Whether that name is legally registered with the business’s home state or not, every business has a legal name. A DBA (or “Doing Business As” is a name that is different from the legal name of the company. A DBA is also referred to as the “trade name,” “assumed business name,” or a “fictitious business name.”
A DBA lets the public know the true owner of a business. DBA laws are consumer protection laws. They exist, so consumers have full transparency on which companies they are transacting business with. In other words, DBAs prevent dishonest business owners from running a company under a different name to avoid legal problems.
Is a DBA a Legal Entity?
A legal entity is any company or organization that has legal responsibilities, including tax filing compliance. The legal entity can enter contracts and go to court as a business to sue or be sued. Legal entities include sole proprietorships, partnerships, corporations, limited liability companies (LLCs), and other professional entities.
Each entity has a legal name either registered in the state or assumed, as is the case of a sole proprietor and partnership that use the owner(s) names. Conducting business under a different name is illegal, and therefore the company must file a DBA.
Registering and conducting business under a DBA name is not forming a company or a business entity. You can choose to reserve a DBA while forming your business entity and filing the required documents for business formation with the state. If you don’t ever file as a legal entity, the state will consider your business a sole proprietorship.
Because a DBA is not a business entity, a business may not use any terms (such as “Inc.,” “LLC,” “Corporation,” etc.) that imply the DBA is the registered legal name. Also, each state has its own rules regarding words they prohibit for use in business names.
How Do I Know If I Need a DBA?
As explained above, any time you want to use a business name or brand name that isn’t the legal one associated with your company, you must file for a DBA. By default, a sole proprietorship or partnership uses the business owner or owners’ name as the legal company name. If these entities want to use any other name, such as one that better describes what their business does, they must file for a DBA.
In a C corporation or limited liability company (LLC), the company’s members or board of directors choose the legal name, which is then stated in their formation documents. When an LLC is formed, or a business is incorporated, the name automatically becomes protected within the state. No other LLC or corporation in the same line of business may legally use that company’s name. However, a business using the name as a DBA in the state has the legal right to do so—since it is not the legal name. Also, companies in other states may use the name.
The reasons businesses decide to file for a DBA vary. For some, it could be a marketing strategy focused on reaching a specific audience. For other companies, it might be a spin-off from the original concept of the company. There are no limits to the number of DBAs a business can have, so some business owners use the DBA to start different brands under the same legal structure.
Do You Need a Tax ID Number for a DBA?
Having an Employer Identification Number (EIN) (or Federal Tax ID number) is one way to separate you from your business. Without an EIN, you must use your social security number on any business licenses, permits, and tax forms. Getting a Federal Tax ID number is optional as a sole proprietorship; however, some business owners opt to get one so they can open a business bank account and for tax filing purposes. If your business is legally structured as a corporation, LLC, or a partnership, you are required by law to have an EIN.
Businesses operating as a DBA still retain their legal business name and, therefore, still need an EIN or Federal Tax ID if the legal structure requires it. Most applications for permits, licenses, and other financial forms ask for the legal name, DBA, and Federal Tax ID number, so it’s a good idea to apply right away and keep the number handy. You do not need a separate tax ID number for a DBA; it is connected to your business’s “true” legal name.
You can apply for your EIN online through the IRS website, or you can let CorpNet bundle your Federal Tax ID Number with one of our other business filing services and save you time and money.
Can an LLC or a Corporation Own a DBA?
Think of a DBA as a nickname or brand name associated with a business. The LLC and the corporation still exist with their legal names contained in their formation documents. The DBA is the name chosen and registered under the original LLC or corporation.
Again, there are many reasons why an LLC or corporation would decide to register for a DBA.
- If you started your business under your name, you might want a more identifying brand name that resonates better with your target market.
- Some banks might require a different business name than the owner’s name.
- You might want to offer new services or products not reflected in your business’s legal name.
- Many business owners start their companies under one name only to learn the domain name is not available for their website. A DBA with an available domain name solves that issue without changing the name of the entire company.
