What is a DBA and Should You File for One?
You’ve probably seen something like this on a legal document — Jane Doe LLC D/B/A Wedding Flowers by Jane. What does DBA mean? It means “Doing Business As,” an alias for a company, its trade, assumed or fictitious name. Using a DBA allows business owners to run their companies under names that are different from the firms’ legal names. Most states require owners to file for, or register, DBAs, although rules governing them vary widely from one state to another. DBAs also have advantages beyond legalities; a DBA that’s a creative name will get a company more notice, online clicks and probably revenue.
Why file for a DBA?
Companies that use trade, assumed or fictitious names may need to file for DBAs in order to comply with the laws of the states where they’re located. There are other reasons for using DBAs — for example, they give owners flexibility to expand or change their products and services without having to start a whole new business. DBAs have been around for generations, but they’re the perfect solution for today’s entrepreneurs who want to be nimble as they build their companies.
Businesses That Need to Register a DBA
Whether a particular type of business is required to register a DBA depends on where the company is located. Some states don’t require registration at all, while others require all businesses to file for DBAs. Here is a look at the types of businesses that might need to register a DBA company:
Sole Proprietorships
In many states, yes. States that require sole proprietors or general partnerships to file for DBAs want the ownership of a company to be on record; these companies don’t have to file what are called entity formation or organization papers with their states when they’re formed, unlike a corporation or limited liability companies (LLCs). If you want to operate a business that’s not under your name or a partner’s, you need to file for a DBA. There’s an upside to a DBA if you’re a solopreneur — you may find that a DBA helps you form your identity as a business owner.
Franchise Businesses
It may not be necessary for the owner of a franchise business to file for a DBA, but many franchisees do so nonetheless. Filing for a DBA informs the state and potential lenders that you’re doing business under the name of the franchise. It also makes clear that your franchise is your business and isn’t owned by the franchisor or parent company.
Other Legal Entities
Filing for a DBA may also be required for corporations and LLCs, although these businesses were required to register with state governments when they formed. A DBA can spare corporations from having to set up an entirely new company — which is the case when they create a subsidiary.
Advantages of a DBA
There are non-legal reasons why a business owner might want to use a DBA, and they have to do with keeping a company nimble. Here’s a look at some of the advantages of a DBA:
Operate Under a Different Name
A company’s name, a key part of its brand, is likely its first point of contact and connection with customers. But it can take time and several tries for a new business to find a name that’s the right fit; filing for a DBA gives an owner flexibility to change the firm’s public-facing name. And creating a fictitious business — obtaining a DBA — makes this significant change easier to make.
Business Expansion
One answer to owners who ask, “do I need a DBA?” is actually another question: Do you want to grow your business? Owners who expand into other products or services may find their company’s legal name doesn’t fit these new ventures. The name Wedding Flowers by Jane won’t help customers know that Jane Doe has expanded into wedding planning, so she needs another DBA for Spectacular Weddings by Jane. DBAs are the easiest, most efficient way to create new lines of business, each with its own name.
Business Banking
A DBA can be helpful as a company builds a relationship with a bank. Most financial institutions require companies to have an Employer Identification Number, or EIN, to open a business bank account. Having a DBA can make it easier to obtain an EIN. And all of this will make it easier when applying for a small business loan; a DBA is a sign of a serious, well-run business.
Keeps Your Business Legally Compliant
A DBA can help protect an owner’s personal assets if the company is sued. If the business is a corporation or LLC, owners’ personal assets are protected. But if the corporation or LLC sets up a business without a DBA, there is no protection. And in the case of a sole proprietorship, while that form of business entity doesn’t automatically protect the owner’s assets, a DBA is evidence that the business and the owner’s personal assets are separate.
How Do I File for a DBA?
DBA requirements differ dramatically among the states, and other factors also affect the process. The good news is filing is generally not complicated, and the cost may be minimal. Your accountant and attorney are resources if you need help. Here are some things to know about how to file a DBA:
In some states, businesses must apply to the Secretary of State or another state office. In others, county or city clerk offices may handle DBAs.
Some states allow companies to file online. Other states require a personal appearance so the owner’s signature can be witnessed. That probably can be accomplished with the help of a notary.
Your business structure may determine whether you need to file for a DBA. Some states exempt sole proprietorships, and some also exempt partnerships.
Advice for Filing for a DBA
There are a few things that business owners should bear in mind when filing for a DBA:
Check that another business isn’t using the name you want. Also, you can’t use LLC, Corp. or Inc. in your DBA name.
You may need to get a certificate of good standing, usually issued by a secretary of state or government agency that deals with businesses.
A DBA doesn’t last forever; each state sets a term such as 10 years for DBAs. At the end of that time, you’ll need to renew your DBA.
Is there more to know?
There’s much more to know about DBAs — after all, every state has its unique rules and requirements. Do some research online and find out what you need to do. You’ll likely find that the time and effort you put into a DBA is a worthwhile investment in the future of your business.
Dan Zeiler
dan@zeiler.com
877-597-5900 x134