What Is a DBA?

September 24, 2020
Business Basics
What Is a DBA?

DBA is an abbreviation for "doing business as." It is a method of assigning a different name to your business, or a part of your business, apart from its registered name. Although it does not offer the same legal protections as other business entities, a distinctive DBA name can enhance your company's branding.

A DBA name is a company's alias to promote a different image or product than its official title. Getting a DBA is similar to Peter Parker conducting his hero work under Spiderman.

Depending on the jurisdiction in which you conduct business, the term "DBA" may also refer to fictitious, trade, or assumed names. These terms are often used interchangeably to describe the same concept.

Registering a DBA is a straightforward and cost-effective process. However, it's important to note that a DBA does not provide legal protection or serve as a formal business structure. While obtaining a DBA will establish your name officially, it does not safeguard your assets or shield you from potential lawsuits.

Do I need a DBA name?

A DBA, or "doing business as" name, is not always necessary, but it can be beneficial. If you intend to conduct business under a name other than your own or your official business name, you must register for a DBA. A DBA provides added credibility for your business, privacy when desired, and an effective marketing strategy for a different direction. LegalZoom has a great article on the differences between an LLC and a DBA.

There are various benefits to creating a DBA that may align well with your business.

1. Rebranding. If you wish for a fresh start for your registered business, such as an LLC (Limited Liability Company) or corporation, and want the opportunity to explore new products or services, a DBA allows you the flexibility of going in a different direction than your official business name implies.

2. Privacy. Unregistered businesses, such as sole proprietorships and partnerships, can use a DBA (Doing Business As) to establish and operate under a business name separate from the owner's personal name.

3. Flexibility. Companies that need to use a name for their product or service already used in their state can create a unique and alternative name.

Example of a DBA

DBAs often assign fictitious names to business entities to protect the business owner's identity, particularly in cases where they have a sole proprietorship or partnership that uses their legal name. DBAs can also be used for other business types, like a single-member LLC or corporation. For example, John Smith might operate his website design business under "Smith's Websites."

LLC owners may opt to expand their product or service offerings. For example, if John Smith established Smith's Websites, LLC for his web design business but later decided to manufacture and sell his furniture, Smith's Websites could operate as Smith Custom Logos instead of forming a separate LLC. This enables Smith to diversify his service offerings while keeping the same business entity.

The benefit of a DBA to sole proprietors or partnerships

Due to its significant advantages, sole proprietorships or partnerships may benefit from considering a DBA:

  • Simplicity and affordability. A DBA is a straightforward option to register your business name without forming a formal business entity such as an LLC.
  • Separate your business and private life. Many people prefer to maintain a distinction between their personal and business lives. If you're unsure whether to use your unique name or a DBA, opting for a DBA enables you to market your business while safeguarding your privacy. It entails minimizing the use of your name in daily business dealings.
  • Branding and marketing. Using a DBA can simplify branding. A DBA enables clear promotion of your product or service for marketing purposes.
  • Establish credibility. Creating a DBA can enhance the credibility of your business, and the best part is that it doesn't require a significant financial investment.
  • Expansion and personalization. With a DBA, businesses can customize their brand according to their location. For instance, if there are multiple ice cream shops in different states, each shop can be named after the state or town it is located.
  • Open a business bank account. A bank may require sole proprietors or partnerships to have an established DBA to open a business checking account. It is crucial to keep personal finances separate from the business. You may also consider applying for a business credit card.

Disadvantages of a DBA for a sole proprietor

A DBA provides a practical method for establishing fictional business names in various locations, but it does not guarantee exclusive rights to the name. To ensure protection, it is necessary to register a trademark for your business name.

While a DBA can help you establish and promote your business efficiently, it does not provide asset protection in the event of a lawsuit. If someone sues your sole proprietorship, your assets can be targeted.

Business owners who wish to limit their legal liability may choose to use an LLC or a corporation instead of a sole proprietorship. An LLC is a separate legal entity that helps protect personal accounts from being considered company assets. Personal items such as cars, homes, and checking accounts are safeguarded from lawsuits against an LLC.

Choosing and protecting a DBA name

When choosing a DBA name, it's essential to check if it's already being used at the state or local level. This step is easy and can prevent future problems. If the name is already in use, it's best to avoid using a similar name as a competitor. Registering your unique name ensures you have exclusive rights to use it in the state.

Registering a company or a company name is distinct from writing a trademark. Registering your company name as a brand guarantees that no one across any state can utilize the company name or logo. This additional measure guarantees the uniqueness of your company name, thereby making it easier for customers to locate your company rather than a competitor.

