Operating under a fictitious business name, also known as "Doing Business As" (DBA), can be a strategic decision in the ever-changing world of entrepreneurship. Whether you’re an individual entrepreneur or managing a small business, using a DBA enables you to establish your enterprise's branding distinctively.
This comprehensive guide aims to demystify the complexities of filing for a DBA, equipping you with the knowledge and confidence to navigate this process seamlessly. Whether undergoing rebranding efforts, expanding a venture, or starting from scratch, understanding how to file for a DBA is an essential initial step toward establishing your unique business identity.
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How to Set up a DBA in 3 Easy Steps
1. Choose Your Location
In most cases, small businesses register their DBA (Doing Business As) in the state or county where they operate as an LLC, corporation, partnership, or sole proprietor. However, if it’s more advantageous for your business, you can register a DBA in a different location.
2. Check Name Availability
Before registering a DBA (Doing Business As), search online to ensure the desired name is available. In most states, a DBA name must be unique and distinct from other registered names, such as LLCs or corporate names at both state and national levels.
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To verify the availability of your chosen name, you can refer to the state agency responsible for business name registration, typically known as the state secretary of state.
They usually maintain a searchable database containing all currently in-use business names within the state. Many counties have databases where you can check if your desired DBA name has already been taken by another business operating within that county.
By entering your preferred DBA name into these databases, you can determine whether any existing businesses use the same or closely resembling names in your specific state or county.
3. Register Your DBA With the State DBA
In most cases, filing a DBA (Doing Business As) involves going through the same office where you would register an LLC or obtain a Tax Identification Number (TIN). The specific office could vary depending on your location, such as the county clerk's office, the state's Department of Revenue, or the secretary of state's office.
Typically, you must create an account if you don't already have one. However, you might already have an account if you previously filed for an LLC with this department. When filing for a DBA, there may be certain documents or information that you will be required to provide.
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- Federal EIN, Social Security number, or state tax ID
- Desired DBA registration name
- Legal name of your business or your own (for sole proprietors)
Filing for a DBA can be done easily through an online application. Once submitted, you receive notification of acceptance either by mail or email. The application process typically includes information about the expected decision time, which usually takes a few weeks.
To file a DBA, most states and counties require a nominal fee ranging from $10 to approximately $100. It's important to note that you'll need to renew your DBA registration periodically, typically every one to three years.
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How to Set up a DBA – Buyer’s Guide
What Is a DBA?
The legal and consumer reference for your business is your DBA (Doing Business As) name. A DBA goes by various names, such as a fictitious business name, assumed name, or trade name.
Sole proprietors who prefer not to use their names or entrepreneurs and small business owners who want to select a distinct business name without incorporating find a DBA ideal.
Having a DBA indicates that the person or entity intends to publicly identify itself with that particular name. The legal entity's true identity remains the individual's personal name for unregistered sole proprietorships or the company's official registered entity for corporations and Limited Liability Companies. However, it’s the DBA under which the public recognizes and knows the business.
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What a DBA Is Not
A DBA doesn’t function as a legal business entity. Instead, it serves as an alternate name for your business, distinct from its official legal name. A DBA must be associated with an existing business entity.
Various forms of business entities serve as examples in this context:
- Sole Proprietorships (informal)
- General Partnerships
- LLCs (Limited Liability Companies)
- For-Profit and Nonprofit Corporations
- LPs (Limited Partnerships)
- LLPs (Limited Liability Partnerships)
When establishing a business entity like an LLC, S corp, C corp, LP, or LLP, you gain the advantage of limited liability protection. This protection shields your personal assets if your business faces a lawsuit.
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Sole proprietorships and general partnerships operate under the owner's personal name and do not possess limited liability protection. Even if you choose to operate under a DBA as a sole proprietor or general partnership, this doesn’t grant your business limited liability protection.
After You File Your DBA
Once your DBA application is approved and officially registered, you can incorporate it into your business activities.
This includes opening a bank account and drafting contracts using the registered name to represent your business. You can leverage the DBA to sell your entire business or specific parts, such as the intellectual property associated with the brand name.
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Not all states restrict duplicate DBAs, and most legal protections only apply within state borders. If safeguarding your trade name against unauthorized use is a priority, consider registering it as a trademark with the United States Patent and Trademark Office (USPTO).
However, please note that this step isn’t obligatory to establish official recognition for your DBA.
When to Use a DBA
Branding
Whether you have a sole proprietorship, partnership, LLC, or corporation as your business structure, registering a Doing Business As (DBA) name can simplify establishing or expanding your brand. If your business provides various distinct products or services, obtaining a DBA can assist in showcasing and promoting specific offerings in a distinctive manner.
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If you run a sole proprietorship or partnership, opting for a DBA name for your business can streamline marketing efforts and enhance customer attraction.
Privacy
For sole proprietorships and general partnerships, it’s mandatory to use the surnames (last names) as their official legal name. If you own a sole proprietorship and prefer not to have your name visible in directories, online platforms, or public records, it’s advisable to establish a DBA (Doing Business As) for safeguarding your privacy.
Setting up Multiple Businesses Under One LLC
Entrepreneurs can establish multiple businesses within a single Limited Liability Company (LLC) by creating fictitious business names (DBAs) for each one.
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Banking
Certain financial institutions may mandate that sole proprietors and general partnerships obtain a "Doing Business As" (DBA) designation before being eligible to establish a business account. This not only enhances your credibility but also ensures that you can accept payments under your business name, satisfying customer expectations.
