DBA: What Is It And Does Your Business Need It?
Find out what “Doing Business As” really means.
- January 15, 2020
- Starting Your Business
- 6 min read
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Choosing a name for your business is one of the most crucial steps every entrepreneur should take early on in the process of starting a business. Whether you’re starting a new business or buying an existing business, your business name is intimately tied to your company’s image, brand and how customers see you.
But what happens if you’ve chosen a name for your business that you end up wanting to change? When forming a business as an LLC or corporation, for example, you’ll need to have a company name submitted with your articles of organization or articles of incorporation. If you go through the whole registration process only to realize later you want to make a name change, re-registering your business can be an ordeal.
Fortunately, there are options available for such circumstances. Though you may have heard the term before, a DBA is a convenient tool for addressing issues with your business name. Read on to find out what DBA stands for and how you can use it to benefit your business.
DBA stands for “doing business as,” and it is used by a business when they want to go by a different name than what they’re officially called. Another term for a DBA is a fictitious business name, which is the term often used in application instructions you’ll find on many secretary of state websites.
A basic example of when a company might use a DBA is if you’re a sole proprietor or in a general partnership. By default, these business entities will often have company names that are the same as its owner or owners. Your first and last name might be fine for official processes, but it might be a poor name for a business. Hence, by filing a DBA, an owner can do business under the name Smith Super Services, instead of simply as Jane Smith.
In general, you usually get a DBA by filing a fictitious business name with a state- or county-level authority or both. Another common stipulation beyond filing is that jurisdictions will require you to have publication of your DBA, such as in the newspaper or other media. Most DBA filings take about one to four weeks, but this naturally depends on the jurisdiction.
What’s great about filing for a DBA is that it is fairly straightforward compared to registering a business. Typically, you just contact your local clerk’s office or recorder’s office to file a fictitious business name and get a DBA certificate. Sometimes the terminology for filing a DBA will vary, often being called a fictitious name filing, fictitious name registration or an assumed name certificate. There’s almost always a filing fee but it’s typically inexpensive.
An important point to stress about a DBA is that it is not the same thing as a business structure or business entity type. For instance, when deciding whether or not to use a DBA, you wouldn’t be deciding between a DBA and forming a sole proprietorship or partnership or LLC or corporation. You choose a business structure and then may decide to file a fictitious business name application to get a DBA.
If you decide to form, say, a sole proprietorship or partnership, then you may want to choose to employ a DBA instead of using your names for the company name. But you could just as easily be registered as a corporation or LLC and want to operate under a different business name. For instance, you could be officially registered as Jane Smith, LLC., but use a DBA to make a less dry, more appealing business name to go by such as Smith Super Services.
In general, your business structure doesn’t affect your ability to use a DBA. The main area of exceptions to this includes certain professional businesses. Medical practices, lawyers or accountants, all tend to have requirements and limitations on how they can name their business, such as including terms, titles, licenses and certification acronyms in their company names. Another limitation is that, if you’re not a corporation or an LLC, for example, you cannot simply tack on “Inc.”, “Corporation” or “LLC” onto your business name using a DBA.
There are plenty of good reasons and circumstances for why a business would want to file a DBA and conduct business under a different trade name. For example, if a corporation has grown and diversified significantly beyond its origins, then the company might want to use a DBA for its different divisions operating in different industries. The reasons for filing a DBA could be more mundane, like disliking the original name.
Here are some of the pros and cons of filing and operating with a DBA:
Using a DBA can be very convenient for several reasons. As already mentioned, it allows sole proprietors and partnerships to avoid having to use their first and last names as their business name. What’s more, for sole proprietorships and partnerships, filing a DBA is a convenient way to get the business name you want without having to change your company structure into an LLC or corporation. Both LLCs and corporations have ongoing compliance requirements, while sole proprietorships and partnerships do not.
Relatedly, a nice advantage of DBAs is that they provide flexibility in case you rushed into establishing your business and registering your business name. If you filed articles of organization for your LLC or articles of incorporation for a corporation, you may have chosen a business name that’s maybe boring or too straightforward just because you wanted to complete the process quickly. If you find the registered name holding you back, then filing a DBA is a convenient option without having to do anything more radical.
Filing a DBA is also great when it comes to opening business bank accounts. If you’re a sole proprietor or part of a partnership, if you don’t have a DBA, they often will make you open business accounts under your personal name. This is an easy and slippery way of intertwining your personal finances with your business finances, a big no-no when it comes to good accounting practices.
A minor benefit of using a DBA is that it can incidentally increase your marketing exposure. For example, customers can find you under the fictitious business name your company uses, while businesses can also find you by searching your official business name, especially in a B2B sense.
A DBA filing does not change the official name of the corporation or LLC. It only allows the business to use a different trade name, which can be in addition to or instead of the official corporate or LLC name. Thus, if you’re aiming to alter the official name of your corporation or LLC, then you will need to file new articles of organization or incorporation. This is only a drawback, however, if you want to officially change your name.
Another drawback, or perhaps a potential source of confusion, is that filing a DBA doesn’t provide any form of legal protection. Again, filing a DBA is not the same as filing articles of incorporation or organization, which establishes your business structure and comes with legal protections. A DBA is merely a different trade name your company conducts business under, not a new business entity type.
What’s more, unlike a trademark, filing a DBA does not grant you exclusive rights to the business name. Registering articles of incorporation for a corporation or articles of organization for an LLC generally does protect rights to your business name. However, filing a DBA is not the same as filing these types of business articles.
One area of potential annoyance with a DBA is if you’re in a state that requires you to register your DBA in every place in which it will do business. This could be as granular as the county level or even city level. This can turn into a time-consuming process, but one that may be unavoidable due to where your business is located.
As with most questions pertaining to small businesses, the answer is dependent on your circumstances. If you’re a sole proprietor who’s annoyed that your business name is your personal name and would like privacy in that regard, then filing a DBA could make a lot of sense. If your official company name is very functional or dry sounding, then a DBA could be a great way to create a more marketable and appealing brand for your business. If your once-small corporation has grown into a multi-industry firm, then filing DBAs for different divisions can help your company stay relevant and evolve with the business that it conducts.
One of the main points to take away about a DBA is that it does not affect how your business is structured. Filing a DBA will not change your sole proprietorship into an LLC or a corporation, nor vice versa. A company’s DBA is just like an alias, a trade name that your company goes by without fundamentally altering the underlying structure. As a result, a DBA does not bring any legal or tax protection to the table. However, it is a very convenient option for your business if you find yourself in the right circumstances for using a fictitious business name.
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