If you’re starting a business for the first time, you have important legal decisions to make. But you’re (probably) not a lawyer, and you might be unfamiliar with all the legal terms and acronyms that get thrown around, from choosing between an LLC or sole proprietorship to filing a DBA.
In this article, we'll focus on the acronym DBA. Registering your DBA alone doesn't legally protect your business, but it might be legally required, depending on the state, city or county in which you operate, as well as your business entity.
Below, we'll dig deeper into the DBA meaning, when your business needs one and a few more reasons why filing a DBA is a good idea for any business.
What does DBA mean?
DBA stands for “doing business as.” It’s also referred to as your business’s assumed, trade or fictitious name.
Filing for a DBA allows you to conduct business under a name other than your own; your DBA is different from your name as the business owner, or your business's legal, registered name. That’s because when you form a business, the legal name of the business defaults to the name of the person or entity that owns the business. That is, unless you register your business as a certain legal entity (more on that below), or if you rename and register your business with a DBA.
So, if Laura Smith wants to start a tech repair business, her business will operate under her own name, unless Laura chooses to register her DBA name as “Laura’s Tech Repair Shop.” After registering her DBA, Laura’s full name isn’t legally attached to her business’s name.
Also keep in mind that, depending on where you live, you'll need to comply with your state DBA requirements.
Which businesses need a DBA?
Not all businesses need DBAs. It depends on a combination of the business's legal entity, the locale's requirements and the business owner's preference.
Sole proprietorships and partnerships
If you're a sole proprietorship or general partnership, you'll need to file a DBA if you want your company to operate under a name that's not your or your business partner's full, legal name. That’s because sole proprietorships and general partnerships are unincorporated, and they don't need to file entity formation papers or a business entity name with the state. (Though they do still need to acquire the necessary business licenses and permits.)
So, the owners and their businesses are one and the same entity, which means they have the same name, too — unless they file a DBA.
While franchise owners don't need a DBA, it is common they file one in order to establish their identity as a local business. Say, for example, you bought a local Burger King franchise. Franchisees tend to form as LLCs or corporations, so you form a franchise under 123 Business LLC, but you make your DBA "Burger King" in order to let your state know that you are "doing business as" the franchise you joined.
Other legal entities
Unless the state, city or county requires it, corporations (both S corporations and C corporations), limited partnerships and limited liability companies, or LLCs, technically don’t need to file a “doing business as” name. Unlike sole proprietorships and general partnerships, these business types have already registered their entities and business names with the state.
However, any business formed under one of these entities still has the option to register a DBA name. That would allow them to do business under a name other than the name on their incorporation documents.
The most common case of a corporation or LLC registering a DBA name is when the business wants an alternate name for a specific line of their business. By filing a name for a new branch of the business, the corporation doesn’t have to form a whole new business just to operate under a different name. For example, John’s Cosmetics Inc. might want to have a separate name for its upcoming skin care line, “John’s Skincare Solutions.” This saves an expanding business both the money and time it takes to launch a whole new business under an additional LLC or corporation.
Also keep in mind that if you register a DBA without first forming some type of legal entity, your state will automatically recognize your business as a sole proprietorship.
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How to file a DBA name
DBA requirements vary by state, county, city and business structure, but in general, registering a DBA comes with paperwork and filing fees anywhere from $10 to $100. You’ll either go to your county clerk’s office to file your paperwork or you’ll do so with your state government.
In some states, you might also have to place a fictitious name ad in a local newspaper for a certain amount of time. This fulfills the “public notice” requirement for some states — giving the local area an official announcement of your business name.
One logistical restriction to note: Your “doing business as” name can’t have a corporate ending such as “Inc,” “LLC," or “Corp.” That gives the impression that your business is a corporation or has some type of corporate status when it doesn’t.
Other than that, there aren’t any restrictions on what you can file for a DBA name. It’s probably best to do a simple business name search within your jurisdiction to make sure no other business has your DBA name, though.
Tips for filing
Now that you know how to file a DBA, let's explore a handful of need-to-know tips about DBAs:
In order to get a DBA as an LLC or corporation, you typically need to provide a certificate of good standing.
Some states allow you to pay online, while others may require a money order or cashier's check. In addition, some states will allow you to file your paperwork online, and others want notarized documents.