Filing for a DBA saves an LLC and corporation from spending the time and money creating an entirely new business when an event in the company’s life necessitates and a new name.
Where Do I File for a DBA?
Most states require a DBA filing; however, where you file varies from state to state.
The following states require county-level filing in place of or in addition to state-level filing, depending on the type of entity:
- New Jersey
- New York
- North Carolina
- West Virginia
The following states require city-level filing in place of or in addition to county-level and state-level filing:
- Rhode Island
States That Don’t Require a DBA
You do not need to file for a DBA in the following states:
- New Mexico
Two states, Alaska and North Dakota, offer exclusive rights to the fictitious name chosen by businesses. Seven states require the company to publish their fictitious business name in an approved newspaper or recognized legal publication once the DBA is approved. Those states are California, Florida, Georgia, Illinois, Minnesota, Nebraska, and Pennsylvania.
How Do You Set Up a DBA as a Sole Proprietorship?
A sole proprietorship is considered legal once the sole owner begins to conduct business with the intent to make a profit. The company must still investigate whether a business license from the city or county is needed to operate the business and if any zoning laws prohibit certain companies from operating in specific locations. Also, there might be other industry-specific permits and certifications for the type of business. A sales tax license from the state tax authority office is required if the company sells taxable items.
To set up a DBA as a sole proprietorship requires registering a DBA if the company wants to use a name different than the owner’s name. Depending on where your state accepts a DBA filing, the business owner must complete DBA forms and pay the filing fee. The owner will then receive a DBA certificate. Some states may have different forms for different entities, so make sure you are filing the correct form.
How Do You Set Up a DBA as a Partnership?
The steps involved in forming a partnership depend on the kind of partnership. A general partnership is similar to a sole proprietorship. A general partnership doesn’t require registration with the state, and the partnership is formed once the partners sign a formal partnership agreement. Like the sole proprietor, the partnership’s legal name is, by default, the partners’ names—unless the partnership agreement specifies a different name. For general partnerships wanting to file for a DBA, the company must again check to see where and how the state accepts DBA applications and then pay the appropriate fees.
The other types of partnerships, Limited partnerships (LPs), limited liability partnerships (LLPs), and Limited Liability Limited Partnerships (LLLPs), are formal business entities governed by the state and must follow the state’s compliance requirements. Filing for a DBA should happen before conducting any business using the fictitious trade name.
How Do You Set Up a DBA Under a Corporation?
Setting up a corporation is usually a time-consuming process. Many corporations choose to file for a DBA (or several DBAs) instead of starting a whole new corporation for a separate business idea.
A corporation is a separate business entity from the business owners and must register with the state. Although some requirements vary by state, the process for incorporating involves choosing a business name, naming a board of directors, filing Articles of Incorporation with the state, obtaining an EIN, drafting bylaws, and having regular board meetings. While the compliance requirements may be cumbersome, corporate business owners benefit from the tax credits, liability protection, and the ability to attract investors.
Although the way to file for a DBA is the same with a corporation, the key difference is the need for the corporation’s board to vote on and approve the DBA. The approval must be documented in the board’s meeting notes and signed by all voting board members.
How Do You Set Up a DBA Under an LLC?
Like a corporation, the LLC is a separate business entity and allows the business owners liability protection from the business’s dealings. Forming an LLC requires filing Articles of Organization with the state in which the LLC will operate. Typically, an LLC also creates an Operating Agreement to define its members’ and managers’ roles and responsibilities. Even in states that don’t require operating agreements, an LLC (especially one with multiple members) might find it helpful for preventing misunderstandings about who should be doing what and who has the authority to make certain decisions.
The LLC is a popular legal structure as it has the benefit of corporate protection and has fewer corporate compliance obligations. Again, filing for a DBA involves the same steps as stated above. Whether the LLC needs approval for the DBA from the other LLC members depends on what terms are specified in the LLCs operating agreement.
There are various reasons why your company might want to file for a DBA or several DBAs. The DBA can restrict other similar businesses from using the DBA and confusing the public. For more information on how CorpNet can help you file for your business’s DBA, contact us today!