What is DBA? Its Benefits for Small Businesses
It’s easy to fantasize about the days when establishing a business was as simple as selling lemonade to thirsty neighbors in front of your house. When you’re older, however, a successful business is about more than just creating the greatest lemonade on the street. You must ensure that you know how to set up your business and what structure will work best for it. You may be seeking alternatives to the traditional sole proprietorship or limited liability company as a small business owner or entrepreneur (LLC). A DBA can help with this.
DBA or Doing Business As
“Doing business as” is abbreviated as “DBA” It’s also known as the assumed, trade name of your company. Filing for a DBA permits you to conduct business under a name other than your own; your DBA is distinct from your legal, registered identity as the business owner. If you’re using your domain name for branding, marketing, customer interactions, social media account names, or other purposes, you’ll need a DBA. You don’t need to submit a DBA if you’re just utilizing the domain name as a website address.
What Does “DBA” Stand For?
DBA stands for doing business as, and refers to a firm or individual operating under a fictitious name. A DBA is a way to go if you choose the last option. A DBA allows you to create a distinct company account from your personal account. This will act as a backup plan for your personal finances. You’ll need an EIN (employer identification number) to open a separate company account, which you’ll get when you file a DBA. Other advantages include its low cost and ease of filing, privacy protection, and the ability to grow into regions where the company’s legal name is used.
Who needs a DBA?
To open a business bank account, you’ll need a DBA. Banks frequently demand that sole proprietorships and general partnership participants have a DBA before opening a business bank account. As confirmation that you registered the name, banks frequently demand you to show them the DBA file or assumed name certificate.
What Are the Pros and Cons of Registering a DBA for Your Business?
DBA means “doing business as” and it’s an option for your company if you don’t want to use your own name or registered business name. A DBA is required in most states, and the process is rather simple. It’s crucial to examine the benefits and drawbacks before applying for a DBA.
The pros of registering a DBA for your business
- Greater adaptability – If you already own a business and wish to grow it into new areas, a DBA can help you do it, whether it’s by expanding geographically or by starting a new line of business. If your firm is called “Restaurants Incorporated LLC” for example, having a DBA will allow you to create multiple restaurants, each under a different name. If you want to expand your business into a place where someone else has already registered your business name, a DBA allows you to register an alternative name and operate under it. A DBA can also help you get into a completely new line of business. There are numerous businesses that provide a variety of services.
- Personal Data Protection – A DBA can protect your privacy if you run your business as a private individual—either as a lone owner or as part of a partnership. Catalogs and postcards will quickly fill your mailbox if you advertise your true name all over town. Your phone will start ringing nonstop—not from clients, but from people wanting to sell something to your “company”. It won’t be long before you wish you’d hired a DBA. As a result, some firms, such as real estate agents or motivational speakers, would prefer not to use a DBA to preserve their privacy.
- Personalized branding – Another advantage of DBAs is the possibility of branding in several target areas. You can utilize DBAs to create different brand names that target specific clients if your firm (however it’s formed) has different lines of business. If you sell home products online, for example, you can build several websites and brands for your furniture, cookware, and linens. Unless you’re famous, your own name(s) will not have much marketing power if you’re running a business as a lone proprietor or partnership. A DBA helps you to create a business name that will appeal to more potential customers.
- Legal Compliance Made Simple – A DBA is not necessary for every state, although it is in the majority of them. You don’t want to be caught using a false name without first establishing a DBA. You never know when a bungled transaction or enraged customer will result in a lawsuit accusing you of fraud. Obtaining a DBA certificate is as simple as calling your local clerk’s office or the recorder’s office. The procedures and fees for registering a DBA vary by state, but the process is easy and straightforward. You may also be able to file your paperwork online.
The cons of registering a DBA for your business
- Tax Benefits Reduced – Unfortunately, a DBA does not create a business; it only creates a name that can be used. In fact, you can’t use terminology like “LLC” or “Corporation” in your DBA, putting your personal assets at risk. Other businesses have tax strategies that A DBA does not. It’s best to get the advice of a professional tax counselor to fully comprehend this subject.
