Estimated reading time: 4 minutes
When starting a small business as a sole proprietor or partnership, your company’s legal name is your name or the names of you and your business partners. However, if you want to operate under a different business name, you can register for a DBA (Doing Business As) name. A DBA name allows you to run your sole proprietorship or partnership under a fictitious name that does not include your legal name. Obtaining a DBA is relatively straightforward, not to mention cost-effective. If you have been wondering what a DBA is and how it works, this Balboa Capital blog article is for you.
Do you need a DBA?
As mentioned above, DBAs apply to sole proprietors and partnerships. If you opt for either of these business structures, you might be legally required to obtain one. This will depend on your business’s state and city, so contact your attorney or accountant if you are unsure or need additional information. Next, you will need a DBA if you plan to use a business name other than your legal name.
Choosing a business name is one of the most important legal decisions. It can be a time-consuming and challenging task because so many variables are involved. In addition to being unique and memorable, your business name needs to represent your brand and communicate what it stands for. If you are lucky enough to come up with a name that sticks out right away, do not assume you can use it.
To prevent potential legal issues from occurring in the future, have a business lawyer or an intellectual property attorney make sure the name is not trademarked. Also, suppose you anticipate switching from a DBA to a corporation. In that case, you might want to trademark your name, as DBAs generally offer no exclusive rights to business names.
Benefits of a DBA.
A DBA presents you with several benefits. First, it helps protect your privacy because your legal name and personal information are not included in public records. Instead, your DBA is included on all business-related records and listings accessible to the public. Next, a DBA allows you to have a unique name for your business. For example, if your name is Kelly Garrett and you own a clothing boutique, the name of your business without filing a DBA is Kelly Garrett, which is not very distinctive. Therefore, you can file one for KG Couture, a fictitious name that communicates your brand better than your actual name.
Another benefit of having a DBA is that it helps keep your small business compliant and allows you to open a business account in your company’s name at your bank or credit union. As you probably know, separating your business accounts from your personal accounts can, in some cases, help protect your home, car, and other personal assets if your business faces a lawsuit. It is essential to note that different business structures such as a corporation or limited liability company (LLC) provide far more legal protection than a DBA.
How to get a DBA.
To get a DBA, you need to complete and file the necessary paperwork and pay a nominal filing fee, typically between $15 and $150. The forms and filing requirements differ based on the state, city, and county, so consult with an attorney or check with your local county clerk’s office to get the information you need. In addition, you might have to announce your DBA to the public in the local newspaper and online.
Completing the application will not take much time or effort on your part. First, you will need to provide basic information about you and your business. Once your application is approved, you will receive a certificate that you can make visible at your place of business. You can then start using and promoting your DBA name. Make a note of when your application was approved not to miss the renewal date each year.
Since a DBA is not a corporation, it is not eligible for certain tax benefits that companies with a corporate tax structure are. Your DBA’s income is included on your tax return and taxed accordingly. If you have a DBA, the tax form you need will depend on whether you are classified as a sole proprietorship or a partnership. It is good to seek assistance from an accountant to make sure you file your taxes correctly.
Creating a DBA is a good option if you are not looking to set up a corporate structure for your business, such as an LLC. A DBA adds instant credibility to your small business. You can use your fictitious business name on your signage, business cards, and website. Remember that a DBA does not provide legal protection, naming rights, and tax benefits as corporate structures. That said, you could always change your DBA to an LLC or a corporation in the future.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.