DBA stands for Doing Business As and essentially allows you to do business under a different name than your legal one. DBA can be referred to in many different ways, including but not limited to Trade Name, Assumed Business Name, or Fictitious Business Name. DBA is a name that the business wants to use when marketing or dealing with customers.
WHY DO YOU NEED DBA?
Not every business needs DBA. Whether you need one or not generally depends on a combination of the business's legal entity, the location and the business owner's preference. Below are the types of businesses that usually use DBA:
Sole ownership and partnerships.
When you form a sole proprietorship or general partnership, you may want to file a DBA if you don’t want your company to operate under your or your business partner’s legal name. The reason for it is because sole proprietorships and partnerships are unincorporated, and they don't require filing entity formation papers or a business entity name with the state. As a result, the owners and their business are considered as one and the same entity and therefore, they have the same name, unless they choose to file a DBA.
Franchise
Generally, franchise owners do not need a DBA, however, if a franchise owner wants to establish their identity as a local business, it is better to file a DBA. LLCs and Corporations are popular business forms among franchise owners, so if you buy a local Krispy Kreme Doughnuts, you will need to register your franchise under ABC Company LLC, but you can make your DBA “Krispy Kreme Doughnuts” so that the state knows that you are "doing business as" the franchise you acquired.
Other legal entities
With the rare exceptions when the state or county requires corporations, or LLCs to file a DBA, these business entities do not need to register as DBAs. However, these entities can and often choose to file for DBA as this allows them to conduct business under a name different from the one on their incorporation documents. DBA form is common when a corporation has several different lines of business. For example, you registered a company “Gifts of Nature, Inc” specializing in all-natural skincare, haircare, and makeup. But now you want to expand your business and open a hair salon where you will also use your hair products. To differentiate your new line of business from the original one, you may want to come up with a different name for your hair salon and call it “Hair Natural.” This will allow you to expand your business and save the money and time it requires to launch a completely new business under an additional LLC or corporation.
ADVANTAGES OF A DBA
It helps your businesses be legally compliant with the state. As an owner of an LLC or corporation, you have certain legal protections, including limited liability against your personal assets if your business gets into financial trouble. However, if you run your business under a name different from the one on your incorporation documents and didn’t file a DBA, those legal protections will be forfeit.
DBA is less expensive and requires fewer compliance formalities than registering a whole new business entity.
If you are a sole proprietor of your business but don’t want your company name to have your first and last names, a DBA will allow you to call your business anything you want without the expense and formality of registering a new business entity. DBA is generally the least expensive way to legally run a business under a trade name.
If you are an LLC or corporation owner, filing DBAs will allow you to keep costs low and avoid additional formalities and paperwork when your business expands. It is always cheaper and easier to file a fictitious name than registering every new location as you expand your business.
It makes business banking easier. It is a standard procedure for banks to require a copy of DBA from sole proprietors and partnerships before they can be allowed to open a bank account and receive payments from customers in their business name.
HOW TO FILE A DBA
DBA requirements vary by state, county, city, and type of business entity, but generally, registering a DBA will require you to file some paperwork and pay filing fees ranging from $10 to $100. Depending on the state where you register your DBA, you will either need to do so with the office of your Secretary of State, other state agency, or, in some states, file for registration with your county.
Specific requirements for filing a DBA vary from state to state, county to county. To file for DBA as an LLC or a corporation, you are typically asked to provide a certificate of good standing. In some states, you register your DBA with the Secretary of State or another state agency. In some states, registration is handled at the county level and each county may have different forms and fees for the process. Some states require that you publicly announce your filing for a fictitious name with the notice in the local newspaper, and your state may require you to provide proof that you have met the publication requirement and submit a copy of the public announcement in its records.
COST OF FILING A DBA
DBA filing fees vary from state to state and range from $10 to $100. Some states or counties only charge one-time fling fee, while others may require an additional annual renewal fee for a DBA.
WHEN IS IT TIME TO FILE A DBA
To conduct business under a DBA, you must complete and file the appropriate DBA forms and pay a filing fee, as required by your state or county. By most state laws, you can start operating as a DBA only after you receive a DBA certificate. A few jurisdictions will all you to start operating as a DBA shortly before you file all the paperwork, however, since having a DBA is typically a prerequisite for opening a bank account or sighing any contracts, it is better to get your DBA certificate first.
In most states and counties, it is required to renew your DBA certificate every 5 to 10 years. However, there are a few states (Indiana, Iowa, and New York) where DBA certificates never expire.
ARE ANY WORDS PROHIBITED IN A DBA NAME?
When you register your business as DBA, you are not allowed to use words such as “Incorporated” or “LLC” unless you file the paperwork to legalize your company as such. These restrictions prevent companies from misrepresenting themselves when performing business transactions.
Also, all states have a list of words that are not allowed in the company name as DBA. Before you choose your DBA check with the state you are filing in for the words not allowed. In many states, such words as “Bank”, “Banker”, “Trust”, “Insurance” are prohibited for use in DBA.
You will also need to be careful so you don't choose a DBA similar or the same to the name of another excising business, especially if your businesses will operate in the same area.