An independent contractor is a self-employed individual who can be hired to provide services to another entity. When conducting business, an independent contractor may wish to use a “doing business as” name, or DBA. A DBA acts as an alternative to their legal name.
Tax Implications for Self-Employed
As a general rule of thumb, client entertaining is not an allowable tax-deductible expense for the self-employed. Although the business can pay for it, it is not deducted from the company profit before corporation tax is calculated.
The Role of a DBA Name
A DBA name is simply a registered name for a business. For example, business owner John Smith might file the Doing Business As name Smith Roofing. Corporations and limited liability companies (LLCs) may register DBA names for specific lines of business.
Sole proprietors don’t require a separate EIN for the DBA. When it comes to a sole proprietorship, it is only necessary to have one DBA. A DBA allows sole proprietors to use a business name without having to create a formal legal entity.
Benefits of Filing a DBA
The main benefit of filing a DBA registration is it will keep you in compliance with the law. Generally, a DBA is less costly to maintain, but an LLC offers better benefits and protection.
Banks often require sole proprietorships to have a DBA before they can open a business bank account. A DBA is a legal requirement to operate your business with a trade name different from your registered legal name.
Filing for a DBA allows you to conduct business under a name other than your own; your DBA is different from your name as the business owner.
Legal Considerations
State law requires an independent contractor who is a sole proprietor to use her own name when conducting business transactions, unless she has a DBA.
Frequently Asked Questions
Is a DBA the same as being self employed?
No, a DBA is not the same as being self-employed. A DBA is a name that the self-employed can use for their business which is different from their own name.
What type of business is a DBA?
A DBA can be used by any type of business, including sole proprietorships, corporations, and LLCs, to operate under a trade name different from the business’s legal name.