DBA stands for “doing business as” and is sometimes called a “trade name” or “business name.” You can also consider DBA as similar to a nickname for a company or business. There are many reasons someone might want to create a DBA name, such as:
- Greater privacy.
- The desire to run a business with a more unique and/or memorable name.
- The need to open a business account with a bank.
- Plans to open a new or different line of business, but not wanting to create a brand new business legal entity to do so.
- Increase the level of credibility or professionalism of a business.
Read on to learn more about DBAs and to see if it makes sense for you to get a DBA name for your business.
What Is a DBA?
A DBA is a business name that’s different from a businesses’ legal or “true” name. For example, a business might be incorporated as “John Smith Research, Inc.” but might do business as “Smith Aeronautical Design and Development.”
A company can use its DBA name in practically all aspects of its business, from signs outside a store to a website domain to company logos and letterhead. A DBA is also popular with franchise businesses, like fast food restaurants and hotels. A Marriott or McDonald’s is the DBA name, but the person or business that owns and operates the franchise location will probably be a local small business entity, such as “Clark Restaurants Co.” or “Jones Hospitality Management, LLC.”
When Do You Need to File a DBA for Your Business?
In most situations, having a DBA is optional. Whether you’re incorporated or running a sole proprietorship, using a DBA isn’t required. However, there are certain situations where you’ll want a DBA designation.
First, it’s when you want to run your business with a name that’s different from your legal business name. If your company’s official name is “Brown Roofing Services, Inc.” and you operate as “Brown Roofing Services, Inc.” then you don’t need to file or register a DBA. But let’s say despite this official business name, you want to operate as “Brown Roofers.” In that case, you’ll want to register your DBA name.
This registration or filing requirement exists because many state or local laws require any business that operates under a name that’s different from their legal name to register the DBA with the appropriate government authority, such as a county clerk’s office or business department.
Second, you want your DBA name to be legally recognized in your business dealings. For example, if you enter into a business contract with a supplier and don’t have a properly filed DBA name, you’ll need to use your business’ legal name instead to create a valid contract.
Who Can Create a DBA?
For the most part, anyone can create a DBA. This includes sole proprietors, partnerships, LLPs, LLCs, and corporations. You can also create as many as you’d like, although you’ll need to register each one.
Sole Proprietorships and Partnerships
If you’re trading as a sole proprietorship or a partnership, the owner (or owners) and their business are the same entity. Sole proprietors and partnerships might want to file a DBA to operate under an assumed name, for example, if two contractors, Brown and Smith, want to trade as Alpha Building Contractors.
Because sole proprietorships and general partnerships are unincorporated, they need not file entity formation papers or a business entity name with the state. Still, they do have to obtain the required business licenses and permits.
LLCs and Other Legal Entities
Corporations (both S and C corporations), limited partnerships, and LLCs technically don’t need to file a DBA name unless the specific state, city, or county requires it. This is because LLCs and corporations do business under the name that appears on their formation documents. However, in some instances, these business entities may need a DBA to expand their business and operate that expanded part under a different name than the registered name.
Franchises
While franchise owners are not required to obtain a DBA, they can do so to establish the identity of their local business. For example, if you purchase a Pizza Hut franchise, you’ll typically register as an LLC or corporation. You’ll then form the franchise under the LLC or corporation – for example, ABC Business LLC – but your DBA will be “Pizza Hut” to inform your state that you’re doing business as the franchise you joined.
Pros and Cons of filing a DBA Rather Than Forming Another LLC or Corporation
A common question many LLC and corporate business owners have when it comes to creating a DBA is deciding whether they should create another LLC, corporation or business form instead of registering a DBA. Below are some of the advantages and disadvantages of using a DBA instead of creating a different business form.
Advantages
- A DBA name allows you to create distinct departments or divisions within the same business without having to spend the time and money of creating a new business entity.
- You have a lot of flexibility to choose the most appropriate DBA name for each respective branch of your company. Maybe you want to distinguish branches based on what they do or where they’re located. Either way, you can likely find a DBA name that works for you.
- You can use different DBA names to identify different parts of your business that use different accounting practices. Which accounting method you use could depend on the specific product or service a particular part of your business engages in. So if you want to use one method of calculating inventory value for one division and a different method in another division, you can use different DBA names to help keep things separate. This separation may also help you save time and money for your accounting requirements. Keeping one legal entity in your accounting software can reduce the amount of accounting work and accounting expenses, yet you’ll have your different business divisions easily identifiable due to their different DBA names.
Disadvantages
- A DBA won’t provide you with an exclusive right to the name that no one else can use. That’s because even though you filed or registered your DBA name, someone else can use it if they create a formal business entity using that name.
- A DBA won’t offer any of the liability protections that are available by creating a corporation or LLC. And while the business owners of the corporation or LLC may be shielded from liability, the other business entities won’t be. So other divisions or branches that only have a DBA name (or the “parent” company itself) could be financially liable for the business division or branch with a DBA name that gets into legal trouble.
- You may not be able to register a DBA name if your LLC or corporation is not in good standing. In other words, if your company is in business trouble, a state or county may not let you use a DBA name.
Pros and Cons of filing a DBA as a sole proprietor
As is the case with LLCs and corporations, doing business as a sole proprietor doesn’t require you to have a DBA. But it offers several advantages, such as having a more professional business name and being able to do business with a name other than the one your parents gave you. However, these benefits also come with creating an LLC, corporation, or other formal business structure. Despite these similarities, there are some benefits and drawbacks to getting a DBA name instead of creating an LLC or corporation.