- Liability protections are fewer – Operating your business under an alias is what a DBA is all about. It does not insulate you from litigation or separate you from your business. Other corporate arrangements, such as an LLC (limited liability corporation), on the other hand, offer far greater safety and security. You should keep your personal assets distinct from your business assets, regardless of the type of business you own.
- Maintenance – Some states require you to register your DBA name in each county where you intend to conduct business. Even if your state has an online business portal, this is a time-consuming process. Be prepared to repeat the procedure of registering your DBA in each county you serve, as you will have to renew your DBA every few years.
- There are no exclusive rights to the company name.
- A trademark should not be confused with a DBA. A trademark gives you the exclusive right to use a specific name for your company, but a DBA only permits you to do business under that name. In some states, multiple firms are allowed to use the same name. While most states charge roughly $50 for a DBA, applying for a trademark can cost several hundred dollars and take months. However, trademarking business names before someone else does may be worthwhile.
DBA vs. LLC
A DBA is not a type of business, but rather a one-time registration that allows you to conduct business under a different name. Beyond name registration, forming an LLC has other advantages, such as reducing your personal accountability for the company’s debts.
Unlike a DBA, an LLC provides liability protection, which means that if your LLC is sued, your personal assets, such as your bank account, car, and home, will not be used to pay the bill. A DBA registration does not give liability protection, and until you form an LLC or another type of organization that does (such as a corporation), you will remain personally liable for your business’s debts and obligations.
Consider trademark protection if you wish to prevent others from using your company name to market their products or services. A DBA registration does not provide trademark protection, which means that anyone, even in the same city as your business, can use your name. You can prevent anyone in the state from using your business name if you form an LLC. You can register your name with the United States Trademark and Patent Office to protect it on a national basis.
DBAs and LLCs are easy to set up and maintain. You must file documents with the state and pay a filing fee in both cases. Typically, you must file renewal documentation on an annual or biennial basis to keep your registration current. DBA and LLC registration processes and prices are Different by state, and in most cases, the cost of forming an LLC is more than registering a DBA. You can continue to operate your business as usual after registering a DBA without jeopardizing your registration. However, you must treat your LLC as a separate firm after you incorporate it, or you risk losing your liability protection.
How to Apply for a DBA?
It’s time to pick how you want to promote your firm to the world after you’ve decided to start a business and chosen a business structure. Choosing a “doing business as” name, or DBA is a solid branding move as well as one of the first steps in establishing your firm.
- The term “doing business as” refers to the name you want your company to be known by.
- The filing fee for a DBA varies by state and ranges from $5 to $100.
- To obtain a DBA, you must submit an application to a municipal, state, or county government body. In some situations, you’ll also need to publish the name of your new business in a local newspaper.
- They can file under any name they want with the help of a DBA.
Applying for a DBA – DIY or Get Help?
It’s time to pick how you want to promote your firm to the world after you’ve decided to start a business and chosen a business structure. Choosing a “doing business as” name, or DBA is a solid branding move as well as one of the first steps in establishing your firm. If you’re the sole proprietor conducting a business under a name other than your own. If you run a sole proprietorship, your personal name is the business’s registered name. Many states have special rules for registering a fictitious name or assumed company name. You do not have to register a DBA in every state. Individual counties within a state may demand DBA registration even if the state as a whole does not. If your state requires you to register your DBA, the forms are usually available at the county clerk’s office. You may be able to download and fill out the form online in some states or counties.
IncParadise can help you obtain a DBA for your business!
Your company name is more than a moniker. A DBA can be an important aspect of your business strategy and have an impact on how you do business. Consider how a fictitious name versus a legal name might help you grow, expand, or even simplify your business. You can use Incparadise to help you brainstorm DBA benefits. Also, make sure they’re properly filled and renewed.
Like what you're reading? Get fresh tips to start & grow your company.