Business Structures and Identities
An LLC (limited liability company) is a distinct business structure that differs from sole proprietorships, partnerships, or corporations. It allows owners to conduct business and gives them the right to register a DBA (doing business as), often used if the official name is inconvenient for marketing. An LLC protects the members from the company’s liabilities and has a flexible tax structure.
A DBA creates a marketing identity useful for sole proprietors and LLCs, allowing them to legally use their DBA name on business cards and promotional materials. In some cases, you might use several DBAs to develop brands and websites for different products.
The most common DBA example is when a sole proprietor wants to run a business under a different name to protect privacy or be more marketable. Many states require a filed DBA so consumers are not misled. A sole proprietorship must file a DBA if the company name differs from the owner’s name.
Tax Implications and Legal Protections
Is a DBA better than an LLC for taxes? While an LLC is eligible for an EIN and gets taxed differently, a DBA offers no separate tax benefits. Filing taxes is relatively straightforward for both a DBA and an LLC, with profits taxed once when passed to the owner’s return. However, an LLC has the added advantage of flexibility in how it chooses to be taxed.
An LLC protects members from the company’s liabilities and can be beneficial for expanding and selling a business, plus generating funding. Unlike a DBA, which offers no personal liability protection, an LLC provides more security for its owners. But bear in mind, fees tend to be higher for LLCs, and more paperwork is required when compared to DBAs.
What are the advantages of an LLC over a DBA? An LLC not only safeguards its members from liabilities but also offers a flexible tax structure, making it a more robust choice for business owners who wish to have the protection and versatility that a DBA does not afford.