Sole Proprietorship and DBA
A sole proprietorship is an informal business structure with one owner. Since sole proprietorships are not separate legal entities from their owners, they need to file a DBA to do business under a name different than the owner’s. A DBA (Doing Business As) is a legal requirement to operate a business with a trade name or pseudonym different from the owner’s registered, legal name.
Filing a DBA for Marketing Benefits
Filing a DBA allows a sole proprietorship to market itself under a specific business name rather than the owner’s personal name. This can help convey the business’s values and offerings to potential customers. Although using a DBA does not change the legal structure of a sole proprietorship, it can provide marketing advantages.
DBA Registration and Tax Considerations
To file a DBA, sole proprietors must register the name with local government before using it. This allows the public to identify the responsible party if issues with the company arise. Sole proprietors must also use the DBA name on all government forms and applications related to the business.
Sole proprietors can have multiple DBAs and DBAs in multiple states if properly registered. They must file tax returns under their personal name but list the DBA name on accompanying business forms like Schedule C.
Sole Proprietorship’s Advantages and Disadvantages
The advantages of a sole proprietorship include ease of formation and the owner retaining sole control of all profits. The main disadvantage is that the owner has unlimited personal liability for all losses and liabilities. A sole proprietorship’s profits are taxed through the owner’s personal income tax return.