What is a DBA and when do you need one?

If you’re launching a new business, you could be thinking about how you’re going to write your next success story as you begin this new, exciting chapter. And your company name could play a big role in that. 

By filing a DBA, which is short for “doing business as,” you can implement a formalized, legal nickname for your organization that’s different from the one you used when the business was first established. It is typically something catchy and can even help you market your business better than using the legal name. 

Determining if a DBA is necessary will depend on a few factors, and potentially something you should consult on with your legal representative. Sole proprietorships or partnerships should use DBAs if they want to have a name other than the company’s owners. Or, if a company is rebranding or changing its marketing strategy, it may make sense to file for a DBA.[1]

What does DBA mean?

A DBA does not change the nature or legal name of your business. Just as the phrase “doing business as” implies, you are conducting your business under an alternative name that differs from the one you selected when you first launched. 

DBA examples

A DBA comes into play if you want customers to know you as a name other than your LLC’s legal name. For example, your name is Dean Sanders, but you want the public to know you as “The Tax Man.” Essentially, a DBA is the business version of aka (or also known as). A big-name corporation example is IBM. Legally, the company’s name is International Business Machines Corporation, but their DBA is an abbreviation, IBM.[2]

DBA vs. LLC

A DBA and LLC only share one common characteristic—they allow you to operate your business under a different trade name. However, that’s where the similarities end. Let’s break down the acronyms further to fully understand what differentiates the two acronyms. 

DBA: This is an official fictitious name, assumed name or trade name that allows you to operate under a different business name than your legal name. It does not, however, provide the same legal protections that come with an LLC or other structure. 

LLC: A limited liability company is a type of business structure that protects your personal liability from the company’s debts. As an LLC, your company is treated as a separate entity from the owners. You must operate under the name of your LLC and use the name in front of customers or clients.[3]

Most people decide to open an LLC for legal protection. However, the process can be more extensive than filing a DBA. 

DBA vs. sole proprietorship

If you’re deciding whether to operate your business as a DBA or sole proprietorship, carefully consider the advantages and disadvantages of both options. 

Sole proprietorship: 

This is the most basic type of business structure. If you don’t form an LLC or corporation before starting operations, you’re automatically considered a sole proprietorship. Your business is not a separate entity from the owner.

Business assets and liabilities are not separate from personal assets and liabilities, and the business is owned by one proprietor. 

In contrast, a DBA is not a business structure. As mentioned above, it’s a filing that announces a business is operating under a different name. 

Pros of a sole proprietorship:

• The owner maintains 100% control and ownership of the business and is entitled to profits.
• There is no required cost.
• The associated tax forms are simple to complete.

Once a business closes, it’s easy to dissolve a sole proprietorship. Just remember to cancel all licenses and registrations. 

Cons of a sole proprietorship:

• You are not allowed to sell stock so it may be difficult to raise money.
• There are rigid rules in place to switch or bring in new ownership if your business changes.
• You are personally liable for any business obligations or debts, which puts your personal property and accounts at risk.[4]

Benefits of a DBA

Filing a DBA is a great option if you don’t want to operate under your own name or legally registered name. 

Here are some benefits to consider:

• It opens expansion opportunities.
• As your business grows, you can add new product lines without needing to establish a subsidiary corporation.
• If you expand your reach into another state, you can establish a DBA in that area under a different name.
• Registering a DBA is cost-effective. It’s a simple, low-cost way to start using a formal business name without forming an LLC or incorporating.
• A DBA could help make it easier to open a bank account under some policies.
• It can help you promote your business more effectively.

Your name can help customers understand what products or services you provide and give you a unique positioning.[5]

Disadvantages of a DBA

While there are ways to benefit from filing a DBA, there are some ways it may be insufficient depending on your business needs. Here are some disadvantages of DBAs to consider:

• There are follow-up steps. A DBA requires a renewal, which can typically include a fee.
• You remain personally liable. If someone files a lawsuit against your DBA, your personal assets are not separated from your business assets.
• Your company name is not legally protected. If a company in another country or state wants to use the same name, they have the freedom to do so without restrictions. However, if you want legal protects, you should consult your legal counsel about  trademarking your company name.[6]

Which businesses would benefit from DBA registration?

Not all businesses need to file a DBA, but depending on preference and your operations strategy, it could be useful. 

Franchises

Filing a DBA allows franchises to establish their identity as a local business and operate under the name of the parent company.[7]

LLCs and corporations

Filing a DBA for these types of businesses could be easier than formally changing the corporate name. It could help diversify their brand presence and even create separate branding identities.[1] 

How to file for DBA registration

The process for filing a DBA is pretty straightforward, but requirements may vary depending on your home state. Some areas may ask you to register with the secretary of state, while others can process the request at the city or county level. There are also a few states where DBA registrations are not required for certain businesses. 

Keep in mind though, there will be a one-time fee that’s less than $200. 

To find specific instructions, be sure to visit your state’s official website or call the secretary of state or Business Registration office.[1]

There are many important decisions you’ll need to make when you map out your plan for growing or expanding your business. And we’re here to help. Visit the Nationwide Business Solutions Center for more tools and tips on building your business success.