What Does DBA Stand for: Does Your Company Need It?

What Does DBA Stand for: Does Your Company Need It?

You'll register a DBA if you wish to do business under the name of your choice. What does DBA stand for? The DBA stands for "doing business as." DBAs may be used by both solo owners and huge businesses because of their versatility. For those of you who don't have a background in law and don't know where to start when it comes to DBAs, we've put up this guide to help you get up to speed quickly.

What is a DBA?

Using a DBA, a company may function under its own name. Keep in mind that running a company under an unregistered name is prohibited, therefore it's important to get a DBA to avoid this.

A general partnership or a sole proprietorship requires you to operate under your own name, which is legally mandated by law. This means that John Miller’s car washing firm would operate under the name John Miller rather than John Miller's Carwash, if it was a single proprietorship. It is necessary to establish a DBA in order for any kind of business entity to employ a fake name. To operate illegally may have serious legal consequences. Don't disregard this and start utilizing a custom company name right now.

Difference Between an LLC and DBA 

Sole proprietorships, general partnerships, and limited liability companies (LLCs) use DBA registrations to operate under a false name. No distinct legal entity is created in this way. LLCs may afford several legal safeguards, such as insulating personal assets from business obligations, as a result of their limited liability structure.

When compared to registering a DBA, which can be done in a matter of minutes and costs less than $200, forming an LLC is more expensive. The ability to register your company under a name of your choice is also available when you organize an LLC. An LLC's name registration process is more involved than a DBA's. With an LLC, you may need to engage an attorney and go through many filings before you can get it up and running. Filing a DBA, on the other hand, generally just requires the submission of a single form.

When founding an LLC, company owners have the option of choosing how they wish to be taxed. They have the option of being taxed as a sole proprietorship, a corporation, or a joint venture. Businesses operating under a DBA, on the other hand, do not have this option and will be taxed according to their present status.

Benefits to Filing a DBA

A DBA, in spite of its simplicity, provides a slew of advantages.

Conduct the business under a chosen name

Personal names must be used for all businesses conducted by sole owners and general partnerships. In other words, if your name is John Miller and you're the sole owner of a house design firm, you can't use the name John Miller Home Design. Transacting under the alias of John Miller is required. That problem is solved by submitting a DBA application. No need to worry about this if your firm is formed, since you may select the name when you incorporate. The majority of applicants are sole entrepreneurs.

Having trouble figuring out whether or not your company is legally recognized as a legal entity? Incorporated firms should be searchable on the website of your secretary of state.

Business banking

If you want to create a business checking account, most banks need an Employer Identification Number (EIN). If you register your firm with the secretary of state or establish a DBA, you may simply receive an EIN.

Sole proprietorships and general partnerships may also be required by customers, partners or lenders to register DBAs.

Scale your business

A DBA may simplify things. Especially if you're now doing so or in the future intend to do so under a single umbrella company. Assume you operate a restaurant and are considering opening an ice cream parlor. You'll need to file a DBA to have two distinct companies with different names. This is because they can't both operate under the same name.

Things a DBA Won't Do

Don't think that creating a DBA will perform any of the following for your firm.

Provide legal protections

DBAs and LLCs aren't the same. You may safeguard your company and your personal assets by using LLCs and other organizational forms, such as corporations. To be a DBA, all you need is the capacity to use a fictional name. There are no extra safeguards provided by DBAs.

Grant naming rights

In certain jurisdictions, a DBA will not protect the name of your firm. Protecting your company name is often a requirement for incorporation. Even if you establish a DBA in your local county or state, it does not ensure that your business's name has protection outside of that county or state.

How to File a DBA?

As a contrast to other difficult legal paperwork and registrations, the process of registering a DBA is rather simple. This means that you probably won't require a lawyer. Local laws will determine the specifics of the procedure. But, you may expect to complete some paperwork with your county or state. Application costs may be anywhere from $10 to $200, depending on the school.

If your firm is not an LLC or a corporation, you will not be allowed to register with a name that contains "LLC" or "Inc." Check to be sure that no other businesses in your neighborhood are using the same name as you before deciding on a moniker.

Within six weeks of submitting, you should hear from the approving body. You will be able to start doing business under your new name after that. Your DBA may need to a renewal every year. Thus, you may need to advertise your firm in your local area.

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