When You Should & Shouldn’t File a DBA

When You Should & Shouldn’t File a DBA jpg

If you want to operate your business under an assumed name, you’ve probably looked into acquiring a “doing business as” (DBA) name.

Getting a DBA is the easiest way to acquire a new business name that you can legally use to represent your company. Because you can get as many of them as you’d like, you can use a different DBA for each branch of your business or each product line you sell.

While obtaining a DBA can be a great move for a number of different businesses, it’s important to know both the powers and limitations of DBAs in the American business landscape. Many entrepreneurs overestimate a DBA’s legal power, which can open then up to legal issues down the road. Before applying for a DBA it’s important to understand how they work and when they are appropriate.

What Is a DBA?

A “doing business as” name gives your company the ability to use fictitious names to legally conduct business. For sole proprietorships and partnerships, acquiring a DBA allows you to use a name other than your personal name or that of a partner.

For larger companies like LLCs and corporations, DBAs are a way to advertise a business with something other than its primary legal name. In each situations, there are both advantages and disadvantages to obtaining a DBA.

When You Should Acquire a DBA Name

There are quite a few advantages to DBAs, and if any combination of these factors apply to your business, you may consider acquiring one.

  • Inexpensive to acquire – While the costs of acquiring a DBA vary from state to state, the majority of states charge anywhere from $10 to $100. This is one of the least expensive business filings you can make.
  • Enhance the credibility of small businesses – If you operate a sole proprietorship or general partnership, and you’re still using your own personal name to officially refer to your business, a DBA can help enhance your professionalism. Many consumers feel more comfortable hiring or writing checks to an established business over an individual.
  • Protect the privacy of your ownership – Beyond sounding more professional, a DBA also protects the privacy of sole proprietorship or partnership owners. Acquiring a DBA will allow you to avoid using your personal name on official company documents and public advertising and marketing materials.
  • Versatility of multiple options – Whether you’re a small operation or a large corporation, DBAs can offer you a great deal of flexibility in how your do business. For example, if you have several distinct product lines, obtaining a DBA for each will allow you to market them separately and more effectively. Additionally, larger companies looking to branch out into new lines of products or services can use low-cost DBAs instead of creating corporate subsidiaries or registering additional LLCs.
  • Branding opportunities – As your company grows and changes, the name you originally chose may no longer fit the direction you’ve decided to take, or may not be working the way you imagined when it comes to branding. A DBA allows you to maintain your established, professional name while adding a more relevant or exciting name to your brand. DBA branding an also aid in establishing trademark rights for your business.
  • Business banking – No matter your business type, a DBA can help you organize your company’s finances. If you’re a sole proprietor or general partnership, even though your business is indistinct from you personally, being able to open a bank account in your DBA name can add a great deal of convenience when it comes to tracking your business earnings. For larger companies with multiple branches, brands, or services, keeping separate accounts for each can make tracking your business’ profits and organizing your finances much easier.

When You Shouldn’t Acquire a DBA Name

While there are a lot of excellent benefits to filing for one or more DBAs, there are also some drawbacks that should be taken into account before making the decision.

  • No legal protection – Unlike forming a limited liability company or a corporation, a DBA does not afford you any legal protections, nor does it limit your liability. There is no corporate veil to protect your personal assets from potential lawsuits and creditors. There are no tax benefits whatsoever. For sole proprietorships and general partnerships, you are in essentially the same situation you were before you acquired your DBA, with the difference being you now have a new name to use. A DBA is not a business structure.
  • Locationally limited – Depending on where you acquire your DBA, it may be restricted to the county or city where you filed it. In many states, you will need to file a DBA in every city or county where you want to use your fictitious business name. At best, your DBA will only be valid in the individual state where you acquired it, and you will need apply separately for each addition state in which you do business.
  • Confusion potential – DBAs cannot be used in legal documents or to execute contracts. This can lead to some confusion when you’re trying to close critical business deals. Since you can ask customers or clients to write checks with your DBA, people are often confused about why they are signing a contract to one business name and paying another.
  • No inherent trademark protection – While a DBA can help you establish trademark rights if you choose to pursue them, there is no built-in trademark or copyright for a DBA. This means that other companies can register their own DBA names very similar to your own, with only the smallest variation necessary to maintain legality.
  • No corporate name reservation – Just because you have a DBA allowing you to use your trade name doesn’t mean someone else can’t incorporate a business with the same name. While your DBA does give you some protection against this scenario in your own jurisdiction, it’s fair game elsewhere. The DBA does not afford you any permanent rights whatsoever to your name.

How Do I Acquire a DBA?

The process for obtaining a DBA can vary from state to state, but for the most part the it is quite simply. You’ll need to file paperwork with your state of formation that includes the basic information about your business and the name you’ve chosen. There is a filing fee that ranges from around $10 to over $100, depending on the state.

While the process is fairly straight forward, you may still choose to hire a professional business services provider to acquire your DBA for you. Sometimes, it’s nice to let someone else worry about the paperwork and legal formalities so you are free to run your business. Here are some reputable DBA acquisition services:

  • LegalZoom ($99): LegalZoom has a great rate for DBAs, and they include any advanced steps that your state may require, such as publication of your business name. They’re also the industry leader for business services providers, so you know you’re in good hands.
  • CorpNet ($108): CorpNet’s price point isn’t quite as low as LegalZoom’s, but they do a great job with DBA acquisitions, and they have several options available to customize their service. They also have excellent personalized services and very positive customer feedback.
  • Swyft Filings ($99): Swyft Filings really lives up to its name, as you can fill out your DBA application in as little as 10 minutes, and enjoy a quick turnaround time of just 1-2 weeks. They also have a 100% satisfaction guarantee.

Final Thoughts

At the end of the day, “doing business as” names can be very useful, with a variety of applications for businesses both big and small.

While it’s nice to be able to refer to your business under an assumed name for advertising and banking purposes, keep in mind that a DBA does not provide the same protections afforded to entrepreneurs who form actual business structures like corporations or LLCs.

As long as you understand what a DBA can and cannot do for your business, it can be a great option for your business.

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