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The DBA is a very common term in the world of business and helps assist with marketing and sales. It’s also a lot easier to understand than you would believe, though there is much confusion surrounding such a simple subject. Let’s clear that up so you can take advantage of all the DBA can offer.
DBA Meaning (in short)
The term ‘DBA’ stands for ‘Doing Business As’. It is also referred to as the trade name, assumed name, or fictitious business name. The purpose behind the DBA is to do business under a different name than the official/legal name you are using.
The DBA might be more useful for marketing, but it is also commonly used when you are doing business in a different location.
The DBA can protect the names of the owners and may also be useful if you intend to expand the scope of your business enterprise.
What Is a DBA?
The DBA is not a distinct legal entity type, such as an LLC or Corporation (C-Corp or S-Corp) It is not a structure, merely a name used for business purposes. It’s possible to use multiple DBAs of the same name in a single state.
Sole Proprietorships and Partnerships have the option of doing business under their name or a DBA. Other legal entities, such as the LLC or S-Corporation, will always have the DBA as a secondary business name (No DBA/fictitious name can include terms such as ‘Corp’ or ‘Inc’).
If you want to open a business bank account, you will likely need to have a DBA. A business bank account cannot be opened with a personal name and personal details. The DBA will also make it easier to run a business, as it looks more professional and can assist you in getting a loan and networking with other people.
The purpose of the DBA is to make marketing easier and to make it clear to customers who run the business. The public needs to know who they are doing business with.
DBA Example
Let’s say your name is Sarah Jeffries, and you are setting up a hair salon, operating as a Sole Proprietorship. For marketing purposes, you might want to create a DBA with the name ‘Cute Cutz’, so that people will want to go to your store. All you would have to do is register the DBA and you could easily operate under this name.
If your company is called Sarah Jeffries, LLC and you are opening a hair salon named ‘Cute Cutz’, then you need to ensure that you register a DBA termed ‘Cute Cutz’.
You cannot just operate under an unregistered name except in a small number of states. Even if it is allowed, it’s usually best to file one anyway.
How to File for a DBA?
Filing for a DBA is easy, not to mention cheap. The cost for the DBA will range between $10 – $100, and likely averages around $50. You will need to visit the local county clerk’s office to file the DBA, or you could file online. It depends on the state and the county. You will likely have to file a DBA in every county that you do business in, which might be tricky. You should get the DBA cleared within 2 weeks.
While there are always going to be differences per state, they are usually trivial. Go to your county clerk’s office, in whatever state you are in, and you can get your DBA within a couple of weeks. In some states, you will be required to publish your DBA name in a local newspaper. In certain states, the DBA is filed at the state level instead of the county level.
Typically, the DBA will have to be renewed every 5 years or so. If your business undergoes significant changes (such as ‘upgrades’ from an SP to an LLC, or changes its office), an amendment may need to be made to the DBA). These amendments are usually quite straightforward.
DBAs for the Different Legal Entity Types
The process for filing the DBA is usually similar across legal entity types. They are especially useful for Sole Proprietorships and Partnerships (due to increased prestige), but also have applicability for LLCs and Corporations.
DBA for the Sole Proprietorship
The Sole Proprietorship owner has two options. S(he) can either run the business under the legal name or file a DBA and run under a different name. The majority of Sole Proprietorships elect to run the business under a different name, as it conveys a lot of benefits. There is more prestige and it makes it easier to network, get a loan, open a bank account, file tax returns, etc etc etc.
DBA for the LLC
There is no requirement for the LLC to file a DBA unless they are doing business under a different name (which is frequently the case). For instance, Best Foods LLC might own a chain of restaurants that operate in different states. Each restaurant might have a unique name such as ‘Super Sushi’ or ‘Finest North Indian Cuisine’. A DBA will have to be registered for each of these entities. Alternatively, a unique business structure such as LLC would have to be created for each, which would add significant complexity.
DBA for the Partnership
Partnerships most often operate under the names of the partners, such as “Hyne and Baker”. But similar to the sole proprietorship, they have the option of filing for a DBA for the benefits conferred. A partnership and general partnership are both treated similar to Sole Proprietorships in a legal context(with the obvious exception of there being more than one owner). The DBA can protect the names of the owners in the event of disrepute, similar to the Sole Proprietorship. This is not as relevant for LLCs and Corporations, who are not liable to the affairs of the company and are run by a board of directors/shareholders as opposed to owners.
DBA for the Limited Liability Partnership
The Limited Liability Partnership is similar to other partnerships, except that the owners have limited liability (similar to LLCs). The LLP business model is not as useful as it once was. It is still used in the legal profession. This is because ‘partners’ pool their legal expertise and decades of experience together and want to use their names to increase earnings. So they join forces and use their names as a legal practice, such as ‘Allen and Overy LLP’. The LLP is necessary because it confers limited liability, which is very important in this field. The LLP has less use for a DBA.
DBA for the S-Corp and C-Corp
In practically all states, Corporations (both S-Corp and C-Corp) will not have to file fictitious names for their primary business model (unless they are doing business under a different name. In which case, they will certainly have to register filings to avoid misleading customers). Corporations would have to file a DBA if they are doing business in a different state. It’s possible that their legal name is taken in a different state but available on their own.
