What is Doing Business As or DBA
Every company has a registered legal name, yet it may use another name for marketing purposes and this called Doing Business As(DBA). Many people have a name that is widely used, though it differs from the name used in the passport or birth certificate. This is no legal problems using different names. When businesses use multiple names they specifically mention DBA. More details on DBA are provided so that a business owner can decide whether it is right for him, the procedure for filing a DBA, and the associated responsibilities.
What is a DBA?
In the United States (U.S.), a DBA helps citizens identify the real business owner. The DBA is the assumed or fictitious name for the business, the operating name of a company. Consumer protection laws have made it mandatory for businesses to specify DBA so that business owners who are dishonest cannot avoid legal problems by using different names. When a business files a DBA, this information is usually published in the local newspaper, typically in the local classified, fictitious business name. It helps the community find out who is the real owner of the business.
Why a DBA is required?
Some of the reasons why a business in the U.S. would require a DBA are discussed below
Sole proprietors may be selling a product or providing a service, for which they may wish to use a relevant business name that differs from their own legal name. In this case, they will have to file a DBA. If the business owner is using his full name in the business name, the DBA may not be required, otherwise, it is required. Business owners can also check with the local county or town clerk’s office to find out whether it is necessary to file a DBA.
Limited liability companies(LLC) and corporations
When a business is incorporated, a legal entity is created which is different from the business owner. This implies that the business owner is absolved of the personal liability associated with the business
An LLC is a combination of a sole proprietorship and corporation. Though the LLC owners are not responsible personally for LLC liabilities, the LLC will stop existing if it declares bankruptcy or if an owner dies. A business owner who has already decided the business name for his LLC or corporation does not require a DBA. Yet if the business owner wishes to use a name that differs from the corporation/LLC documents, he will have to file a DBA. A DBA is required if the business owner is planning to use any variation of his original name for doing business.
Why DBA is a recommended business strategy?
Though business owners find that filing for a DBA is time consuming, tedious, there are many reasons why a DBA is recommended
– For sole proprietors, DBA filing is an inexpensive and simple way to use a specific business name. The DBA can be used to create a distinct business identity without forming a corporation or LLC
– Corporations or LLCs can run multiple businesses without forming a separate corporation or LLC for each. This will reduce the expenses and paperwork, though the business owner has multiple income streams
– DBAs help the business owners enjoy legal protections especially if they are corporations or LLC. The business owners may not get these protections if they do not file for a DBA or use another name.
– Business owners often do not want to run a business using their own names. The procedure for starting a business using a personal name is simple and is preferred by sole proprietors. Yet many business owners want some privacy, to separate the business from their personal life, Filing a DBA using another name, ensures that the personal name of the owner is not mentioned when the business is discussed publicly
– Many companies want to give their business a name matching the service or product they provide. Using a DBA allows them to have a distinctive, creative business name.
– Banks may make it mandatory for partnerships, sole proprietors to show proof of DBA registration/filing before they open a bank account for the business
– Many online businesses are selling different product categories, and they may want different websites using the same business name
– Filing a DBA can help in preventing others from misusing the business name, registering the same or similar name.
Filing a DBA
Business owners can also consult an attorney if they are not sure about the benefits. Every state and county has different rules, forms, fees, and other requirements for filing a DBA. State-wise DBA filing details are provided by the US SBA in a chart. In some states, the form, office for filing DBA may differ for sole proprietors, partnerships, LLC may differ. The processing time for a DBA also differs depending on the county. Some other information for filing a DBA are:
– A certificate of Good standing is required for an LLC or corporation. This certificate is provided by the secretary of state, and a form has to be submitted to get the certificate.
– Inc. Corp or LLC cannot be added at the end of the DBA name
– the county or state may ask the business owner to announce their DBA by advertising in the local newspaper so that people are aware of the DBA
– Payment and filing methods differ in various states. Some states accept online payment using debit or credit card and filing while in cases, cashier’s check, money order, notarized documents are required.
– To keep the business and personal matters separate it is advisable to apply for an employer identification number(EIN), so that the business is not linked with the social security number.
– DBA should be renewed, usually after every five years, ideally before the expiry date
– If there any changes in the DBA like address change, having a new partner, the DBA will have to be revised, with the procedure varying in each state.
– It is illegal to run a business using an assumed name that is not registered, and in some states, penalties are imposed for non-registration. Hence it is advisable to hire a specialized service that files legal documents and ensures compliance with relevant laws.
The DBA is an important part of the business, so it advisable to hire the services of a business, legal expert for DBA filing