If you operate under an assumed name that has not been registered, you can get hit with big fines from your state regulatory agency.
In many states, you must renew after a set amount of time. Be sure to stay on top of when you must renew your DBA, as letting it lapse can have a severe impact on your business from a marketing perspective.
Certain states also require you to file a new DBA if the information provided in the original filing changes, such as a change in officers (for a corporation), partners (for a general partnership), or members (for an LLC). Note that in some states, you can simply file an amendment under these circumstances.
In most cases, it is not necessary to hire a business attorney to help you file. The process is simple enough that most business owners can handle it on their own. However, if you're confused about the process or have a more complicated business situation, it's always a good idea to seek professional help.
Advantages of filing a DBA
You should file a DBA if you don't want to operate under your own name or the name under which your business is legally registered. Besides these scenarios, there are a few crucial reasons why you should consider registering a DBA name.
Makes business banking much easier
We recommend that every business owner opens a business bank account separate from their personal bank account. That's because separating your business and personal finances will protect your personal assets in case of a lawsuit, preserve your personal credit score if your business fails, make your bookkeeping and taxes that much easier and generally make you look more professional in the eyes of your clients (and small-business lenders).
But if you’re operating a sole proprietorship or general partnership, you’d run into a roadblock here: If you haven't registered your business with the state, you don't have an employer identification number, or EIN. And without an EIN, you can't open a business bank account.
When you file a DBA, however, you'll also get an EIN.
Keeps your business legally compliant
Owners of LLCs or corporations have certain legal protections such as safeguarding the owner's personal assets if the business is sued. But if you operate your business under a name other than what’s on your incorporation documents and didn’t file, those legal protections won’t hold. So, if you’re incorporated as John’s Cosmetics Inc. and sign a contract with a client as John’s Skincare Solutions, without registering the latter as your DBA, then that contract won’t hold up.
And although a DBA doesn't provide you with legal protections in itself, it does further separate you from your business. In the unlikely scenario that your business is sued, for instance, you could offer up your DBA as evidence that your business and its assets are an entity separate from you and your assets.
Additionally, some clients might require that you have a DBA in order to contract with you, or some business lenders might require that you have one before extending any small-business loans to your business.
Your name defines your brand
Your brand name is the public's first impression of your business. Ideally, your business's name should reflect your product or service, and give people a reason to become paying customers. If sole proprietor Laura Smith kept her business’s name as just “Laura Smith,” who would know what she offered until they walked into her shop? And why would they feel compelled to walk into that shop at all?
Choosing the perfect name for your business before you’ve even opened your doors can be hard, though. When your business is in its infancy, who knows where you’ll be in five years? If you’re struggling to come up with an awesome name to file as a DBA, try a business name generator for a little inspiration.
Opens up expansion possibilities
Registering a DBA allows businesses to operate multiple firms under one ownership, without having to form a separate business entity each time they expand. If there’s any hope that your original venture will want to expand into multiple websites, stores, services, restaurants and so on, you’ll want to register each under a separate DBA name.
Note that if your business expands to other states, you'll need to file a foreign qualification in each new state to avoid steep penalties. Your business's legal name in the states where you qualify will be the name on your company's certificate of authority. If you want to use a different name, you'll have to register a DBA in that state.
You want to launch a website
You can file a DBA in order to transact business under your company's domain name. This is useful in the event your company name is not available as a domain name, or if you want to expand your business into e-commerce.
Easier to register a business name
When it comes down to it, filing a “doing business as” name is the easiest way for sole proprietorships to register their business’s name and establish their businesses as entities separate from themselves. It's also relatively inexpensive.
Filing a DBA name isn’t hard — you just need to work within your state or county’s requirements to go about it the right way. It’s usually best to get this all done before you operate under your intended “doing business as” name; somewhere between 30 and 60 days before you open your doors.
You’ll usually hear back with approval in one to four weeks, depending on your jurisdiction. Once you’ve been approved for your DBA name, you’re all set to start operating your business — meaning you can open your doors, take on new clients and set up your business bank account.
After that, make sure you’re staying compliant by operating under your business name and check with your state government offices to see if you need an annual renewal.
This article originally appeared on JustBusiness, a subsidiary of NerdWallet.