What is a DBA (Doing Business As)?
07 October, 2020
Heard about DBA from your rivals or successful entrepreneurs in your community? Got an idea about the meaning of DBA? Do you know when this type of entity is needed the most? Why do some people prefer to incorporate their business entity as DBA? If you are looking for answers to all the questions, keep on reading it! We are adding all the information that demonstrates the need to apply for a DBA business entity, and which companies should prefer to have DBA.
What is a DBA?
DBA stands for the fictitious business name or assumed business name. It is an official way of getting your business registered with a name, either the local jurisdiction or state. This type of name is used when you want to give multiple names to your single company. Or maybe a sole proprietor who wants to get their business recognized as a not legally registered name.
This business type allows the business founders to operate their company legally with a special name without creating a completely new business entity at minimal costs. Under DBA, you would be allowed to accept payments, advertise, and present yourself under that name. In fact, it would be considered illegal when you present your business under a name other than your proper legal name without proper notification.
Sometimes, it's normal to use different names for personal as well as professional reasons. There is nothing wrong with having a name that everybody knows and names belonging to the other supporting documents.
To be more precise, if you look at these situations in a commercial version or business entity, then it is called Doing Business As (DBA).
Which kind of words are prohibited in a DBA?
Well, if you are thinking of choosing DBA, then you should be aware of the words which are prohibited in this business entity. There are some restrictions that need to be kept in mind before going forward. The words which can mislead the public or portray the wrong message, in general, should not be used in DBA.
Let's take a case; if your company is not officially formed as an LLC, you can't use words like "Limited Liability Company" or "LLC" for your business. Similarly, the corporate name ends with "Corp", "Inc.", "Incorporated", if the company is not officially incorporated as a Corporation.
Why would your Small Business require a DBA name?
Generally, there are two situations where business entities would be required to name their company under DBA. Do you want to know, 'which two situations are those?' Well, when you want to set up your business as sole proprietors, or for corporations and Limited Liability Companies. If you are thinking of operating these types of business entities, you should start considering DBA names. Are you ready to gather more information about this name? Let's dive deeper!
If you are thinking of operating your business as a sole proprietor, you should start thinking of filing for a DBA. Under the DBA name, you can apply your business with a different name than your personal name. Let's take an example under this situation.
If a sole proprietor named Michael Williams wanted to start his business with the name, ''Green Bell Chilly Thumbs, he would need to file a DBA in this situation. But if you are thinking of combining your name and some part of your product or service description in the business name, you don't require a DBA name.
In the case mentioned above, Michael can start his business as Bell Chilly Williams Services. At that time, he wouldn't be required to file a DBA. However, if the company name starts with the first name Michael Bell Service, then he would require a DBA. This is because he is not using his full legal name.
For Corporations and LLC's
Another type of business entity where you would require a DBA name for your company is corporations and LLC in some situations. As a matter of fact, in order to make a business legal entity in the state, you have to incorporate your business by following all the rules suggested by the government.
When you legally incorporate your business, it means that you are absolutely cleared of any personal liability associated with your business. In this situation, you won't be liable to pay any debt of the business.
If you are looking for a hybrid type of business entities of a sole proprietorship and LLC, you can think of starting an LLC business. The owners of the LLC business are not liable to pay any company's liabilities. But if somehow the company went bankrupt or the owner dies because of some reason, then the company will not live.
But here is the twist; if you have set your business as an LLC or corporation, you won't require to apply for DBA. If you plan to operate your business activities differently from the name filed with your LLC/corporation paperwork, you would require to file for DBA.
For instance, Michael has incorporated his business as Red Chilly Foody Hub. But he also wants to operate his business under "RedChillySpringFoodHub.com" or "RedChillyFood". In this case, he would need to file a DBA. In short, you need a DBA to operate with any kind of variation on your original name.
What are the Reasons for Filing DBA?
Are you looking for the answers where you need to file DBA so that you can operate your business successfully and increase your leads? If your answer is yes, these reasons can help you:
- The first and foremost reason is when you want to set up a business bank account for Sole Proprietorships and General Partnerships. Most of the banks require DBA in this situation.
- When you want to use a separate business name than your entity's official name or personal name, in this situation, you would require DBA.
- Finally, when you want to grow and expand your business in the competitive fierce business marketplace. This will help you to keep your business line separate from others and cut down on expenses and paperwork.
Where should you file your DBA?
Well, DBAs are normally filed in the country or state where the street address or principal business address is determined. If your business is incorporated in other states than the state where the business is located, you would be required to file for DBA. But here, the DBA would be filed in the state of incorporation instead of the state of the business location. You have to file the DBA in other local jurisdictions in special cases, such as with the city or town clerk.
What are the Common DBA Misunderstandings?
There are many people who are still confused about the DBA name. There are so many misunderstandings in the concept of DBA which needs to be cleared.
The newly-set up business companies often confused DBA with a legal business structure. They assume that if they register their business under the DBA name, they are moving forward to create a formal business structure. Moreover, under the DBA name, they are also protected against business liabilities. But this is just a myth!
If you are operating a sole proprietor and apply for a DBA name, you are actually just creating a sole proprietor with a DBA name. There is nothing more than that! This DBA name will help you in banking facilities as well as the branding of your business. But the personal assets of yours would be completely on stake and exposed to lawsuits and creditors.
On the other hand, if you are thinking of setting up an LLC or Corporation while applying for a DBA name, then it will let you manage multiple companies without the requirement to launch a separate corporation or LLC for each business. Let's suppose you have started a small business in the starting period. But now, you want to expand and increase your brand's visibility.
Whether you invest in multiple services, products, stores, websites, or anything else, the DBA name can be used for every business name. This will cut down on your expenses and paperwork when you're operating multiple projects.
This article is all about the DBA name and which companies should apply for it. Still, wondering whether you need to apply for DBA? Or perhaps not sure whether doing business under DBA is right for you or not? You can consult IncParadise, who can help you walk through the possible benefits and procedures for applying the DBA name for your business.
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