Definitions and Key Differences
DBA stands for "doing business as". It is a fictitious name used to conduct business instead of using your own legal name. An LLC, or limited liability company, is a separate legal business entity that provides liability protection for its owners.
A key difference is liability protection. With a DBA, there is no legal separation between personal and business assets – the owner is personally responsible for all business debts and liabilities. An LLC protects owners’ personal assets from business debts and lawsuits.
Comparison and Considerations
- LLCs require more paperwork and compliance than DBAs, which are simpler to set up.
- LLCs provide exclusive rights to the business name in a state, while multiple businesses can register the same DBA name.
- LLCs have more complex tax requirements while taxes for DBAs pass through to the owner’s personal tax return.
When deciding:
- Consider business risk and personal liability exposure.
- Understand the legal and tax implications.
- Consider whether exclusive naming is important.
- Weigh costs and administrative requirements.
- Think about 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 ensure you make the best decision. With knowledge and planning, you can pick the right structure to help your business vision succeed.