DBA is the short form of ‘Doing Business As’. A DBA is a way for sole proprietors and companies that allows them to do business under an assumed name without registering another firm.
A DBA is an easy and effective way of branching out from an existing business, opening new shop/franchise, or getting into a different line of business without much legal hassle.
How does a DBA work?
A DBA offers you an assumed name or a fictitious name. Mostly, DBA is used for creating a brand name. For example, in the case of a sole proprietor, you are legally bound to use your name for your business. Laura, a florist, with a sole proprietor business license, will have to name her business ‘Laura’s Shop’. However, if she files for a DBA for a brandable name like ‘Daisies Studio’, she can name her shop like that.
A DBA meaning ‘Doing Business As’, is not a legal structure and it does not provide any additional liability protection.
Who needs a DBA
A DBA serves small businesses the most by offering name branding opportunities, increased privacy, easy setup, and flexibility.
LLCs and corporations benefit from the DBA by using it for new franchises, branches, and branding purposes. You can enter a new city or state with a new name under DBA.
Remember that a DBA is not a business structure but only an assumed name under the same business entity.
What does DBA mean? A DBA means more freedom of choice in business name and better positioning your business in the market.
DBA vs LLC
A DBA does not offer any additional benefits. The benefits and liabilities that come with your original business structure stay the same. If you are a Sole Proprietor and file for a DBA, your liability is still unlimited whereas you are covered with limited liability protection with an LLC.
If you operate as a sole proprietor, it is simple to convert to an LLC.
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How to get a DBA?
The process of getting a DBA is straightforward.
Some states have the DBA registration process online however you can also register your DBA with the county clerk or a state agency. Upon due diligence and fee collection, they will award you the DBA certificate.
The DBA fees include a registration fee, a name check fee in some states, and an attorney fee if you have hired an attorney for the process. Your business must be in good standing for the DBA and most cases, you don’t need an attorney for DBA registration.
A DBA stays valid for 5 years in most states but the DBA expiry time may vary from state to state. Make sure you know the time limit and renewal date for your DBA in your state. Your original DBA paperwork might have the expiration date or you can find it on the state business portal. Some states may also send you email or mail before your DBA expires.
Things to Remember
- Your DBA cannot have ‘LLC’ or ‘Corp’ at its end. Like, you can register for ‘Geralt Termite Control’ but not as ‘Geralt Termite Control LLC/Corp’.
- You may need to announce your DBA registration through a newspaper or publication in some states. The relevant office will notify you about it.
- The filing method and payment will vary from state to state. Some states will accept credit cards or online payment while others may ask for a cashier’s check or money order. Similarly, filing can also be done online or in-person or you may need to send in notarized papers. Check your state’s payment and filing process on their website before you start.
- You will need to identify your business with your SSN (Social Security Number) or EIN (Employee Identification Number) or Federal Tax ID. You cannot use an unregistered DBA for business and doing so can get you both civil and criminal penalties.
- When there is a change in your business address, business’s legal structure, or any other basic change in the business setup, you will need to notify the state agency. Some states will only require amendment in your DBA while others may ask for filing for a new DBA.
Tax Treatment of DBA
The DBA is only an operable name for your existing company and it does not form a new business.
A DBA doesn’t receive any special tax treatment. The taxes are the same as your parent/original company’s business structure. However, you will have to file taxes for your DBA separately.
Pros and Cons of a DBA
We have weighed the Benefits and Disadvantages of a DBA here.
With a DBA, you will not need to use your name for banking or receiving payments in a sole proprietorship. You can use your DBA for all your banking needs.
When you are operating a sole proprietorship, you are legally bound to use your name as the business name. For example, John Smith will have to use his name everywhere which will attract unwanted attention and may also cause trouble. However, with a DBA, he can use the DBA everywhere and protect his name for better privacy.
Easy Expansion and Branding
You can easily expand with a DBA. Consider you are operating a fast-food restaurant and you want to launch a Chinese or Indian food joint with another name suitable for that business, you can do that easily with a DBA. Just register a DBA with a name suitable for the new venture and you are good to go. The same can be applied when you want to expand to a new city or state etc.
Learn more about branding in our guide on How to Choose a Business Name.
No Change in Tax and Liability Coverage
The DBA does not offer any special tax treatment or liability coverage. The tax treatment and liability protection is determined by the business structure of your original firm. For example, if you have filed a DBA as an LLC, you are protected for limited liability whereas you are exposed to liability claims as a sole proprietor with a DBA.
No Exclusive Rights to Business Name
A DBA does not give you exclusive rights to use a business name. It is possible to have many businesses with the same name in a state. Others can use the same business name with or without a DBA. A trademark gives exclusive rights to a business name but it costs more.
A DBA is time-bound and it expires after a few years. You will have to renew it or you won’t be able to use the business name.
Some states may also require you to register the business name in all counties of the state and the renewal may also need to happen in all counties. This calls for additional resources and time for maintenance for a DBA.
A Summary of the Topic
What is a fictitious business name or DBA? A DBA or ‘Doing Business As’ is an operable, brandable name for a business. It is also called ‘assumed name’, ‘fictitious name’, or ‘trade name’.
What is a DBA in business? DBA is not a business structure and it does not offer any additional protection in liability. Your tax treatment, liability, and other legal matters are governed by your original company’s business structure. For more clarity on tax-related issues, consult with a tax advisor.
Doing business as a DBA, a DBA offers the most value to a sole proprietor but the LLCs, LPs or Corporations can use it for business branding or expansion.