With official US business formation statistics indicating recent peaks and more foreign companies preferring the US for technology startups, why is there so much interest in DBA registrations? We take a closer look at DBA’s:
DBA is the abbreviation for “doing business as.” It’s a nickname for a business which may also be called a fictitious name, an assumed name or a trade name. A business needs to file a DBA if it trades under a name other than the legal name of the entity. A DBA is filed in the jurisdiction under which it is going to operates but it can be protected nationally by registering a trademark.
Steps for registering a DBA
Registering a DBA is simple. A business owner can do it personally or get the help of a registered agency. Below are the steps to be followed.
1. Check the state laws
The first step is to read the state’s guidelines. Every state has its own guidelines as to how to register a DBA. A business may be required to file with the state, the county or the city government.
2. Name search
Searching on the U.S. Trademark Electronic Search System will indicate whether the preferred name is taken by another business or is too similar to another business in the same state. If the name is available the next step is to check if a domain is available for the DBA.
3. Register the DBA with the state
Follow the guidelines of the state in terms of the documents required, the fee and the place where documents have to be submitted.
What you should know about DBA
A DBA is not a business entity. It is simply a trade name under which a legal entity such as an LLC, a corporation, a sole proprietorship or a partnership carries on a business. Here is what you need to know about it.
What are the benefits of registering a DBA?
A DBA provides an opportunity for branding which does not involve the names of the owners of a sole proprietorship or a partnership. For example, if Sarah Woods is a sole proprietor offering IT consulting services, calling the business Expert IT Consulting is more professional and easier to brand than calling it Sarah Woods.
A DBA is potentially important as it can play a large role in creating new opportunities, attracting customers, and complying with regulations.
Is a DBA taxed separately?
A DBA is not a business entity therefore it is not recognized for tax purposes. Its income or loss is factored into the total tax liability of the legal entity. In that case it does not need an EIN.
Can a DBA open a bank account?
A DBA can get a bank account. Therefore, if an LLC, a sole proprietorship or a partnership operates several businesses under different DBAs, it can open a bank account for each one to keep accounting clean. It’s good for the business to accept payments in the name of the DBA as that increases brand awareness in the eyes of the customers. The bank is likely to ask for the DBA paperwork and EIN documents for the legal entity when opening the account.
Does a DBA protect personal assets?
In a DBA for a sole proprietorship or partnership, personal assets are not protected because there is no separation between the business and its owner. Consequently, the owner(s) are liable for the business’ liability. Any person who wants protection of personal assets should register an LLC or a corporation.
Which is better, changing a legal name or registering a DBA?
If a business wants to rebrand or to focus on a new line of products, it is easier to register a DBA than to change the name of the legal entity.
Is registering a DBA expensive?
The cost of registering a DBA differs from state to state and can be anything between $10 and $100.
Is registering a DBA a must?
A person who plans to operate a sole proprietorship needs a DBA so that he can open a business bank account and accept payments in a name different from his legal name. the same applies to partnerships. An LLC or a corporation may need a DBA if it wants to conduct a business under a name different from the legal name or if it wants a different name for a particular line of products.
Can a DBA expire?
A DBA can expire after a set number of years or it can operate indefinitely depending on state laws. If it expires, it has to be renewed before its expiry date by filling a specific form and paying the right fee.
How many DBAs can a business have?
A business can have as many DBAs as it needs, provided there are good reasons for having them. Each DBA comes with its own paperwork and expenses.
Can a DBA be transferred?
A DBA cannot be transferred in most states but it can change the contact information at a fee.
Is my DBA protected from being used in other places?
Some state laws prevent the registration of DBAs that resemble existing ones too closely. Stronger protection is available from trademarking a DBA.
This article was produced in collaboration with startup servant from TRUiC.