If you are looking to open a business, choosing between a DBA and LLC goes down to your plans and what activities you want the company to do. A DBA is a good option if you’re going to open a small company that won’t have to scale up in the future. It is a nickname of a sole proprietorship or a partnership, but the downside is you are tied to the liabilities.
To help you prepare, learn the differences between a DBA and an LLC and the pros and cons for each.
Differences Between DBA and LLC
An LLC is a limited liability company which is a fully recognized independent legal entity, whereas a DBA is a fictitious business name that a sole proprietor or partnership can use to brand their business.
An LLC protects the members from the company’s liabilities, whereas a DBA offers no protections as it is just a business nickname. An LLC is eligible for an EIN and gets taxed differently, whereas a DBA has no tax benefits and the owners are taxed on their individual returns.
Making the Best Decision
An LLC offers name exclusivity and liability protection, but it is more formal and requires ongoing paperwork and adherence to state laws, with higher expenses. Filing fees for both options vary by state, with DBAs generally less expensive but with ongoing costs. It is essential to carefully consider the pros and cons of each option to make the best decision for your business.