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 cover the following:
- DBA definition (aka, your business trade or fictitious name)
- Limitations of a DBA
- Main reasons for using a DBA
- Key tips for registering your DBA name (which you will be required to do in the states where you intend to use it)
DBA meaning: Using a trade name vs. a legal name for your business
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).
An individual or business entity can also choose to conduct business under a name that is different than its legal name by filing a DBA. DBA stands for “doing business as”. A DBA name is also referred to as a “trade name”, “assumed name”, or “fictitious business name”. 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 of a DBA name is required so that the public knows the actual owner of the business they’re buying from or dealing with.
Can a business have more than one DBA?
There are no limits to the number of DBAs or assumed names a business 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 sole proprietor/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.
What a DBA is not
Registering a DBA is not the same as registering your business
Registering your DBA and doing business under that DBA name is not the same as registering your business as a legal 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’s 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's 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 form and documents to register your “doing business as” name.
A DBA is not a trademark
Registering a trade name or DBA name does not provide the same legal protection as a trademark. In most states, a DBA name isn’t protected from use by another business. To obtain a trademark, you must file a separate registration with the United States Patent and Trademark Office (USPTO).
Also, If you’re planning to grow the business into additional states, you’ll need to “foreign qualify” (register to do business) in 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 to register your DBA name in that state by filing the appropriate documents.
Why do companies use a DBA name?
Here are some of the more popular reasons why businesses would 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.
Do business using a DBA instead of 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.
Use a DBA for a more memorable or distinctive business name
The legal name of your business may be long, hard to spell or pronounce, difficult to remember, or not search engine friendly. For example, your LLC is called Quality Automotive Care Company LLC, and you want to open a repair shop in the town of Monroe. You can file a DBA to do business under the name Monroe Quality Auto Repair.
If you are a sole proprietor or partner, you may want your business name to be more distinctive, or to be descriptive of the kind of business you’re in. 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.
Use a DBA when 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 the 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 services in the winter. You could file a DBA for Plowing Specialists for that portion of your business.
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.
Use a DBA to strengthen business credibility
Having a DBA name can provide additional credibility for sole proprietorships and general partnerships.
Register a DBA 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 protection against someone else registering the same name the way that a trademark would.
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.