What is a DBA?
A DBA (doing business as) is a registered fictitious name for a business. It does not require creating a new legal entity.
A DBA itself does not pay taxes. The profits of your DBA will pay income tax and self-employment tax. Taxes are paid quarterly on April 15th, June 15th, September 15th, and January 15th.
Should I operate under a DBA? DBAs improve visibility by helping businesses present as more professional. They form a brand identity recognizable to vendors, customers, and competitors. However, DBAs don’t offer financial or tax benefits.
Tax Obligations and Reporting
Having a DBA doesn’t change your tax obligations. You pay taxes according to your business entity – LLC, corporation, etc. Even if your business has multiple DBAs and bank accounts, you don’t pay taxes separately for each.
Although registering a DBA does not provide legal protection, it may be necessary based on where you operate and your organization type.
DBAs can be used by any business entity. The tax implications depend on if it is a sole proprietorship, partnership, LLC or corporation. Refer to more in-depth sections on each entity for DBA tax details.
A DBA is reported on Schedule C of your 1040 tax return. The business income and expenses are entered there. All profits are subject to self-employment tax. You can deposit DBA checks into a personal account if you’re a sole proprietor. And for sole proprietors, a DBA is required to open a business bank account. Having a DBA will separate personal and business finances, which is helpful during tax season.
LLCs and DBAs must comply with state laws to ensure proper maintenance and use. Unless the LLC decides to be taxed as a corporation, it is a pass-through business. That means LLC taxes pass through to owners to include on their returns.
If your business is a corporation or partnership, the IRS requires an EIN whether under a DBA or not. Sole proprietors and single-member LLCs without employees or excise tax liability don’t need an EIN. Taxes are paid through an EIN if your business has certain obligations like paying employees.
You must report payments over $600 made for services and other purposes, including to attorneys. You also report sales totaling $5,000+ of consumer products for resale. Payers file forms with the IRS and provide them to the payment recipients.
DBA Registration and Compliance
DBA requirements vary but generally involve paperwork and fees from $10-$100. You file with your county clerk or state. In some states, you might have to place a newspaper ad.
Sole proprietors must file annual taxes, not just if income exceeds $499. Partnerships, LLCs, and corporations also file annual returns and may pay quarterly taxes.