What Is The Difference Between A DBA And An LLC?
What is a DBA?
DBA is an acronym for “doing business as”. In some states, a DBA might be called a fictitious name, trade name, or assumed name. To the point, a DBA is essentially a nickname for your company.
Let’s say you own ACME Tools but you’d like to market a few specialized products to the high-brow tool crowd. Instead of forming another business entity, you can file for a DBA and start marketing your tools under the name Super Fancy Tools.
In this scenario, Super Fancy Tools is your nickname (DBA) and your business’s legal name is still ACME Tools.
What a DBA Isn't
A DBA isn’t a business's legal name—that is, it is not the name you file when forming a business entity. And, a DBA is definitely not a legal business entity like a sole proprietorship, partnership, or LLC.
And since a DBA isn’t a type of business entity, it provides zero protection between it and the company or person it is operating under. Really, it’s just a name and nothing more. So if Super Fancy Tools gets sued or has a rocky year, so does ACME Tools.
What is an LLC?
A limited liability company (LLC) is a type of business entity that allows its owners to protect their personal assets from business liability. A business entity is a company set-up separately from an individual owner for tax and operating reasons.
The key differences between a DBA and LLC are:
- A DBA is just a name.
- An LLC is a business entity.
How to Set Up a DBA
Now that we’ve clarified some common questions and misconceptions about DBAs, it’s time to learn how to get one.
In most states, setting up and maintaining your DBA will be easy. Our state-specific DBA guides make setting up your DBA simple.
DBA Bank Accounts, EINs, and Taxes
So we know that a DBA is just a nickname and not a business entity but what happens when we need to report taxes or open a bank account for a DBA?
Do you have to file taxes for a DBA?
A DBA isn’t a business entity. The income or loss from a DBA is factored into your total tax liability for the business but you do not have to file a tax return specifically for the DBA.
For instance, if Super Fancy Tools doesn’t do well and has a loss, those numbers will be calculated within the tax liability for the Acme Tools LLC.
Does my DBA need an EIN?
A DBA doesn’t need an EIN because a DBA isn’t a business entity; a DBA is essentially just a nickname for your business. Needing an EIN is dependent on the type of business entity you are operating.
To learn more about EIN requirements, read this article by our friends at TRUiC.
Frequently Asked Questions
Are there any reasons not to use a DBA?
The only real disadvantages to using a DBA are maintaining it, paying for it, and dealing with any confusion the extra name might cause (which really should be minimal).
When does a DBA expire?
This depends on your state. Each state has its own set of rules. Your DBA could expire after some number of years or be valid indefinitely. Check your state’s specific regulations to see how long a DBA is valid for.
How much does a DBA cost?
The cost of registering a DBA varies from state to state but usually falls between $10 and $100.
Check out our state guides to see the potential costs in your business’s home state.
Can a DBA get an EIN or Tax ID?
DBAs aren’t required to have a separate EIN because DBAs aren’t a business entity. The business entity that the DBA is under would have an EIN if an EIN is required.
To learn more about EINs and when you would need one for your business, read What is An EIN on How to Start an LLC.
Can a DBA become an LLC?
Your DBA is just a name. A DBA is often confused with a sole proprietorship. If you mean “can my sole proprietorship become an LLC?” then the answer is “Yes. Absolutely.”
To learn how to form an LLC, visit our Form an LLC state guides.
How can I add a DBA to an LLC?
The process of adding a DBA to an LLC can vary slightly from state to state. Check out our state DBA guides to find the information that is relevant to your business.
When is a DBA required in my State?
If you are operating a sole proprietorship, you will need a DBA in order to open a business bank account or accept payments in a name other than your legal name. If you have an LLC or a corporation, you will likely need a DBA if you want to conduct business under a name other than the one you already registered.
However, these rules can vary by state. Check out our state DBA guides to see what the regulations are in your business’s home state.
Can a DBA have two owners?
A DBA doesn’t have owner’s per se because a DBA is just a nickname for the main business entity. The main business entity can have two owners depending on the organization’s business structure.
Is my DBA protected from being used in other places?
There are some state-level laws that prevent DBAs that are too similar to existing ones from being used, but this varies from state to state. It is possible to trademark a DBA, which would offer stronger protection across state lines.
Can a DBA be transferred?
Most states don’t allow DBAs to be transferred but you can usually change the contact information for the DBA by completing a form and paying a fee. For state-specific information, check our state DBA guides.