Identification Numbers (EINs)accounting software, and other legal paperwork will all show “John Smith Restaurant Services” as your company name. Let’s take this example one step further.

Now, after the success of All-American Sports Pub, you decide to open a food truck that services Mexican-inspired food. A food truck named All-American Sports Pub would be confusing. So, you decide to file a DBA for the name “Tasty Taco Truck.” In this case, the legal entity, John Smith Restaurant Services is doing business as “All-American Sports Pub” and “Tasty Taco Truck.”

So, in summary, if you plan to run a new business under a name different than the one you declared on legal forms, you’ll need to submit a DBA filing with your respective secretary of state’s office. Doing so makes your assumed business’s name a matter of public record.

Reasons to form a DBA

Here are some reasons that small business owners may want or need to submit a DBA request.

Operating under a different name

If you wish to run your business under a name other than your own, you’ll need a DBA. However, if you include your personal name in the business name, it may be possible to avoid filing for a DBA.

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), a DBA will likely be legally required.

Operating multiple businesses or websites

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 you conduct business or sells goods on multiple websites, you will need to file a DBA for each new branch of the company. This is cited in the example above regarding John Smith’s Restaurant Services.

Credibility

Securing a fictitious name (DBA) could give you more credibility than your own name. For instance, imagine you operate a sole proprietorship, which operates under your personal name. A DBA would make the operable name of your business more appropriate.

A more formal name for business needs could make you appear more credible to both consumers and investors. It will also make it easier for people to find you on Google and other search engines.

Similarly, a DBA can provide your business entity with brand recognition you can use for marketing purposes. In the example above, using “Tasty Taco Truck” as the name of the business allows John Smith to market himself better against competitors.

Business banking

It’s not possible to open a business bank account unless you can provide a tax ID number. Sole proprietors and the owners of general partnerships don’t have EINs unless they’ve registered at the state level.

Thus, if you’re the owner of a sole proprietorship or general partnership without a tax ID number, you’re likely mixing your personal finances with your business finances, which is a big problem.

When you submit a DBA registration, you’ll also receive an EIN. This will then allow you to open a separate business bank account, providing more credibility to your company and helping you more easily manage your finances.

Maintain legal protections

A DBA alone does not necessarily provide legal protections. But, it does help maintain the corporate veil. Certain business entities, like limited liability companies and corporations, provide liability protection to owners. If someone were to sue the business, they could not go after the owner’s personal assets.

But, if the owners operate under a company name other than the one on their registration forms, they’ll lose personal protections. Let’s say the business owner in the above example registers his LLC name as John Smith Restaurant Services.

He then opens All-American Sports Pub and agrees to work with a vendor. The two sign a contract for the vendor to provide beverages to the restaurant. Smith’s business fails, and the vendor sues All-American Sports Pub.

In this case, Smith operated All-American Sports Pub as a separate legal entity without filing a DBA. So, the vendor could still come after Smith’s personal assets.

Managing a separate legal entity without filing a DBA pierces the corporate veil. If Smith had sought legal advice and submitted a fictitious name certificate, the corporate veil would still be intact.

The problems with registering a DBA

Although DBAs can be useful for small business owners, they’re not without their risks. Business owners need to understand how DBAs work before proceeding.

No legal right to a name

A DBA allows you to use a name. In some ways, fictitious name filings do nothing more than enable you to tell your respective state you’re doing business under that specific name. However, a DBA does not provide you with the permanent right to the name.

Let’s say that John Smith works to build the “Tasty Taco Truck” brand but does not register as a business entity with the state. Someone else could register “Tasty Taco Truck LLC,” and there’s nothing that Smith could do to stop it.

Lack of legal protection

Yes, DBAs help maintain legal protections, but they don’t provide them explicitly. A DBA does not offer the same corporate shield you’d obtain if you registered your business entity with the state. DBAs leave you open to the many risks and liabilities associated with running a company. If you are looking for these protections, you’ll need to seek them out elsewhere.

Burdensome

Registering a DBA can cause administrative hassle. Not only must you register at the state level, but you may also have to submit forms at the county level. You must do this in every area in which you operate.

And, there’s a chance someone has already filed a DBA in that respective area. If that’s the case, you have to use a different name or cease to exist in that area.

Does my business structure matter?

When it comes to securing a DBA, the type of business you have is very important.

Sole proprietorship and partnerships

If you are the owner of one of these entities, then your business name is your personal name unless you file a DBA. These organizations do not file entity formation papers, so they don’t have any registered business name on file with the state until they file a DBA.

As mentioned, registering a DBA would allow you to open a business bank account and market yourself more favorably.

LLCs and corporations

These business entities have already filed with their respective states. They should already have an EIN and business bank account. So, they don’t need to file a DBA unless they plan to conduct business under a different name for separate lines of business.

How to get 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, companies should avoid names that may confuse the public about their product and service offerings. Your local county or state may provide a service to help you see if a name is available or already in use.

Once you’ve chosen a name, you can visit your county clerk’s office for a DBA form or print one online. The Small Business Administration offers specific instructions for business owners in different U.S. states and counties.

You will fill out the proper form for your fictitious business name request and submit it to your municipal or state government along with your filing fee per the instructions.

Additionally, some states require filers to publish a notice in their local newspapers alerting customers to the change of business name.

If you already operate in multiple areas, you may not have time to file forms everywhere. Filing services like BizFilings can submit paperwork on your behalf to help you secure a DBA name.

Is a DBA right for your business?

A DBA could give you better control over your finances. It could also boost your company’s credibility and allow you to protect the corporate veil. Make sure you submit forms correctly to your local secretary of state’s office to ensure you properly secure a DBA.

If done correctly, a DBA is a useful tool that can provide you with more flexibility in how you market and run your company.


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