Advantages
- It’s usually easier to create and maintain a DBA name than incorporate or form an LLC. For instance, you’re less likely to need to hire an attorney when registering a DBA name. There are also few formalities or procedures you have to follow once you’ve created your DBA name, such as choosing officers and adopting articles of incorporation.
- It’s often cheaper to register a DBA name than to set up a corporation or LLC. The exact costs will vary depending on state law, but the money needed to keep a DBA name current is usually less than maintaining an LLC or corporation.
Disadvantages
- Having a DBA name won’t protect you from personal liability if your company gets into legal trouble. However, having an LLC or corporation can limit or eliminate this potential personal financial liability.
- If you want to use a term in your DBA name that signifies your company is a corporation or limited liability company (like the terms, Inc., Corp., or LLC), you’ll have to form a corporation or LLC instead.
- After establishing a DBA name, you’ll still need to pay a renewal fee every five or so years, depending on your state or county’s specific requirements. This fee may be less than the regular fees needed to keep an LLC or corporation active.
Does a DBA Provide Privacy?
Yes, but only to some extent. After you register your DBA name, you don’t need to use your real or legal name when carrying out your business operations. So your average customer or business partner may not know that when they’re talking to you on the telephone or emailing back and forth with you, they’re dealing with the owner of the company.
But if someone wants to do some research into who is the business owner of an entity that uses your DBA name, they can probably figure it out. The only question is how much digging they’re willing to do.
Depending on what state you’re searching in, anyone can type in your DBA name at the department of state or other appropriate government website and find out who the owner is of a particular DBA name. One such state is Florida. But you can add another layer of privacy protection by creating an LLC or corporation and listing that LLC or corporation as the owner of the DBA name. With enough effort, though, most people can eventually figure out who the true owner of a DBA name is.
How Do I Register a DBA?
The exact rules and requirements concerning DBA’s will depend on state and local law. But generally speaking, you need to complete the following steps:
- See if your DBA name is already taken. You can do this by going to your state’s DBA name database and see what’s already been registered.
- Contact the relevant government agency. This could potentially include your secretary of state or your state’s department of revenue. There’s also the possibility that there’s a government agency or department at the county level where you’ll register your DBA name.
- Following the specific DBA name filing process for your jurisdiction. What this entails will vary but almost always includes having to provide information about your real business name, your desired DBA name, the location of your business, and the identity of the business owner(s).
- Pay the registration fee.
- Publish your DBA name in the appropriate local newspaper. Not all states require this, but its purpose is to give the general public notice about your new name and how it’s related to your business’ official or legal name.
After you register your DBA, you’ll usually have to renew it at least every few years. This will also require you to pay a renewal fee which shouldn’t be more than the cost to register the DBA name.
What do I need to register a DBA?
To file a DBA, you will have to provide the following basic information and pay the necessary fee:
- Publicly known name of the business
- Date of company formation
- Nature of business being carried on i.e., the products or services provided
- The name(s) of the owners or that of the legal entity that owns the company
- Some states may require the signature of a notary public
Filing a DBA is mostly straightforward and is easier than registering an LLC. The rules to file a DBA vary from state to state. It also depends on the type of business you’ve registered. You may have to file your DBA either with the state or with the county and may be subject to additional requirements such as publishing your DBA in a newspaper. These requirements are tabled below per state:
| Requirements | States |
|---|---|
| States where you don't have to file a DBA | Alaska, Arizona, Delaware, Florida, Hawaii, Kansas, Maryland, Mississippi, New Mexico, Nebraska, Ohio, Wisconsin, and Wyoming |
| States that require county-level filing in addition to or instead of state-level filing | Arkansas, California (only for out-of-state businesses), Colorado, Delaware, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Nevada, New Jersey, New York, North Carolina, Tennessee, Texas, Virginia, and West Virginia |
| States that require city-level filing in addition to or instead of county- or state-level filing | Maine, Massachusetts, Rhode Island |
| States that require DBA publication in a newspaper or similar | California, Florida, Georgia, Illinois, Minnesota, Nebraska, and Pennsylvania |
How Much Do DBAs Cost?
The exact cost depends on where you’re registering your DBA name, but you should expect it to cost anywhere from $5 (in Washington State) to $150 (in Illinois if you’re a corporation registering a DBA name). Most other states or local jurisdictions will be somewhere between $20 and $55. You’ll also have to renew your DBA name registration every few years (often five), which normally requires a fee equal to (or less) than the initial registration fee.
Are DBA Names Protected?
Yes, but usually only to the extent that other people in your state can’t get a DBA name that’s the same as yours. In some states, like Alaska and North Dakota, your DBA name will be protected from not just other people trying to register their DBA names but also business name registrations in general, such as LLCs or corporations. If you want to make sure you have exclusive rights to your DBA name, one option is to register it as a tradename.
Can you open up bank accounts or get credit cards on behalf of a DBA?
It will depend on the specific rules and policies of the financial institution, but for the most part, the answer is yes. This is one of the main benefits for a partnership or sole proprietor to register a DBA name. When opening the account, you should expect the bank to ask for proof that your DBA has been properly registered. This might require you to provide a copy of your DBA filing or certificate showing your DBA name has been registered.
Final thoughts
A DBA can be a powerful tool and an important part of your business strategy. It affects how you transact business and gives you a lot of flexibility and credibility. However, there are also disadvantages specific to each business type. The two biggest disadvantages of a DBA are the fact that it does not guarantee the exclusive use of your chosen trade name and it offers no personal asset protection for sole proprietors and partnerships.
It’s often the case that registering an LLC is the better option as the process and similar and the costs are comparable. However, this will depend on your specific requirements, your business type, and your state or county’s requirements. It’s always advisable to consult with a lawyer before making any business decisions.