In simplest terms, a DBA or assumed name tells the public that you are “doing business as” a company name that differs from the one you legally registered.
A DBA protects consumers by clearly linking “Fictitious Business Names” (another term for DBA) to the legally registered parent company. That way dishonest businesses can’t circumvent bad press or legal troubles just by operating under a different name (shysters, beware).
But there are plenty of reasons why you as a business owner might want a DBA for your own benefit as well.
Why should you file a DBA?
If you run a sole proprietorship, or you’re in a general partnership, you and your business are one and the same legal entity—unless you file a DBA name. By default your small business will operate under your name or your partner’s. So if your name is Eloise Chang, but you want to call your interior design business Marie-Your-Condo, you’ll need to file a DBA to use the new trade name.
Or maybe you run an established corporation but want to sell products or services under a different name for branding purposes, without creating a new business entity. For example, if men’s underwear company Super Shorts Inc. opens a female athleisure shop, their name probably doesn’t appeal to their new target market. Instead they might choose to register the DBA “SheShe Apparel.”
In some states you may be legally required to register your DBA in order to conduct business using it, so check with your local government to see if you need one.
Benefits of registering a DBA
A DBA offers more than just flexibility and consumer protection. Here are some reasons you might want one.
Benefit 1: It helps you separate your personal and business banking
If your business is a corporation, this doesn’t apply. You already have a separate business name. But if you don’t have a separate business name, getting a DBA and federal tax ID number (EIN) allows you to open a business bank account—independent of your personal account, under your personal name. It’s a necessary step for separating your funds appropriately. You may also need a DBA to secure certain loans.
Benefit 2: It brings your brand to life
Just like the look of your brand, your business’s name should reflect your products or services—giving people a reason to trust, and invest in your business. Using your own name or the name of your corporate entity just might not fit the bill. Especially if you registered your business as something functional (read: boring), then came up with a better brand concept down the road.
Benefit 3: It publicly separates your name from your business if things go wrong
A DBA enables you to exist separately from your business, which is helpful in a PR disaster. You are still personally liable for the debts of your business—unlike a corporation or LLC. So if you get sued, it’s on you and your personal assets could be at risk. But it does give you the flexibility to start fresh with a new name if something goes sideways.
How do you file a DBA?
Just like registering your business, file your DBA in the state or county where you primarily do business. Check your Secretary of State’s website for guidance. Most have an easy online name search tool, so you can quickly see if your chosen name is available or if you need to go back to the drawing board.
Once you have your name, register it online or file with your local Registrar-Recorder/County Clerk’s Office. Processing can take up to a month, and may require a filing fee. After your DBA registration is complete, you’re allowed to officially open the doors, and bank account, of your new business!
As a final step in some states you might also have to place a “fictitious name ad”—a notice in a local newspaper to give public notice of the DBA filing.
What’s the difference between a DBA and an LLC?
The biggest difference between a limited liability company (LLC) and a DBA is liability protection. With the LLC business structure, your personal property remains separate from your business. This can be a real lifesaver if you run a high-risk business or own significant personal assets you’d want to protect if your LLC faces bankruptcy or lawsuits. A DBA doesn’t give you any legal protection.
A DBA also does not provide any tax benefits, while an LLC lets you take advantage of lower tax rates.
It’s important to remember that a DBA is not the legal name of a business. It’s simply the name that a business owner sells their products or services under. The legal name of the business must be used on all government applications and forms. That included tax forms at the state level, county level, and federal level.
An LLC can have multiple DBAs under its umbrella. When tax time rolls around, several DBAs can be wrapped into a single tax filing.
Also, you don’t have exclusive rights to a DBA. When you name your LLC, that’s yours and no one else can do business under that name. But with a DBA, another Marie-Your-Condo could open up down the road under their own DBA.
Ultimately, if you’re planning to grow, you will eventually want to convert your DBA into an LLC—for the tax breaks and the liability protection. But if you’re happy to stay small, you want flexibility, or you have the perfect brand name in mind, a DBA is a quick, easy way to bring your business to life.