It’s not uncommon for various businesses, regardless of business entity type, to be “Doing Business As” (DBA). But what is a DBA? How does it work and do you need, or want to use one in your business? Let’s break it down.
What is a DBA?
The DBA, which also can be called a Fictitious Name, Assumed Name or Trade Name, is a way to make sure the public can determine who the real owner of a business is. Sometimes it will make sense for a company, or a sole proprietor, to operate under a different name, and to do this they file a DBA. All types of businesses can use a DBA, and if you’re going to operate under a name other than the official company name (or your personal name if you’re a sole proprietor), you’ll need to get one. Requiring a filing in order to get one is a form of consumer protection, the purpose being to prevent shady business owners from operating under different names to avoid any legal issues.
The biggest misconception with using a DBA is this: It’s not a legal business entity and it does not give you the same limited liability or legal protections that an LLC, corporation or other corporate entity does. A lot of sole proprietors are using DBA’s under the misguided notion that they have set up a company and now have limited liability. If you’re a sole proprietor consider setting up an LLC to get the limited liability protection and then use a DBA if it fits with what you are doing from a business standpoint.
Does Your Business Need A DBA?
Maybe, it depends on how you are going to operate your business. As mentioned above any business can get a DBA, so it often times comes down to being a business and branding decision.
Sole Proprietors
Typically, if your business name is going to be different than your actual name you’ll need a DBA. You may not need one if your name is John Doe, and the name of your business is John Doe Consulting since it’s a combination of your name and the service you offer. Outside of a situation like that you’re probably going to need to get a DBA for your business.
LLC’s & Corporations
In this case you’ve already got a registered business name that you can operate under. Where DBA’s come into play with LLC’s and corporations is that they want to operate under a different name than the one they registered.
The most common situation where an LLC or corporation will be using a DBA is that they are expanding the business into a new product offering and are looking at offering new or different services, probably with new branding as well. For example, you have a marketing consulting company called “John Doe Marketing, LLC” and are looking to expand into the sales training business as well. You can keep the existing LLC, file for a DBA under John Doe Sales Training under the existing LLC and conduct business under the new name while still having the limited liability protection.
For an LLC or corporation it can be a useful way to expand your services or change the name you operate under with losing the protection of a limited liability business entity.
Things to Watch Out For
- Using a DBA probably isn’t going to give you official rights to the business name. If you haven’t registered an entity in the name it may be possible for someone else to come along and register an entity in the same name as your DBA.
- A DBA does not give you the legal protections that a corporate entity does.
- Regulations vary and a DBA may need to be registered locally and at the state level, and may only be limited to the local area where you operate.
Need a DBA for your business, or have other legal risk concerns and questions? Contact us for a free legal consultation.