DBAs provide limited legal protection and are primarily used to obtain the right to use a specific name. However, they do not typically offer a comprehensive defense. Combining DBAs with trademarks is the most effective marketing and legal protection approach.

How to set up a DBA

Setting up a DBA can be a straightforward process. It is crucial to follow general steps, and you may need to consider state-specific requirements that can often be found on the respective Secretary of State's website.

  • Entity Name Search. Ensure that the DBA name you desire is not already taken. Typically, you can search for a business entity on the Secretary of State's website.
  • Review the naming requirements of your state. It is generally not allowed to use words or terms that could be associated with a banking or any governmental entity.
  • Fulfill operating requirements. In some states, operating under your DBA before registering is necessary. Examples of operation may be as simple as printing business cards or launching a website.
  • Register your DBA with the Secretary of State and/or Local Government Agency. Typically you can fill out a form online, via mail, or visit your county clerk's office.
  • Apply for any Business Licenses. If your DBA operates in a new industry, acquiring a business license for a particular product or service may be necessary.

FAQs for DBAs

These common questions can assist you in evaluating fundamental aspects as you consider establishing a DBA for your business.

How long does a DBA last?

When you register a DBA, it's essential to keep track of its expiration date. Each state has different renewal requirements. In California, you'll need to renew your DBA every five years. In Texas, you can use the DBA for ten years before resuming. New York has no expiration date, and no renewal is necessary.

A DBA registration typically lasts five years in most states before it needs to be extended or renewed. Monitoring your DBA's expiration dates for your business's well-be is crucial.

If you choose not to renew your DBA, it is recommended to cancel the registration to prevent any confusion or potential legal problems.

Am I legally required to have a DBA to operate under a different name?

Depending on where you do business, you may or may not need a DBA. Some states require registration, while others do not. It is recommended to check with your state and local government to determine if registration is required. The information can typically be found on the Secretary of State's website. It's important to know this. If your state does require a DBA and you don't register, you could be penalized.

Even if registration is not mandatory in your state, establishing a DBA can be beneficial. It ensures legal compliance for your business and simplifies setting up multiple companies.

What are the steps to cancel a DBA:

  • Contact the local or state office where you first registered your DBA.
  • Submit any state-required paperwork or official documents, and pay any related fees. (Some states have a filing fee for processing a cancellation.)
  • If you have registered your DBA in multiple jurisdictions, you must repeat the process to cancel your DBA in each one.

If your DBA is near expiring, you could just let it pass and not renew it.

Various factors can lead a business owner to close a DBA, such as retirement, selling the business to someone who wants to rebrand, or reorganizing the business entity. Regardless of the specific reason, canceling a DBA typically involves contacting the relevant authority, filling out the necessary paperwork, and potentially paying a processing fee.

How do taxes work with a DBA?

DBAs are not required to file separate taxes. Instead, taxes for income generated through a DBA are included as part of the business return. However, the frequency of tax filing varies depending on the business structure. A sole proprietorship typically files personal tax returns annually unless the business has no yearly income.

Obtaining an Employee Identification Number (EIN) can help a DBA keep it's business and personal affairs separate. The IRS does not require an EIN for a sole proprietorship. When filing taxes, you can use your Social Security number. However, some banks may need an EIN to open a business account. Obtaining an EIN and a business bank account is essential for establishing legitimacy for your business.

How do I get an EIN for my DBA?

The IRS issues an EIN. You will need your Social Security number and business contact information to apply. If you decide to establish a DBA, you must also provide the DBA name.

What is the cost of setting up a DBA?

Registering a DBA usually does not involve any extra expenses for incorporation or organization. To report a DBA, you must complete the necessary paperwork and pay the required filing fees to the Secretary of State in your state. The filing fees can vary from $10 to $100, depending on your location.

What is the purpose of a DBA?

A DBA, or Doing Business As aims to enable a business entity to operate under a name other than its official designation. This can be a fictitious name for a sole proprietorship or a distinct division of operations for a corporation. Registering a DBA notifies the public that a business entity intends to conduct operations using a name different from its official legal name.

When you're ready to set up your business or DBA

Using a DBA can be an excellent opportunity to test a new business or product idea without fully committing. If you are operating as a sole proprietorship or partnership, it is essential to transition to the next step once you have proof of concept. This may involve starting an LLC or incorporating your DBA to establish legal and liability protection to protect your personal assets and ensure a strong foundation for your business. It is always recommended that you consult a business attorney if you have any questions.

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