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A DBA stands for ‘Doing Business As,’ meaning that this is a trade, assumed or fictitious name of a business. In other words, this is the name under which a company, freelancer, partnership or any other business operates, as opposed to its legal name. Using a DBA may serve many purposes such as protecting consumers who conduct business with the entity or giving you the flexibility to rename and rebrand your business for marketing purposes.
Below are the main topics that you should know with regards to DBAs.
Who Needs It?
When a company files for ‘doing business as’ it means that it will be operating under a trade, fictitious or assumed name which is different from its legal, registered name. For people who are sole proprietors or operate as a partnership, DBA’s allow them to operate under a name that’s different to their own name (e.g. Jack Hunter can do business as ‘Digital Design Ninja’). Whether you’re incorporated or not, you can register a DBA but keep in mind that you’ll need to comply with the local requirements of your state.
A DBA is not mandatory but it’s a good idea in many cases such as opening a business bank account, operating more than one business, opening a different product or brand line, launching an online business, etc. A DBA is not a legal entity, however, regardless of whether you have a DBA or are registered as a sole proprietor or a different entity, you’ll have to pay taxes on all revenues received from running a business.
What Is a Company’s Operating Name?
Naming your business is a very important step when you first start up. You want it to be evocative of what you do, attract customers, be memorable and future-proof. This will be the public face of what you do as a business so it’s important to invest time and effort to come up with the best name. It’s often overlooked, but it’s also a good idea to do a search through the Secretary of State’s office of the available business names. If you combine this with searching through available domains and social media handles, then you can ensure that your business name is unique and not already in use. This will also help you avoid disappointment if your name happens to be taken by another business. Some states will also require you to publish a notification of the DBA in a newspaper as part of the application process to ensure that nobody objects to you using it. Even though it’s a formality, you need to be prepared that it might add extra days to the application process. Therefore, it is good to give yourself at least 30-60 days to file, to ensure your DBA name is approved prior to you starting to operate as a business.
Now you know what a DBA is, you can see that this is the name under which a business is operating, which can be different (if you are an LLC for example) to the name under which you’re incorporated. And if you are a sole proprietor or in a business partnership, your operating name aka DBA, will likely be different as you would not necessarily want your customers to associate your business with your personal name.
If you are not sure whether you need to register a DBA, the government’s Small Business Administration website is a great resource to look through.
Main Benefits of Registering a DBA
The main advantage of filing for a DBA is so you don’t have to operate under your own name or under the legally registered name of your business. Besides that, there are a few other significant benefits:
- Ensures your business is legally compliant – A DBA gives you a certain degree of separation from your business. Unlikely as it might seem to you now, your business might be sued or have other legal issues. In this case a DBA can be used as evidence that your business, its assets and everything related to it are separate from your person. Even without any legal challenges, some of your customers might require you to have a DBA in order to contract you, same goes for business lenders and financial institutions providing small business loans.
- Separates your business from your personal finances – If you are a sole proprietor or in a general partnership you will need an employer identification number (EIN) in order to open a bank account. If you haven’t yet filed for an entity formation (which you’re not obliged to do as a sole trader or partner) filing for a DBA will ensure you get an EIN as well. However, you’ll still need to file for business licenses and permits.
- Cuts through red tape – As mentioned above, filing for a “doing business as” name is a quick, easy and relatively inexpensive way for sole proprietorships to register their business’s name and establish a business entity.
- Brand expansion – If you want to expand into a different line of business, have a separate brand or diversify your products or services without linking the new ones to your existing business, filing for a DBA can be an easy solution which saves you from going through incorporation.
- Adds Gravitas – When you register a DBA name as a sole proprietor this implies a level of expertise and professionalism that’s difficult to convey just by using your own name.
Ensures privacy – When you operate under a DBA name, your personal details are kept away from the general public, so you keep a level of privacy.
Do I Need a DBA if I Have an LLC?
If you want to register an LLC (Limited Liability Company) this will protect you as the owner from personal responsibility for its debts or liabilities amongst many other benefits. In this case, your company usually has a business name that’s not linked to your own name. Even so, an LLC can still register a DBA and do business using this operational name rather than the name on the incorporation documents.
Most frequently, a DBA is used by LLCs when they open a new brand, product/service range or line of business. Keep in mind though, that your DBA name cannot contain endings such as “LLC,” “Inc,” or “Corp.” It might be misleading as it might give the impression of an incorporation status that you might not have.
Unlike sole proprietorship, filing for a DBA does not set up a business entity such as an LLC.
Can I add a DBA to My Personal Bank Account?
When you have a DBA name as a sole proprietor, you can use it to open bank accounts, make and receive payments (including transfer money from your Fiverr earnings), promote your business and any other types of business transactions. In fact, you can use your business bank account under your DBA for personal reasons e.g. paying bills etc. It’ll still remain your choice as a sole proprietor how you use your DBA account. However, if you are an LLC or another more formal business structure, there is a higher degree of separation between your personal and business accounts. Even if you are a sole proprietor or in a partnership, it’s always best to keep your personal and business finances separate.
Can I Get a Business Credit Card with a DBA?
When you have a business, no matter how small or big it is, you can apply for a business credit card. The legal name of your business will appear on your card, so if you have already registered a DBA you can include this in your credit card application. If you’re a freelancer or any other type of sole proprietor, you will also need either your Social Security number or an IRS-issued Employer Identification Number which you’ll receive when your DBA application is approved.
Can a DBA Be Used by a Non-Profit?
There’s nothing stopping a non-profit organization from using a DBA name as long as you do it the right way. If you are genuinely structured and run as a non-profit, then you can use your DBA name to promote and market your vision and mission to your audience. So, as long as you follow the strict IRS guidelines for Charities and Non-profits, filing for and using a DBA that reflects that will not harm the integrity of your organization. However, if you’re incorporated as an LLC but apply for a non-profit sounding DBA, you might encounter serious problems as you’ll be misrepresenting your mission.
The Bottom Line
As long as you follow the requirements of your state or county, it’ll be easy to file for a DBA name without missing an important step. Make sure you research the process and give yourself plenty of time, at least 30-60 days prior to opening for business, to be on the safe side. If you are a sole proprietor, approval for a DBA name will also mean you’ll get an EIN, however you should still apply for all necessary permits, licenses and ensure you file all your taxes on time.
Once all this is done, you can use your DBA name for your business/brand, open a business bank account, get a credit card or loan and take on clients. Don’t forget to check the local requirements with your state government offices as DBA renewal policies vary from state to state or even county to county.