However, just like the LLC, the Corporation will have to file DBAs for all of its subsidiary business models. Corporations and LLCs will often prefer to open a registered agent in a different state if they have a presence there.
When You Should File For a DBA
There are many instances where you could consider filing for a DBA. The main ones will include:
- When you are operating in a different county.
- When you are operating in a different state.
- When you want to market effectively with a catchy business name.
- When you have many distinct business outlets that all need unique branding.
- When you want to get the benefits of a business bank account, loan, or networking opportunities.
When You Should Not File For a DBA
There are not that many instances when you do not need to file for a DBA, but there are some. Don’t file for a DBA if:
- Your business name is already appropriate.
- You want people to associate your name with the business directly.
- You are an LLC or Corporation that operates in one place only.
DBA Advantages & Disadvantages
There are relatively few disadvantages to the DBA fictitious name. Generally, you file one when you need one, and you leave it be when you don’t. Simple. Below is a table summarizing the advantages and disadvantages of filing for a DBA. As can be observed, it has more benefits for Sole Proprietorships and Partnerships in comparison to LLCs and Corporations.
LEGAL ENTITY TYPE | ADVANTAGES | DISADVANTAGES |
Sole Proprietorship | Marketing potential, increased prestige, personal name protection, increased area of operation, increased legal protection. | Small filing fee. |
Partnership | Marketing potential, increased prestige, personal name protection, increased area of operation, increased legal protection. | Small filing fee. |
Limited Liability Partnership | Personal name protection, increased area of operation, increased legal protection. | A small filing fee, less prestige. |
Limited Liability Company | Marketing potential, increased area of operation. | A small filing fee, less prestigious, may require a ‘Certificate of Good Standing’. |
Corporation | Marketing potential, increased area of operation. | A small filing fee, less prestigious, may require a ‘Certificate of Good Standing’. |
DBA Requirements Per State
Some states have separate offices for Sole Proprietorships/Partnerships and LLCs/Corporations in terms of DBA filings. For an overview of the DBA filing requirements per state, check out this site: DBA Filing Online. The following are 3 examples of DBA requirements in Arkansas, California, and Massachusetts.
Arkansas
DBA registration is required for any Sole Proprietorship or Partnership that does business under a name other than its legally registered name. The fee for the Arkansas DBA varies from county to county. Businesses need to check their local county clerk office for more details.
California
In California, the DBA for Sole Proprietorships and General Partnerships has to be registered at the county level. Corporations, LLCs, and LLPs will register an assumed name (‘DBA’) as part of the typical filing process, but this happens at the state level through the Secretary of State. Note that California is the most expensive of all states when it comes to starting a business, with an $800 annual fee for LLC formation, along with other fees.
Tennessee
Tennessee does not require the filing of a DBA name. It is one of the few states where you can operate under a different name than your official legal business name. Corporations, LLCs, and LLPs will still register an assumed name with the Secretary of State as part of their typical formation process. Sole Proprietorship and General Partnerships don’t have to file.
Common DBA Myths Debunked
The following is a list of some of the more common DBA misunderstandings and Myths. DBA is a very easy paradigm to understand. It is merely a name used to do business, other than the officially registered name.
Myth #1
The trademark and the trade name (‘DBA’) have nothing in common. Trademarks have to be registered with the US Patent and Trademark Office (‘USPTA’). The trademark may include the trade name, but it relates to intellectual property, a confusing field that is largely reserved for larger Corporations. Trade names are registered with a locality Trademarks are Federally registered with the USPTA.
Myth #2
Registering a DBA is not the same as registering a business name. A business name is registered with the state and is a distinct legal entity for taxation and regulation. A DBA, on the other hand, is registered in the locality where you are operating. The secretary of state website handles business name registration (in nearly all states, though some have a better business bureau). The local county clerk’s office handles DBA name registration. It’s the difference between local and state registration.
Myth #3
The DBA is not a distinct legal entity structure. It is merely a name used for trade. While you might use the DBA on legal forms, it is only a reference pointer to your actual legal name. On IRS forms, you will often put the legal name followed by the DBA name afterward, to make it even clearer for the authorities.
Myth #4
The DBA has nothing to do with your domain name. The domain name is merely the name of your website address, such as Sarah.Jeffries.com. It does not have to match your DBA (though it is often helpful if it does, for marketing purposes.
Myth #5
You do not need an attorney to register a DBA. The process is extremely straightforward to complete. It is even part of the filing process for LLCs, Corporations, and Limited Liability Partnerships. However, you can use filing services to streamline operations if you want. It can also expedite the process.
Myth #6
The state usually has nothing to do with the DBA name registration, unless filed automatically as part of LLC/Corporation registration. The DBA is most often handled at the local county clerk level. However, you will likely need to file a DBA for each county you do business in.
Conclusion
The DBA is far easier to understand than most contend. It’s merely a trading name for branding purposes and to expand your business. Filing is easy and cheap, often made available online. Most business owners have far more to worry about than filing a DBA, and it should be obvious to you from this article whether or not a DBA is necessary for your business arrangement.