There are many reasons why doing business under a DBA (Doing Business As) name may be a good decision for a company. In this article, we’ll define what a DBA name (or fictitious name) is, what it’s not, cover the major reasons you might want to consider using one, and provide key tips for registering your DBA name – which you will be required to do in the states where you are using it.
What is a DBA
Every business has a “legal” or “true name”. In the case of a sole proprietorship or partnership, that legal name is the name of the business owner or owners. In the case of a corporation, limited liability company (LLC ) or other statutory entity, the legal name is the one on its formation document (e.g., its articles of incorporation or articles of organization).
If the person or company does business under another name, that is a DBA name. DBAs are also referred to as an “assumed name”, “fictitious business name” or “trade name”. There are no limits to the number of DBAs or assumed names you can use. But the law in most states is that unless the DBA name is registered, which is done by making a filing in the state, a person can only do business under his or her own name, and corporations and LLCs can only do business under the name on their formation document.
The purpose of registering a DBA name is to notify the public that a particular person or business entity is conducting business under a name other than its legal name. Assumed name (DBA) laws are consumer protection laws. Registration is required so that the public knows the actual owner of the businesses they buy from or deal with.
What a DBA is not
Registering and doing business under a DBA name is not the same as forming a business or a business entity. If you register a DBA without first forming as an LLC, corporation, or some other legal entity type, the state you’re doing business in recognizes your business as a sole proprietorship.
As a sole proprietor, you can legally conduct business in that state under your fictitious business name, but you won’t have any limited liability protection. That means you are responsible for the business’ debts and obligations.
Forming an LLC, limited partnership (LP), limited liability partnership (LLP), or corporation (whether it is a C corporation or S corporation for income tax purposes) grants the owner or owners of that business entity limited liability protection. The corporation, LLC, LP or LLP owns the business and is responsible for the business’ debts. The shareholders, members or partners are not. That is one of the major benefits of forming a company. After you formed your corporation, LLC or other entity, if you want to do business under a name other than the one on your company’s formation document you will have to file the appropriate documents to register your DBA name
Note: if you’re planning to grow the business into additional states, you’ll also need to Foreign Qualifying each respective state. Every corporation, LLC or other statutory business entity is prohibited from doing business in a state without being qualified. There are penalties if you don’t comply. Your legal name in the states where you qualify will be the name on your company’s certificate of authority. If you want to use a different name you will have register your DBA name in that state by filing the appropriate documents.
Why use a fictitious name?
Following are some of the most popular reasons why businesses use a DBA name. Note that these reasons often vary depending on business type. What motivates a sole proprietorship to opt for an assumed name, for example, is different from what motivates a corporation or LLC.
- You don’t want to do business under your personal name. This is a particularly important decision for sole proprietors and general partnerships. Unless you file a DBA, your business name and your personal name will automatically be the same whenever you have to list your business’ name on a public record. So for privacy reasons may want to give your business a different name.
- You want a more distinctive name. A sole proprietor or partner may also want the name to be more distinctive, or to identify the kind of business. If you are John Smith and you have a gardening business, the name of your business is John Smith. But maybe you want to do business as John’s Flowers and Gardens. The same is true for general partnerships; the business name is the same as the partners’ names. Registering for a DBA allows you to transact business under the fictitious name instead of your personal name.
- Your bank requires a DBA to open a business bank account. Banks often require sole proprietorships and the partners in general partnerships to have a DBA before they can open a business bank account. Banks often will require you to show them the DBA filing or assumed name certificate as proof you registered the name.
- Your company is entering a new line of business not reflected by your current name. Often a Doing Business As name is used when a corporation or LLC wishes to enter a new line of business or to market new products or services that your current business name does not represent. Having a more descriptive name could be beneficial. For example, suppose you have a sprinkler system installation and repair business, Summer Sprinkler Systems Inc., and plan to offer snowplow service in the winter. You could file a DBA for Plowing Specialists for that portion of your business.
- To use a domain name as a DBA, enabling operations as another business or website. A DBA can be filed in order for a company to transact business under the company’s domain name. This is especially helpful when your company name is not available as a domain name. For example, you may want to operate another business or website in addition to your existing one. Imagine that your LLC makes and sells women's handbags. You also produce handbags for tweens and teens. Knowing they would never purchase from the same company or website as their moms, you file a DBA to register the fictitious business name and create a separate website specifically targeting this audience.
- To strengthen business credibility. Having a DBA name can provide additional credibility for sole proprietorships and general partnerships.
- To notify the public of your DBA name and brand. Registering a DBA name is a public notification to other businesses that the name is in use, as the DBA name becomes part of the public record. But remember, in some states a DBA filing does not provide any protection against someone else registering the same name.
- To use a more memorable name. The legal name may be long, hard to spell or pronounce, difficult to remember, or not search engine friendly.
Again, these reasons will vary in relevance to your company depending on your legal business entity type, what kind of business you’re in, and your growth strategies. We strongly advise speaking with your accountant or attorney to determine whether a DBA registration is the right choice for your business.
