When you are starting your own business, it is possible that you may not be that familiar with all the legal requirements and terms that come with it. Before we go any further, you should know what is DBA? DBA stands for “doing business as”. This is the name you choose your business to be known by the public. The name may not include your business’s legal name.
Who Needs a DBA
General partnerships, sole proprietorships require a DBA to operate as a firm that works under a brand that is not their full or legal name. These two are unincorporated and therefore do not need to have entity formation papers. Unless they don’t file a DBA, your business and you are the same entity and will be treated as such with all your assets.
Other legal entities such as LLCs and corps cannot themselves file a DBA, as they are already registered separate entities. However, when these entities decide to form a new business, they do have the option to file for a DBA.
Why a business may need a DBA can be better explored when you start to dig deeper. Here are some of the advantages a business can enjoy working with a DBA:
Easier Banking for Your Business
It is important that first-time business owners separate their personal and business finances. You must open a business account, under which all your personal assets are protected in case of a lawsuit. It is also a great way to ensure that your personal credit score is perfect even when your business experiences lows in terms of business and failure to pay timely back on credit borrowed. You will soon also notice that it becomes a whole lot easier to maintain bookkeeping and taxes. It also makes you appear more professional with clients.
Now it is typical that most business owners find that when you operate as a sole proprietorship or even as a general proprietorship, you are likely to run into several roadblocks. If you still have not registered your business with the state, you will not have received an EIN which is your federal tax ID. Without an EIN, it is impossible to open a bank account for any business.
This is where DBA’s come to the rescue. When you file a DBA, you will automatically receive an EIN, and there you go, get your separate bank account.
You Become a Legally Compliant Business
When you register your DBA, you are keeping your business compliant with the state laws and regulations. Owners, who run LLCs and corporations, find that there are plenty of legal protections such as protecting personal assets when you are under fire from a lawsuit. Most people make the mistake of assuming that a DBA is penning a different name on the letterhead. The fact of the matter is that even if you operate your business under a different name since the beginning but do not file for an official DBA, you will not benefit from the protection outlined earlier.
Without a DBA, your legal contracts with other businesses will not hold up either if you have decided to use a different name under the dotted line.
A DBA simply separates one from their business, which is one thing every entrepreneur can benefit from. It is of course very unlikely that your business is sued or finds itself in a legal debacle. But one can always use a DBA as evidence on separating business from your assets.
In a lot of cases, a partnership or a client may even require you to file for a DBA as a condition to go through a deal. A lot of lenders also require that you have a DBA before extending any loans to a business.
Having a DBA Opens a Lot of Expansion Possibilities
With a DBA, your business is better able to operate through multiple firms from single ownership. Each time you expand, you do not need to go through the hassle of having to construct a new business entity. Every time your current venture is willing to work on an expansion opportunity, all you need to do is file a DBA and then operate a store or many restaurants and your website under this name.
The best part about having a DBA is that you have an anchor that is your original business, to which everything comes back.
It is the Easiest and the Least Expensive
Filing a DBA is the best and the easiest way for a sole proprietorship to register a business name and establish it as an entity that is separate from him or her. You will find that it is also a very inexpensive option.
Filing for a DBA early on is an excellent way to start your new business while you are able to reduce your start-up cost. It means that you are under no obligation to keep up with a lot of requirements and formalities that go with keeping up a corporation or an LLC. It includes a lot of record-keeping formalities. You can however as your business grows, convert the business to an LLC with the profits.
One of the more sought-after benefits of having a DBA is that it offers you privacy protection. A lot of entrepreneurs and even partnerships would rather not have their name revealed to the public and the focus remains on the fresh face of the brand. It helps protects a person’s privacy and lets a business venture explore its own individual brand image.
There is great value in having a fictitious name to create brand awareness. You are free to choose whether you want to make it central to the features your product offers, or the values that your product stands for.
A DBA Offers Great Flexibility
State laws require that businesses operate as a distinguishable name that remains within the state boundaries. It helps in avoiding confusion, and a business may not be available in states where you want to expand. Registering under a fictitious name helps you solve this problem and allows you the freedom to expand in markets where you may already be using the original legal name of your business.
How Can One File a DBA
There are certain small requirements and specifications that may vary from state to state and county to county. However, the crux of applying for it remains the same.
In a lot of states, you register for a DBA with the State Secretary of the State or with an agency of the state. Here the type of forms and fees may vary but not by a lot. You can check with the SBA that is the Small Business Administration office to help you outline the requirements that fit the bill for your particular type of business. Some of the states also require that you publish a notice in your local paper announcing to the public this information and also as proof that you have submitted all publication requirements.
If you feel you may not have the time or the expertise to deal with a DBA filing and registration, you can always turn to a filing service. Their specialists will take the complexity out of situations and ensure that the process strictly follows the requirements of your jurisdiction.
Usually, you get to hear back after four weeks of sending in the papers. Once you have your DBA approved, you can start operating your business under this new name. It means your next step should be to set up a business account and begin dealings you’re your clients.
It is important that you understand that a DBA must be filed before you conduct any business under that name in the United States. Some jurisdictions allow that you conduct business and within a short time file for a DBA, but this is not true for all. It is best to get this done first to avoid delays in other arrangements that you may need to conduct. Even if the jurisdiction allows it, you don’t want anything else to become an obstacle, for example needing to do business outside of the state.
Remember that with a DBA you must ensure that you are staying compliant by operating under this name. It also means checking to see when you require to renew your DBA. If you’re on your way to starting a new business, you should have a DBA now, which would save you from a multitude of problems and roadblocks later.
Sohail Rupani is a Senior SEO Strategist and Blogger for PNC Digital, Link Building HQ. He is passionate about technology and loves to analyze the tech industry in his spare time and stay in touch with the latest happenings. He also writes technical articles about SEO and digital marketing. Follow @sohailrupani for more updates.