It is easy for anyone to dream of starting and running a successful business, but not too easy to implement that. Running a business in practical life is not just about coming up with a quality product to sell. It is also about knowing how to set up a company. It is about choosing the best structure and name for your company.
Many small business owners look for options for their company outside of the typically limited liability or sole proprietorship, which is where the DBA concept comes in. But what is DBA? Let’s define DBA first, and then we’ll discuss why it might be an essential tool for your business.
What is DBA?
The DBA definition is ‘doing business as’, or in other words, a fictitious business name. It is a name you keep that you decide to do business under. The DBA meaning is that you would instead run a business in some other term than in your name, for whatever reason.
A DBA business is suitable for those entrepreneurs who do not want to start a company as a separate LLC. They would instead branch out from their current company structure, doing business as a new name. They do not want this new name to be their name, and thus they use a DBA.
There are both small and large DBA businesses in the world. Once you know how to define DBA, you will see more opportunities to grow your business as DBA as ‘doing business as’.
If you run a DBA business, your DBA would be different from your organization’s legal name. It will be like another brand of your existing business or the name you run a company with that does not match your real name.
A DBA is sometimes referred to as an assumed business name. It is what you like to call your business. The way we explain it might sound confusing, but a DBA is just another name that you use for your company to run a business.
Your DBA will not be a legal entity. It will not have any personal asset protection or personal liability. But it will allow you to open up a business bank account and make transactions or accept cheques for that business.
A general partnership or a sole proprietorship might want to use a DBA to run a business under a different name. A limited liability company might also want to use a DBA. The partners do not have to build a separate entity for expanding the business or using a different name for a new branch.
People could be doing business as another name for financial reasons, transparency purposes, or providing consumer protection. When you register your business with the government as a DBA, your customers’ information gets available and verified. If a customer is not satisfied with your services and wants to complain, they may choose to report a complaint to the state.
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Examples of DBA Uses
Let’s say your real name is John Smith. You want to start selling lemonade but do not want your business to be called ‘John Smith Lemonade’. So you think of a new name that does not have your real name and start selling lemonade under the new name. You might file a DBA called Yummy Lemonade.
Later on, you decide that you want to convert Yummy Lemonade into an LLC. The business starts working out so well that you want to expand it further and start selling milkshakes as well. You think that selling milkshakes and lemonade together under an LLC would be more suitable than selling them both under the same DBA. So you register an LLC called Yummy Lemonade LLC and start selling milkshakes as the DBA Yummy Milkshakes.
The new DBA in this case, will help you differentiate the two businesses without you having to handle two different corporate structures. If you cannot make good sales with Yummy Milkshakes, your company’s assets will be at risk because Yummy Milkshakes would be just another asset that the LLC owns. If you want your milkshakes business to have separate liabilities, you would have to register another LLC for it.
Comparing a DBA with an LLC
An LLC, or a limited liability company, is a formal business structure. In contrast, a DBA is just another name you give to your business that you can operate your company in. The main difference between the two is that an LLC gives you limited liability protection and certain other legal protections, which a DBA does not.
It is up to you to decide whether you want an enterprise or a DBA. You can weigh the pros and cons of each before making your decision. DBAs are often used for making alternative corporate structure decisions for a business. An LLC might expand as a DBA if the business owners are unwilling to create a separate entity.
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What is a DBA Used For?
Setting up and running a DBA gives the business owner certain privileges. Once you file for your business as a ‘doing business as’, you can start accepting payments in the form of cheques under the DBA name. You can also open bank accounts under that name.
You can apply for an employee identification number and a federal tax ID number under a DBA name.
For someone already running a company, a DBA helps avoid the hoops of starting a new company when diversifying product range to enter a new market. Entrepreneurs who run multiple businesses simultaneously do not want all of them to run under their name. Therefore, they might choose to run a few under a DBA.
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Some businesses require a DBA before they officially start a company. This is common for freelancers and highly or professionally skilled people who do not have the financial means yet to register a company and open an office. ‘Doing business as’ serves as an essential concept for such individuals.
A corporation can use a DBA on a new product launch to run a new product line under its umbrella. Some corporations use a DBA in the transition phase when they are strategizing to rebrand their business. Until all the official paperwork is done, the DBA can expand the operations and offices under the new business name.
The Pros and Cons of Using a DBA
Learning how a DBA can help your business makes you realize its advantages and disadvantages. Here is a list of a few of its benefits.
- A DBA is usually a simple name and easy to remember.
- A DBA is a lot more convenient and affordable to establish as compared to a separate legal entity.
- DBAs offer privacy protection and are thus very useful if you want to conceal your name or information from your business contacts.
- Doing business as a different name adds more credibility and legitimacy to your operations.
- A DBA can be highly useful for branding and marketing purposes.
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Among its disadvantages, the most significant one is that it lacks certain benefits in terms of the business structure it provides. It does not give you personal or limited liability protection and does not let you get tax breaks.
Another disadvantage is that it does not guarantee any exclusive rights for you associated with that name. Therefore, it is not a permanent solution, but it can be helpful in the short run.
Naming Your DBA
If you choose to build a fictitious business name, you need to keep certain guidelines in mind. Your DBA cannot be the same as your real name. It cannot include words like ‘LLC’, ‘incorporated’ or ‘inc’. Using such words would only confuse your business partners and customers.
Moreover, having a DBA would not mean that you own the name legally. If you want to own it and make sure that the name belongs exclusively to your company, you must get it trademarked.
If your brand name includes your service, you won’t need to file a DBA. But if you run your company with your first name, you need to file separately for a DBA that has to be different from your real name.
It is also worth mentioning here that your domain name can be different from your DBA. It does not have to be the same. You might have set up your website already when you started your business, and you do not need to change its domain name when you get a new DBA for a particular segment or product line of your business. You just need to make sure that you remain cohesive in terms of your overall branding.
Making changes to your website can be a complicated process if you have a web developer to build the site for you from scratch. But if you use our website builder, Strikingly, we make it super simple for you to edit or update your website any time you like.
The Strikingly editor is designed to be used by those who have no knowledge of programming languages and like to have the freedom to manage their website independently. Our drag and drop interface enables you to edit your web pages easily by clicking on the area that needs to be edited and making the necessary changes.
If you use our Pro Plan, you can use your own custom domain for your website. But for all those just starting a business or using a DBA until you officially register your company, our free plan would suffice to create a basic website that will showcase your products and services.
Concluding Remarks
Filing a DBA name for your business isn’t hard. All you need to do is work within your country or state’s requirements to make sure you’re doing it right. It is best to understand the process before you actually start operating under the DBA name.
Depending on the jurisdiction in your locality, you’d usually hear within 30 to 60 days to get approval on your DBA. Once you get this approval, you are all set to run your business and marketing operations under this name.
After that, you just need to make sure you stay compliant with the existing policies and check with the government offices to know if you need a yearly renewal.