Domain Name Availability
It's possible that your business name may not be accessible as a domain name. Some entrepreneurs opt to register a DBA (Doing Business As) that aligns with their chosen domain name.
Credibility
In certain cases, sole proprietors and general partnerships may enhance their credibility by using a business name that differs from their personal name.
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How Much Does Registering a DBA Cost?
DBA filing fees can vary depending on the state. According to Babbitt, the fees typically range from $5 to $50, with an average of around $20. However, in some states, the fees can go up to as much as $150.
Choosing not to register a DBA can result in significant costs. The initial registration cost may be insignificant, failure to register can lead to penalties and fees amounting to several thousand dollars. This is primarily done for consumer protection purposes.
States want to have contact information for businesses when consumers file complaints. While most states require businesses to obtain a license covering this aspect, some states don't mandate business licenses but still require DBAs to be registered.
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There’s no specific limit on the number of DBAs one person or business entity can register. Note that registering multiple names could become expensive due to individual DBA filing fees for each name.
It's worth mentioning that Alabama, Arizona, Nebraska, Oklahoma, and Rhode Island are exceptions among all other U.S. states as they don't impose mandatory registration requirements for individuals operating under a DBA.
It’s advisable and best practice for individuals or entities conducting business operations under a DBA name outside these five mentioned states to check with their respective state authorities regarding any local requirements and regulations specifically for registering a fictitious business name.
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What Are the Advantages of Having a DBA?
A business owner can benefit from the various accomplishments of a DBA.
- DBAs assist in rebranding a company. Using a DBA can be an effective means for an organization to shift its focus and change its overall direction. If a business desires to undergo a rebrand without establishing a new corporation or Limited Liability Company, it can opt to register a DBA instead.
- DBAs are valuable for business owners to differentiate between multiple companies. They also prove helpful for entrepreneurs looking to distinguish their various businesses.
- DBAs help individual business owners establish a unique brand identity. For sole proprietors, registering a DBA enables them to create and promote their brand using a name of their choice, rather than relying on their personal name. This strategic move not only helps target specific customers but also boosts overall brand recognition, ultimately benefiting the growth and success of their business.
- Registering multiple DBAs can have additional benefits that may not be immediately apparent. For instance, a memorable scene from the TV series Parks and Recreation where Tom and Ben search for a tent rental company for an event. Their initial deal falls through, prompting them to contact another company.
- To their surprise, they discover that the same individual owns both companies. This person owns all the tent rental businesses within a specific radius. Occurrences like this aren’t uncommon in the industry.
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What Are the Disadvantages of Having a DBA?
One could make the case that the expense associated with filing a DBA is a drawback. Any actions taken to promote growth and establish structure in your business will require financial investment. Following this line of reasoning, the cost of obtaining a DBA is only a minor disadvantage.
Another common error is confusing DBAs with other business structures like LLCs. Only the latter offers liability protection in the event of a lawsuit and impacts how your business earnings are taxed. It's important to note that DBAs do not serve as trademarks themselves.
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Therefore, DBAs are only disadvantageous if their purpose is misunderstood.
DBA Taxes
The taxation of a business depends on its organizational structure. The Internal Revenue Service (IRS) has established distinct filing obligations for each type of business structure.
Since a DBA (Doing Business As) isn’t considered a separate legal entity, there’s no requirement to file a tax return solely for the DBA. The profits or losses generated by the DBA are considered when calculating your business's overall tax liability.
If your DBA experiences financial difficulties and incurs losses, these figures will be factored into the overall tax liability of your business.
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DBA EINs
An Employer Identification Number (EIN) functions as the business equivalent of a Social Security number. It’s used by the IRS to monitor a business's tax reporting requirements. To comply with government regulations, any business with employees must apply for an EIN.
It's important to note that a "Doing Business As" (DBA) doesn’t possess its own EIN since it’s not considered a separate entity. Instead, if the underlying business structure associated with the DBA has employees, it will be assigned an EIN.
How to File a DBA – Frequently Asked Question
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Can I File a DBA Online?
Absolutely. In most places, you can apply for registering or renewing a DBA electronically via the official website of the relevant office.
Can I Use More Than One DBA?
A single company has the freedom to use multiple DBAs with no restrictions.
How Do I Set up a DBA for a Rental Property?
Having a rental property registered under your name or a DBA doesn’t protect you. The most effective solution is to establish an LLC, which safeguards your personal assets in case of any complications with the rental property. However, it’s advisable to seek legal advice from an attorney in all circumstances.
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When Would Getting a DBA Versus a Legal Name Change Be Good?
Opting for a DBA (Doing Business As) is frequently a more favorable option than altering your business's official name. If you intend to reposition your company's brand or shift focus to another business area, obtaining a DBA involves a less complex procedure than formally changing the legal name.
Is My DBA Protected From Being Used in Other Places?
Different states have different laws regarding the use of similar DBAs. Some state-level laws prohibit using DBAs that are too similar to existing ones. However, obtaining a DBA trademark is possible, providing more robust protection across state borders.
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Bottom Line
A DBA or fictitious name is a trade name that allows you to conduct business without creating a complete business entity. The process of registration is simple and affordable, with the option of online registration available in most states.
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Disclaimer: The above is a sponsored post, the views expressed are those of the sponsor/author and do not represent the stand and views of Outlook Editorial.
