You’ve come across a DBA and want to know what it means? Below, you’ll find a detailed breakdown of this term, why you might need it, and what benefits it can bring to your business. So, keep on reading!
A DBA Definition
A DBA is an abbreviation that stands for “doing business as.” It refers to a name a company operates under on the market and is usually different from that under which the company is established or its legal name. A DBA name is also called a fictitious, assumed, trade, or business name. As opposed to the legal moniker mentioned in incorporation documents and specified on all formal and legal paperwork pertinent to the business, a DBA is rather a nickname meant for marketing, advertising, and promotion purposes. It will appear as a part of your logo, company letterhead, commercial signs, and marketing materials. DBAs are used to make the enterprises recognizable for customers and to create distinguishable unique brands.
From the legal point of view, a DBA is neither a legal structure nor a legal status. It’s rather an identifier having no impact on the legal framework of your venture and bringing no added protections as well. Thus, if you have an LLC, no matter a different name, it will technically remain an LLC with its initial rights and protections. The same is true for all other business forms.
Which Businesses Need a DBA and Why?
Straight off the bat, a DBA is not a legal requirement for business formation. It’s a choice entrepreneurs can make either when only initiating their venture or in the course of running their business. The most common reasons why companies choose to use DBAs are as follows:
- Creating a distinctive market image for the company to make it distinguishable among the rivals;
- Running multiple business lines under the same legal structure;
- Expanding the business across the states without setting up multiple ventures;
- Rebranding to give your venture and business idea a new lease of life on the market;
- Choosing to run a new activity that doesn’t refer to your company name anymore. A DBA in this case will save the need to change a legal name.
DBAs can be used by registered and unregistered entities alike. The need for a DBA depends on a few factors including the business structure and related state requirements as well as the owner’s goals and strategies.
Sole Proprietorships and Partnerships
These are two unincorporated business forms. They file neither incorporation papers nor an entity name with the state. Both are directly associated with their owners and are named after their owners accordingly. To give their companies more appropriate and descriptive business names, they can use DBAs. While still retaining full liability for all business issues, sole proprietors and partners will have an opportunity to create independent and well-organized brands and better promote their business activities on the market.
Limited Liability Companies and Corporations
Being incorporated under state laws, these two entity types also register legal names during the business formation process. Similar to unregistered forms, they can also make the personal names of the owners a part of the company name. However, in contrast to those, LLCs and corporations are entitled to choose other monikers to the extent they match valid naming rules and guidelines. At the same time, both are also entitled to operate under other names different from their registered ones.
Using DBAs, LLCs and corporations can make use of their flexibility to the full. Most commonly, they apply for a DBA when launching a new business line or starting a new activity. DBAs allow separating brands and businesses while still having them under the roof of the same legal entity. It’s also enough to register a new DBA to expand your business to another state. This way, you won’t have the trouble of establishing and filing a new legal entity each time.
Normally, franchise owners can use a franchise name they’ve bought. However, franchisees often file DBAs to settle formalities and legally introduce the franchise to their business structure. Franchise buyers are usually incorporated entities that already have legal names. Hence, they register DBAs to make use of the franchise sticking to their legal framework.
While DBAs don’t seem anything special, companies can benefit from using fictitious names a lot:
- Conducting business under the desired name: Filing a DBA is the easiest way to register a business name without actually filing a legal entity. It’s a perfect choice for sole proprietors who are not eager to incorporate to create a solid and well-shaped identity for their business;
- Scaling opportunities: Fictitious names allow running multiple businesses without the hassle and paperwork pertinent to official business formation. When you already have a registered legal structure, you can launch a number of projects under its umbrella and each of them will have its own business profile. Meanwhile, you’ll be able to grow your business step by step and introduce new business lines without a problem;
- Branding power: Using a catchier and more memorable fictitious name clearly rendering your business idea or reflecting the strengths of your product, you can easily set up a brand that will speak to customers and distinguish your company from competitors. Likewise, if you need to boost up an existing brand and infuse new life in it, a DBA has the right power for that;
- Better banking options: It’s a big benefit for smaller businesses existing beyond incorporation. DBAs enable sole proprietorships and partnerships to get EINs and easily open separate bank accounts for their companies. Not only will it let them split between personal and company finances but also it will make their entities look more credible, reliable, and trustworthy in the eyes of potential partners and customers.
Filing a DBA Name
A DBA name needs registration. You can’t legally use a fictitious name unless you’ve filed it with the state. One more important thing to remember here is that a DBA cannot exist independently beyond an entity. So, you need to establish some type of business entity first. Once you have it, registering a trade name for your firm is not a daunting task. There are only a few simple steps between you and your new company name:
- Check the DBA registration requirements valid in your state by searching the web or contacting your state department;
- Download a registration form on the website of the Secretary of State or your local business clerk’s office and fill it in;
- Submit a completed form along with a registration fee payment. That fee also varies by state and is somewhere from $20 to about $100;
- Get approval from the registration authority, which usually takes up to six weeks;
- Publish a notification about your new business name in a local newspaper. This step is optional since many states don’t have a publication requirement.
Getting registration approval enables you to use your chosen DBA lawfully and eligibly for as long as you deem necessary. Yet, it’s worth noting that some states call for a fictitious name renewal on an annual or biennial basis.