‘Doing business as’ or DBA refers to the name used by the business, such as an assumed business name or trade name. In this case, it refers to a name that is different from the legally registered name. A DBA allows you to operate a business under a different name from the registered name. To acquire a DBA, you must file and comply with your state’s requirements.
From taxes to liability, there are considerations that go into deciding which business structure is right for you. This article breaks down key differences between running your business as a DBA versus an LLC. By analyzing the pros and cons of each and the risks and liabilities, you can feel better informed as you decide how you want to do business.
What is a DBA?
DBA is an acronym for “doing business as.” As a sole proprietor, a DBA allows you to conduct business under a name that is not your legal name, known as a “fictitious business name” or an “assumed name.”
What is an LLC?
In contrast, an LLC allows multiple owners to own and run a single business. Unlike DBAs, LLCs are considered separate legal entities from their owners, providing asset protection for members if sued or goes into debt.
Choosing a Business Name
Filing for a DBA is fast, easy and usually inexpensive. If you are already using a name for business purposes that is not a registered business name, then you should consider filing the paperwork to make it official.
Most states require you to register a DBA before you do business and create contracts using anything other than your own legal name or a legally registered business name.
LLCs and Asset Protection
Opting for Limited Liability Companies (LLCs) presents entrepreneurs with a flexible and protective business framework.
Trademark Protection: An LLC formation automatically offers you trademark protection. It prohibits anyone in the entire state, county, or city from using your business name.
Advantages and Disadvantages of a DBA
- DBA can be a good choice for low-risk businesses and owners who want to test their business idea before forming a more formal business structure.
- Filing a DBA is fairly simple: You often complete a certificate form and file it with the county clerk. Some states may also require you to announce your DBA in a local newspaper.
- Under a DBA, there is no distinction between your personal assets and business assets.
Advantages and Disadvantages of an LLC
- LLCs provide asset protection for members, shielding personal assets from business debts and liabilities.
- They require more paperwork and compliance than DBAs and offer exclusive rights to the business name in a state.
- LLCs may have more complex tax requirements while taxes for DBAs pass through to the owner’s personal tax return.
Considerations for Your Decision
- Assess your business risk and personal liability exposure.
- Understand the legal and tax implications.
- Decide if exclusive naming is important and weigh costs and administrative requirements.
- Consider your future plans for growth or ownership changes.
The choice impacts your liability exposure, operations, finances, and ability to evolve over time. Review both options thoroughly before registering your business. Consult legal, tax, and financial experts to make the best decision for your business vision.