Doing Business As (DBA): What Is It and Is It Needed?
May 7, 2013
In the course of running your business, you’ve probably encountered more legal fine print and formalities than you ever thought possible. In this post, we’ll break down the “Doing Business As” (DBA) to see if your business needs one.
What Is a DBA?
In the U.S., a DBA lets the public know who the real owner of a business is. The DBA is also called a Fictitious Business Name or Assumed Business Name. It got its origins as a form of consumer protection, so dishonest business owners can’t try to avoid legal trouble by operating under a different name.
When someone files a DBA, it’s normally circulated in some kind of print newspaper (maybe you’ve noticed all those “fictitious business name” entries in the local classifieds). It lets the community know exactly what people are behind a business.
Do You Need a DBA?
In general, there are two reasons why a business in the U.S. will need to get a DBA:
1. For sole proprietors: If you’re operating your business as a sole proprietor, then you’ll need to file for a DBA if your business has a different name than your own name. So, let’s say I’ve started a gardening business called Spring Flowers Gardening; I’ll need to file for a DBA for “Spring Flowers Gardening.”
There are a few other details to know. In some cases, you don’t need a DBA if your business name is a combination of your name and a description of your product or service. In this case, if my business was called Nellie Akalp’s Gardening Service, I may not need a DBA. But, if it’s just my first name (aka Nellie’s Gardening Service), then a DBA is required. If that sounds confusing, don’t worry; just touch base with your local (town or county) clerk’s office and ask them if you’ll need a DBA.
2. For corporations and LLCs: If you have filed to become a corporation or LLC, then you’ve already registered your business name and don’t need a DBA. However, you will need to get a DBA if you plan on conducting business using a name that’s different than the name filed with your LLC/corporation paperwork.
So back to my Spring Flowers business… I incorporated my business as Spring Flowers Gardening. My business will need to file a DBA in order to operate under “SpringFlowersGardening.com” or “Spring Flowers.” Likewise, if I opened a Garden Shop, I’d need a DBA for “Spring Flowers Garden Shop.” In short, you’ll need a DBA to operate with any kind of variation of your original name.
The Importance of a DBA
I’m sure this sounds like a lot of unnecessary, extraneous paperwork. Yet there actually are a few important reasons to get your DBAs in order.
1. It’s the easiest way to register your name: If you’re a sole proprietor, then filing for a DBA is going to be the simplest and least expensive way to use a business name. You can create a separate professional business identity, without having to form an LLC or corporation. And for sole proprietors, a DBA is required in order to open a bank account and receive payments in the name of your business.
2. For LLCs or corporations, a DBA will let you operate multiple businesses without having to form a separate LLC or corporation for each business. Let’s say your business wants to expand into multiple websites, stores, restaurants, services, etc. You can create a corporation with a relatively generic name and use a DBA for each individual business. This will cut down on your paperwork and expenses when you’re operating multiple projects.
3. Keeps your business compliant: If your business is an LLC or corporation, you enjoy certain legal protections. However, these protections may be invalidated if you’re operating under a different name and didn’t file for a DBA. For example, I may have incorporated Spring Flowers Gardening, Inc. But if I sign a client contract under Spring Flowers (or some other variation like that), that contract may not hold up in court.
Filing a DBA
The rules, requirements, forms and fees associated with filing a DBA are different in each state and county. The U.S. SBA provides a chart which details DBA filings state-by-state. By using a legal document filing service, you can make sure that you’re following your county and state requirements perfectly and won’t be accidentally operating outside of the law.
Wondering what business structure is right for you? See Nellie’s post on business structures.