If you operate a sole proprietorship, you might wonder if you have to register a DBA, or “doing business as,” for your business.
The short answer is that no, you most likely don’t need to file a DBA.
However, there are a few circumstances where you could be legally required to do so, or there will be distinct advantages to having a DBA for your sole proprietorship.
Naming Your Business
You can use almost any name you want for your business, subject to some practical limitations. For example, you probably can’t (and shouldn’t) use vulgar or inappropriate words in your business’ name. Then there are situations where you can use certain names, but only in certain situations.
For instance, if you’re registering a DBA for your sole proprietorship or partnership, you can’t use terms that imply your business has a different legal form. So a sole proprietorship could use “Acme Consultants” as its DBA but not “Acme Consultants, Inc.” or “Acme Corporation.” Other business name limitations generally include:
- Not using professional titles or certifications that don’t apply or aren’t present with the business.
- Using a name that implies the business is a government entity.
- Using a business name similar to another business’ name.
One thing to keep in mind is that if you use a formal business structure (like a corporation or limited liability company), you’ll need to have a registered agent to accept legal documents on the behalf of the business. An owner, partner or member of the business can serve as the registered agent. Still, it’s usually more convenient and practical to assign someone else, such as a registered agent service.
Advantages of Having a DBA
If you decide to get a DBA for your business, nothing changes about your business besides the fact that it has a business name that’s different from its legal name. But as mentioned earlier, there are a few benefits to filing a DBA for your business if you have a partnership or sole proprietorship.
Legally Operating Your Business
You don’t have to have a DBA for your business just because it’s a sole proprietorship. But if you market or operate your business with a name that’s different than its official name (which would be your personal legal name, in the case of a sole proprietorship), then you must file a DBA.
Opening a Business Bank Account
Banks will often only allow you to open a business bank account if your business has a DBA. Some exceptions could exist if the bank is located in a state that doesn’t have this requirement.
Marketing Your Business
Depending on what business you’re in, having a memorable name can help expand and marketing your business. “John Brown Bakery” doesn’t have the same impact on potential customers as “Magical Bakery Creations and Treats.”
Forming an LLC Instead of a DBA
Despite the above-discussed advantages of a DBA, it still has some limitations. One of the most notable is that it provides no liability protection for the owner. So if your business gets sued and loses in court, you could be personally liable for paying the legal judgment even if you have a DBA for your business.
Forming an LLC, or Limited Liability Company, allows you to avoid this major drawback and avoid personal liability for the legal debts and judgments of your business (subject to a few limited exceptions, such as “piercing the veil”).
Conclusion
If you operate your business as a sole proprietorship, you don’t need to have a DBA. The only major exception is if you’re using a name for your business that’s different from its legal name. That said, certain advantages come with having a DBA, such as opening a business bank account and having a name that makes it easier to market your business. The biggest limitation of a DBA is that it offers no personal liability protection if your business gets into financial or legal trouble.