What Is Doing Business As (DBA)?
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Why Do Businesses Need a DBA?
In some cases, a company may wish to use another name to operate or transact business. Most sole proprietorships use a DBA in this manner because the legal name of their business is technically the full (first and last name) name of the person operating the business. If a proprietor wanted to operate a business with a more marketable name, they would need to file a DBA with their local city, county, or municipality to stake their claim on the business name of their choice.
In the case of a legal business entity like an LLC, S-corp, or C-corp that wishes to conduct business under a name other than the name of the entity itself (e.g., a company called ABC Company, LLC doing business as “ABC Fruit Stand”), most U.S. states will require the DBA of the business to be registered at the state level, but it depends on which state the owner is filing in.
For example, some DBAs need to be registered at the city level, others at the county level, and others at the state level. Among its rules is that there should be no mention of the words “corporation,” “incorporated,” or their abbreviations unless the company is registered as a corporation with the secretary of state.
DBA vs. Legal Name vs. Trade Name
In a sole proprietorship and in most general partnerships, the company’s legal name is, by default, the personal name of the owner (or the partners), with which they use to file for an Employer Identification Number (EIN).
Meanwhile, a DBA is a fictitious name of the company, with which a sole proprietorship or a partnership can perform business under an assumed name.
Many people think a DBA is also a “trade name,” and in many contexts, they are synonymous. However, a DBA filed by a sole proprietorship or a general partnership is not technically a trade name, but a person (or a partnership) “doing business as.” By contrast, a corporation or a limited liability company (LLC) assumes the trade name as a synonym of a DBA, as a trade name is the one most consumers know the company as.
Which Businesses Benefit From a DBA?
Some business entities stand to benefit from a DBA with their city, county, or state. Here are some examples.
Sole Proprietorships and General Partnerships
As described above, the legal name of a sole proprietorship is the full name of its owner, such as “Ted Smith.” If Ted Smith wants to make a hotdog-selling business, the name “Ted Smith” may not be the most ideal, descriptive name of a business that sells hotdogs. For marketing purposes, Mr. Smith may choose to create and file for a DBA, for example, “Ted’s Juicy Hotdog Company.”
General partnerships also fall into the same situation. By default, the general partnership will take the last names of its partners (unless the partnership gave itself a name in a written partnership agreement).
Franchisees can purchase a franchise and form a corporation or an LLC for it, although the individual franchisee’s business entity name is usually different from the franchisor’s due to trademark laws. In this scenario, a franchisee may file a DBA to establish their local identity but as part of a bigger “brand.”
Say Ted Smith has bought a local Sonic Drive-In franchise as “T&J Hotdog LLC.” To anyone in the vicinity, no one has heard of T&J Hotdog, so the owner may opt to file a DBA for “Sonic Drive-In” in his state to inform consumers and the state that Ted Smith is “doing business as” the franchise they have bought.
If there are already multiple Sonic franchisees in the same state (suppose this situation takes place in the state of Oklahoma), Ted Smith might choose a name like “Sonic Drive-In of Tulsa” to differentiate the name even further.
Strictly speaking, an e-commerce business does not need a DBA, but there are some instances where an online storefront may need one. Apart from the usual benefits a DBA can impart to a business, a DBA for an online business also allows the e-commerce business to open a business bank account, as owners of these businesses cannot make or receive payments using their personal bank accounts. With a DBA, the online business can now accept and issue payments using the storefront’s name.
Corporations, LLCs, and limited partnerships can assign a company name when they file their business with the state, so they do not technically need a DBA. However, they can still make a DBA if they need to, such as when they need to launch a spin-off of a highly specific line of their business. This saves time and money instead of creating a whole new business entity for the line.
How to File a DBA
The rationale behind filing a DBA is to inform the state (and the customers) that a certain individual or entity is doing business under another name. Filing a DBA is usually done by filling out a DBA form, obtained either from the website of the state government or in-person from their offices. A flat-rate registration fee is also required, which may range from $5 (in Iowa) to as much as $250 (in Illinois, depending on the year and the business entity that files it).
Furthermore, some states, like California and Illinois, require that a business needs to publish a “fictitious business name statement” in a local newspaper, preferably in the county where the business is primarily located.
Advantages and Disadvantages of a DBA
Like any business entity, a DBA can have several advantages and disadvantages.
- Flexibility. A DBA can allow business owners to branch out and diversify their businesses by making specialized “lines” of business without creating a new corporation or an LLC all the time. One entity may have several DBAs, each of which handles a specific product line or service.
- Targeted marketing. As a DBA is only effective up to the state level, owners may use other DBAs to register their business in other states. Business owners may use this to their advantage to appeal to other demographics and markets by creating a targeted name or brand.
- Privacy. Sole proprietorships and general partnerships expose the owner/s of the business. For privacy purposes, some business owners may not want to let their personal information be known everywhere, unless the business’s legal name is tied to its operation, such as motivational speaking.
- No liability protection. A DBA only creates an operable name, not another business entity. An owner would still be liable for debts, losses, and other liabilities they would incur had they otherwise operated under their legal name.
- No new tax benefits. As mentioned above, a DBA is not a new business entity, so it is still taxed under the same scheme as the business entity that filed for it.
- No exclusive rights to the name. A DBA should not be confused with a trademark, which gives a company the exclusive right to transact business or operate under that name. Only two of the 50 states (Alaska and North Dakota) grant exclusive rights to a name filed as a DBA.
A doing business as or DBA is a fictitious name a company uses while operating the business. Business entities like sole proprietorships and (to a lesser extent) general partnerships create a DBA primarily for privacy protection, as the legal names of their businesses are often the full names of their owner/s. In general partnerships, these are often the last names of their partners.
A DBA does not create a new entity, but only a new name under which the business may be known to the state and the consumers. This means that the DBA does not “shield” the business from its liabilities. However, it has a few advantages, such as targeted marketing and flexibility in specializing in particular lines of business.
States require the registration of a DBA, but the requirements vary. Some states require the registration to the city or county in addition to state registration; others even require publication of a DBA notice to a local newspaper after filing for one.
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