If you’re starting a business for the first time, you have important decisions to make. But you’re (probably) not a lawyer—and you might be unfamiliar with all the legal terms and acronyms that get thrown around when you’re taking the steps you need to start a business.
From LLCs, S corps vs. C corps, to filing a DBA, there are a lot of important legal acronyms you need to understand before you open your doors for business.
Let’s walk through the details of that last one—DBA.
What is DBA? And when does your business need one? Here’s everything the aspiring entrepreneur needs to know.
What Is DBA?
DBA stands for “doing business as.”
It’s also referred to as your business’s assumed, trade, or fictitious name.
Filing for a DBA allows you to do business under a different name. Your DBA is different from your name as the business owner, and it is different from the names of any partners you have, too.
Certain businesses have to pay attention to DBAs and take the motions to file for one.
That’s because when you form a business, the legal name of the business defaults to the name of the person or entity that owns the business—unless you rename and register your business with a DBA name.
So, if Laura Smith wants to start a tech repair business, her business will operate under her own name—unless Laura chooses to register her DBA name as “Laura’s Tech Repair Shop.” After registering her DBA, Laura’s full name isn’t legally attached to her business’s.
Who Uses a DBA?
Now that you know what a DBA is, your next question is likely, “Do I need one?”
Not all businesses do.
That’s because sole proprietors are usually going solo, with just themselves as the business owner. Having a DBA name separates their business’s identity from their own, personal name.
Sole proprietors aren’t the only business owners who might want to file a DBA name.
Corporations (both S corporations and C corporations), general partnerships, and limited liability companies (LLCs) technically don’t need to file for a DBA name—they’ve already registered a business name.
But any business formed under one of these entities might also register a DBA name, allowing them to do business under a different name than what’s found on their original incorporation documents.
The most common case of a corporation or LLC registering a DBA name is one where the business wants to have an alternate name for a specific line of their business.
By filing a DBA name for a business or industry expansion, the corporation doesn’t have to fully form a whole new business just to operate under a different name. For example, John’s Cosmetics Inc. might want to have a separate name for their upcoming skin care line, “John’s Skin Care Solutions.” This saves an expanding business both the money and time it takes to launch a whole new business under an additional LLC or corporation.
5 Reasons Your Business Should File a DBA
Right off the bat, you’ll want to file a DBA if you have no desire to operate your business as just your full name.
If Laura Smith doesn’t want her tech repair business to be “Laura Smith,” then she needs to legally file her DBA name.
But besides that first case, here are 5 more reasons why you’d want to register your DBA name.
1. Business banking is much easier
First and foremost, the reason to file a DBA name is to take the headache out of banking for your business.
For one, if you don’t have a DBA name—and operate your business under your full name instead—issuing and receiving checks for your business would be nearly impossible. A business owner can’t use their personal accounts to issue and receive checks for their business.
To solve this problem, you’d go out and set up a business bank account. But if you’re operating a sole proprietorship, you’d run into another roadblock. Without a DBA name, you can’t set up a checking account or savings account for your business.
So if you run a business that’s anything other that a corporation or LLC, you need to register your DBA before setting up any banking accounts—or receiving any money for your business.
Avoid running into this issue in the first months of your business by simply registering your DBA name before you open your doors.
2. It Keeps Things Separate
Now that we’ve gone through what is DBA filings and who usually files DBA names, you know that a DBA keeps your personal and business name separate.
The added clarity of separating your names isn’t the only benefit of a DBA name, though.
Registering your DBA name helps keep your business compliant. Owners of an LLC or corporation have certain legal protections. But if you operate under a different name than what’s on your incorporation documents and didn’t file for a DBA, those legal protections won’t hold. So if you’re incorporated as John’s Cosmetics Inc. and sign a contract with a client as John’s Skin Care Solutions (or any variation of John’s Cosmetics Inc., for that matter), that contract won’t hold up.
In general, if you’re running an LLC or corporation and file a DBA name with one of those designations, you’ll have further legal liability protections. You’ll have liability protection for your personal assets, you can arrange taxation of your business in a way that is the most beneficial for you and your business, and you can use various names for your different business endeavors.
And one last thing—in some unlikely cases, a client or partnership might require you to have a DBA in order to go through with a deal. Some clients might require that you have a DBA in order to contract with you, or some business lenders might require that you have a DBA before extending any small business loans to your business.
3. Your Name Defines You
Your business name isn’t everything. Many successful businesses have been built off the backs of bland names.
But with that being said, branding is important—and naming a business is the ultimate branding exercise.
If you’re just starting a business and entering a new market, your name will be important for advertising your business and building a customer base.
If sole proprietor Laura Smith kept her business’s name as just “Laura Smith,” who would know what she did until they walk into the shop? Your name is a great way to not only inform your customers but to give them a reason to come in.
Choosing the perfect name for your business before you’ve even opened your doors can be hard. When your business is in its infancy, who knows where you’ll be in five years? If you’re struggling to come up with an awesome name to file as a DBA, try one of these business name generators for a little inspiration.
4. It Opens Up Expansion Possibilities
As we’ve mentioned above, registering a DBA name allows LLCs and corporations to operate multiple businesses under one ownership without having to form a separate LLC or corporation for each new business they open.
So if there’s any hope that your original corporation or LLC will want to expand into multiple websites, stores, services, restaurants, and so on, you’ll want to register each under a separate DBA name.
5. It’s the Easiest Way to Register a Business Name
When it comes down to it, filing for a DBA name is the easiest way for sole proprietorships to register their business’s name.
It’s also inexpensive. Sole proprietors who want to run a business without having to form an LLC or corporation can easily file a DBA name to create a professional business identity they’ll use when dealing with their vendors and customers.
How to File a DBA Name
Now that we’ve run through what is DBA filing, how would you actually go about registering a DBA name?
In general, registering a DBA comes with paperwork and filing fees anywhere from $10 to $100. You’ll either go to your county clerk’s office to file said paperwork, or you’ll do so with your state government.
But procedures for filing a DBA name vary among states and depend on where you’re starting your business.
In some states, all you have to do is go to the county clerk’s office or state government office. In some states, you might have to place a fictitious name ad in a local newspaper for a certain amount of time. This fulfills the “public notice” requirement for some states—giving the local area an official announcement of your business name.
The SBA breaks down the requirements for registration in a state-by-state chart, so use this as your reference for how to go about filing your DBA name.
One logistical restriction to note when you’re actually going to file your DBA name: Your DBA name can’t have a corporate ending such as “Inc,” “LLC, or “Corp.” That gives the impression that your business is a corporation or has some type of corporate status, when in fact, it doesn’t.
Other than that, there aren’t any restrictions on what you can file for a DBA name. It’s probably best to do a simple business name search within your jurisdiction to make sure no other business has your DBA name, though.
Filed Your DBA Name? Here Are Your Next Steps
Filing a DBA name isn’t hard—you just need to work within your state or county’s requirements to go about it in the right way.
It’s usually best to get this all done before you operate under your intended “doing business as” name—somewhere between 30 and 60 days before you open your doors. (Sole proprietorships won’t be able to receive any money until they register a DBA name, anyway.)
Once you’ve gone through the paperwork and paid your state’s administration fee, what can you expect?
You’ll usually hear back with approval in one to four weeks, depending on your jurisdiction. Once you’ve been approved for your DBA name, you’re all set to start operating your business—meaning you can open your doors, take on new clients, and set up your business bank account.
After that, make sure you’re staying compliant by operating under your legal business name, and check with your state government offices to see if you need an annual renewal!
from Fundera Ledger https://www.fundera.com/blog/what-is-dba