Many critical decisions go into starting a new business. What kind of work will you do? Which business structure will you use? Do you need any business licenses? And, perhaps most importantly, what will you call your company?
Registering a DBA could be important for business owners or entrepreneurs looking to start a company. We’ll cover what a DBA is, how it works and whether or not one is right for you.
What is a DBA and how do they work?
DBA stands for “doing business as.” These may also be called fictitious business names. Simply put, it’s a name you can use for your business. Rather than having to operate your company using your legal name, you can operate under your DBA.
For example, John Smith might want to work as a magician but think his personal name is too run of the mill. Instead of simply using his own name, he might file a DBA that lets him operate under the name “Johnathan the Astonishing Magician,” which is a bit more exciting.
Filing for a DBA would let John use his business name for things like opening a business bank account or signing contracts with clients.
While DBAs are popular for sole proprietors who want to use a name other than their own when running their business, limited liability companies (LLCs) and corporations can also use DBAs to differentiate their activities. For example, if you have an LLC that does both tech repair and hardware sales, you could have two DBAs, one for each line of business.
It’s important to note that filing a DBA doesn’t let you establish a formal business. It serves as a nickname for your current company. If you want benefits like liability protection, you’ll want to form an LLC or use another business entity.
How to start the DBA process
You can complete the DBA registration process with your state, county or local government. This means that the process for getting a DBA will depend on where you live. However, the steps usually include the following:
- Choose a DBA name: Consider what you want your company’s name to convey and brainstorm a meaningful name that will get that idea across.
- Confirm availability: Check with your local government to ensure no other businesses use the name you want.
- Fill out the application: Each location will have a unique DBA filing application. For example, in Massachusetts, DBAs are filed with the government of the cities where you plan to operate. The City of Boston charges a $65 filing fee. In some areas of California or New York, you may need to publicize the name of the business you intend to use in your local newspaper.
- Wait for approval: Wait to get confirmation that your DBA is approved before you start using the name. The last thing you want is to open a bank account or start using your new DBA only to find the name is already in use or that your application wasn’t approved.
- Keep the DBA active: You may need to renew your DBA regularly, so pay attention to any local rules regarding the filing and renewal of DBAs.
If you want to avoid going through this process alone, you can hire a service to help you set up your DBA. These services can help with filing paperwork with your county clerk’s office or Secretary of State, assist with publications in local newspapers if needed and help with anything else your business needs to start using a DBA.
Tax considerations
Dealing with business taxes can be a headache. The good news for small business owners is that a DBA has no tax implications. The best way to think of a DBA is as a nickname for your business. It isn’t a separate legal entity and doesn’t change how your company is owned, managed or operates. It’s just an extra name that your existing business can use.
So, if you’re running a sole proprietorship using a DBA, you’ll pay taxes like a sole proprietor. If you’re running an LLC with an S Corp tax election that has a DBA, you’ll file taxes following S Corp rules.
Pros and cons of DBAs
There are many reasons to file a DBA and a few downsides. Still, it’s worth considering both the pros and cons before you file for a DBA.
Pros
- Good for branding: You can use a DBA to operate your business under a name that makes sense for your industry. Plus, you can choose a catchy brand name for marketing purposes.
- Easier business banking: For sole proprietors, a DBA lets you open business bank accounts under a unique name, making it easier to keep track of your business finances.
- Compliance: If you want to operate using a name other than your own, you must file a DBA for your business. Failing to do so can lead to significant financial penalties. Using a DBA is also good for further separating yourself from your company, which can help keep the liability protection offered by an LLC should you choose to form one.
Cons
- Filing fees: You must pay an application or filing fee when you submit your DBA. Depending on where you live, pricing can range from around $50 to $100.
- Upkeep: You’ll have to renew your DBA regularly and may need to submit updates if your business changes structure, you bring on a partner or you make other changes to your company.
Final word
A DBA serves as a legal nickname for your business, letting you operate under a new name of your choosing. Filing a DBA is usually straightforward and low-cost. Using a DBA is a good idea if you want a different name for branding reasons or to protect your privacy.
Just remember that a DBA is only a nickname. It doesn’t offer liability protection for your personal assets like an LLC or change your tax situation. You’ll need a more formal type of business if you want those benefits.
