What is a DBA?
A common question we often get is, What is a DBA?
Today we are going to dive into this question and cover the important things you need to know before registering a DBA for your business.
What is a DBA?
A Doing Business As (DBA), also known as fictitious business names, trade names, or an assumed name, is a name that the legal owners of a business register with the state.
Owners must register a DBA only if they use a different name on items like business signs, letterheads, advertisements, and so on.
This DBA name is something other than the names of the legal owners of the business (for sole proprietors and partnerships) or the business name the owners listed on the formation paperwork (for LLCs and corporations).
DBA’s are not required or needed to run a business, but sometimes they are needed.
DBA’s are often used by partnerships, sole proprietorships, LLCs and corporations for branding purposes.
Here are examples of why a company might decide to file a DBA:
- You have a registered business under a certain business name but are looking to rebrand or branch out into other products and/or services.
- You have a sole proprietorship or partnership that is unregistered and want to do business under another name that is different from your personal name. Note: this should only be done for very small businesses or businesses that are low profit or low risk.
DBA for Sole Proprietorships and Partners
There are some rules for the types of DBA names you can use.
Sole Proprietorships and Partnerships use the owner(s) personal names when registering their business.
If a Sole Proprietor or Partner is going to be using a business name that does not include the last name(s) of the owner(s), then they must register a DBA.
Another instance in which a Sole Proprietor or Partner must register a DBA is if they want to use a name that suggests that the business has more or fewer owners than it actually does.
For example, let’s say Jeff Jones owns a delivery company. He cannot call himself “Jones and Sons Delivery” if he is the only registered owner because the name suggests that there is more than just one owner.
Likewise, a Partnership with multiple owners cannot use the name “Jeff’s Delivery Service” because the name suggests there is only one owner.
These are examples of times that you would be required to register as a DBA.
Sole proprietors and partnerships can include words in the business name other than the owners’ names and can change the order of the partners’ names without registration (as long as they meet the requirements discussed above).
DBA Benefits for a Sole Proprietor and Partnership
- Expand their branding – without a DBA, Sole Proprietors and general Partnership operate under the personal name(s) of the business owner. A DBA helps you expand your branding by choosing a business name rather than having your business be called the name of the business owner.
- Increased privacy – Using a DBA makes the name of the business owner private from the general public.
- More options and access to Small Business Banking – You are able to accept payments in the business name rather than your personal name into a business bank account.
DBA for Corporations and LLC’s
If a Corporation or Limited Liability Company wants to use a name other than the one on their Articles of Organization (formation paperwork), they must do a DBA filing registration.
DBA registration rules for Corporations and LLCs are much stricter than that of Sole Proprietorships and Partnerships.
Before using a DBA, Corporations and LLCs must first register the DBA name they want to use.
For example, if a Corporation’s legal name is “Extreme Burger, Inc.” but they want to go by “Extreme Burgers,” they must register the DBA “Extreme Burgers” before rearranging the order of words, adding words, or removing words.
DBA Benefits for Corporations and LLC’s
- The main benefit is that DBAs allow formal business structures to create multiple brands, multiple businesses (business names) or lines of business under one LLC or corporation.
How to Register a DBA
Each and every state is going to have its own requirements for registering a DBA and filing a DBA is fairly simple.
In most states, you must file your DBA paperwork with the Secretary of State and pay the state filing fee which can range from anywhere between $10 to $100.
Some states only require you file a DBA once and the name will remain active indefinitely while others may need to be renewed every five years or so.
A handful of states require that a business publish a statement in a local newspaper when their name is changed and a DBA is filed.
Risks of using a DBA without Registering
If you use a name other than the legal name for your business and fail to register the DBA, you might face legal and financial consequences.
In some states, it is a misdemeanor to operate a business under an unregistered name.
The state might impose fines or stop your business from continuing to operate under the assumed name until you register, or both.
Be sure to register your DBA before offering your services or entering agreements under the assumed name.
Most banks will not allow you to open an account without showing that you registered the business name.
This is usually verified by showing a copy of your DBA certificate which is a legal document showing you registered the fictitious names.
If you enter into a contract under a DBA that you have not registered, and the other party does not perform under the contract (for example, they do not ship the products they agreed to send), you typically cannot sue them in court to enforce the agreement.
As you can see, using a DBA without registering can have some serious consequences to you personally and to your business.
A DBA isn’t a business structure and doesn’t provide any personal asset protection like an LLC or corporation.
It is simply using a different name to operate your business under.
One common misconception is that a DBA is a type of business structure or business entity.
An entrepreneur or small business owner who starts a new business and only registered a DBA name, is actually just creating a sole proprietorship with a DBA name.
Sole proprietorships do not offer personal asset or liability protection.
If you have a sole proprietorship, we recommend converting to an LLC so that you can get the added benefits of liability protection.
LLCs protect the owners personal assets shuld the business face financial hardships.
FundsNet requires Contributors, Writers and Authors to use Primary Sources to source and cite their work. These Sources include White Papers, Government Information & Data, Original Reporting and Interviews from Industry Experts. Reputable Publishers are also sourced and cited where appropriate. Learn more about the standards we follow in producing Accurate, Unbiased and Researched Content in our editorial policy.
SBA.gov "Choose Your Business Name" Page 1. April 7, 2021