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There are a lot of tough legal decisions that you’ll need to make whenever you’re the founder of a business. For example, you’ll need to form your business entity, decide on equity ownership, and how to scale your team correctly. Business owners must make these decisions early on, which will have a long-lasting impact on their overall success.

Other legal decisions are much less consequential and don’t require as much planning. For instance, you’ll need to decide whether or not you want to file for a DBA. You might have no choice but to file for a DBA depending on where you register your business and your chosen structure.

What does DBA mean?

DBA is an acronym for “Doing Business As” and allows you to conduct business under an assumed, fictitious, or trade name. The definition sounds much more complicated than reality. It’s easiest to think of a DBA name as an official company name on your DBA registration. 

It would be like someone named Michael Jenkins wanted their nametag at work to read “MJ.” The responsibilities would stay the same, and the paycheck would go to Michael Jenkins, but it would be “MJ” that was performing the job.

Which businesses need a DBA?

Filing for a DBA is a relatively standard process when registering your business as a sole proprietor or partnership. The reason is that your business’s default name will be the owners’ name(s). It doesn’t work the same for incorporation if you register your business as an LLC (limited liability company) or corporation. You’ll be able to choose the official registered name of your business as part of the process. 

It’s easiest to use an example: let’s say that Maria Smith wants to start a business with the brand name “Blue Skies and Pies” and register as a sole proprietorship. The business’s official name would be Maria Smith since she is the owner. To conduct official business as “Blue Skies and Pies,” she must file a DBA.

Smith could now operate her business without her legal name being directly attached. The company’s official registration would still be linked to Smith, so she wouldn’t receive any extra asset or liability protection. However, her own name would no longer be legally attached to the name of the business. 

Is a DBA a type of business structure?

A common mistake many first-time entrepreneurs make is that they think a DBA is a type of business structure. They’ll often assume that filing for a DBA will offer liability protection because it separates their name from the business.

The truth is that a DBA doesn’t have anything to do with reducing personal liability. If you register as a sole proprietorship and file for a DBA, your personal assets will still be at risk from creditors and lawsuits, regardless of your assumed business name.

Are DBAs legally required?

Technically, DBAs aren’t a legal requirement unless you want to conduct business under an assumed name. However, a few states require you to take specific actions after your DBA is approved. 

For example, if your business is registered in California, Florida, Georgia, Illinois, Minnesota, Nebraska, or Pennsylvania, you’ll have to publish a fictitious business name in an approved newspaper or other publication.

It’s important to note that the legal requirements for registering a business vary significantly from state to state. A few states don’t require you to register your small business name. Others will require that you register it with the city, county, and state.

The best way to ensure you stay in compliance with your start is to consult a business attorney. The last thing you want to do when starting up a new business is run afoul with the local government.

What are the benefits of a DBA?

A DBA is a good idea for anyone who is hesitant to conduct business under their own name (like in a sole proprietorship) or the name in which your business is registered (like in an LLC). However, there are more benefits to filing for a DBA than the ability to use a different name. These are a few examples of why you should consider registering an official DBA:

Names are important.

The name of a business is one of its most essential characteristics. You should take great care whenever you’re thinking of a name for your business. The name of your business can play a much more significant role in its success or failure than you might think.  

The name is typically the first impression of your business for customers. People often judge a company by its name in the same way they judge a book by its title. Most people probably wouldn’t walk into a store that said “Anna Wilson” on the front or head to a bakery called “Joe Johnson” in the local newspaper. They wouldn’t know who that is or what’s being sold.

DBA filing will allow you to create a brand and inform potential customers about your business. If the business’s name were “Anna Wilson’s Coffee House” or “Joe’s Pastry Shop,” then at least customers would know what’s being sold. In time, the name Anna Wilson could be synonymous with coffee the way Goodyear is with tires, Hersey is with candy, or Kellogg is with cereal.

Maintain your privacy.

Starting up a sole proprietorship will mean that you’re taking on a lot of responsibility. You’ll make all the decisions, claim all the profits, and absorb all the losses. You’ll also be sacrificing your privacy as there won’t be any legal separation from your business.

Without a DBA, your personal name will appear in the public record anytime your business is mentioned. Your name will appear in every headline if you own a diner and people get sick from undercooked food. A situation like that could be impossible to recover from, and you would likely be haunted by it for many years.

Banking is more simple.

It’s always a good idea to separate your business and personal assets. Even if you’re a small-business owner or even the only employee of your company, you should have a business bank account that’s a separate legal entity from your personal one. Having a business account will make life much easier for you come tax time, help protect your personal assets, preserve your credit score, and look more professional. 

The problem with opening up a separate bank account for your business is that you’ll need an employer identification number (EIN). You won’t be able to get one until you’ve officially registered your business with the state. You would have to use your Social Security number (SSN) instead, and the account would be in your name.

Whenever you file a DBA, you’ll be given an EIN that acts as the SSN for a business. You’ll be able to use the EIN to open a bank account for your business, apply for business licenses, and file tax returns, among other things.

Expansion is smoother.

Filing a DBA will allow you to operate multiple firms simultaneously under the same ownership. Let’s say you own a landscaping company called “Moe’s Mowers” that specializes in cutting grass. You’ve recently decided to expand into a moving company called “Moe’s Movers” on the side.

Typically, you would need to create an entirely separate business which means re-registering, paying taxes, and jumping through all the legal hoops again. By filing a DBA for “Moe’s Movers” instead, you can operate both businesses simultaneously and significantly reduce paperwork and expenses.

Compliance is easier.

Certain legal protections are provided whenever you register as an LLC or corporation. Your personal assets will be separated from business assets as long as you comply. However, if you conduct official business using a name other than the one you registered under, these protections can be lost.

Let’s say that you have an LLC for a car garage called “Murphy and Son’s Magic Mufflers.” If that’s the official name of the business, it’s the only one under which you can do business without a DBA. So if you were to sign a customer contract using “John Murphy” instead, a lawsuit would go after your assets and not the business.

How do I get a DBA?

Depending on your state, the process of getting a DBA will be different. You should be able to find the information on filing a DBA in your state by looking up the Secretary of State’s website. The process should go something like this:

  • Look up the name. You need to ensure that the DBA you want isn’t already being used. You can probably imagine the legal nightmare if several thousand “Acme” businesses were operating in each state.
  • Fulfill the requirements. Each state and county level is different regarding what names can be used and when you can register. Some can require you to operate under the DBA for a time before it’s officially recognized. You’ll want to consider filing fees and other DBA costs as well.
  • Officially register the DBA. You’ll need to fill out a few forms and file them with the relevant government agencies. The Secretary of State is usually the office for statewide registration, but it would be your county clerk to register locally.

Use a DBA to separate your name from your business.

You’ll automatically be filing a DBA as a part of the registration process if your business is structured as an LLC or corporation. However, that’s not the case if it’s a sole proprietorship, and you’ll need to file a DBA separately. 

Filing a DBA isn’t complicated or expensive and offers several benefits. You’ll be able to create a unique name for your business, maintain your privacy, open business bank accounts, and expand easier. There are virtually no downsides to filing a DBA, so it’s worth considering for your business.

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