The name is the basis of every business’s reputation. People see it on your company logo and business cards, find it on the Internet when they search for your products, and hear it from people who have already interacted with your company. A good name makes your company memorable and attracts new customers.
But what if the company has already got one name, but you want to launch a new product line under a different name?
Fortunately, when conducting business, there is no need to limit yourself to just the name listed in the Articles of Organization. You can choose as many legal names for your products or services as you like using a tool like a DBA.
In this article, we’ll talk about the specifics of obtaining and using a DBA with an LLC and sole proprietorship. Additionally, we’ll describe the DBA pros and cons that are important to consider when making an informed decision on whether it meets your business goals.
“DBA” is an abbreviation that stands for: “doing business as”. Depending on the state, you may also hear the terms such as “fictitious name” or “a trade name” used along with “DBA”. All these terms refer to the assumed name under which a business operates, and which is different from its official name.
The number of DBA names that can be used by one business is not limited. However, they must all be formally registered.
As a rule, the trade name is valid for 5 years, but in some states it can vary from 1 to 10 years. After that time, you must renew your application to continue using the DBA name.
Note that obtaining a DBA is not officially starting a new business. An assumed name is just an addition that cannot exist without an officially registered company. Even if the DBA is registered with the state authorities, it cannot form a separate legal entity.
A significant feature is that there is no exclusivity for DBA names in most states. In practice, this means that other companies are free to use your assumed name. Moreover, someone may even register it as the official name for an LLC or corporation, acquiring the exclusive rights to use that name. In this case, you will have to come up with a new DBA name for yourself.
Using a DBA correctly can be a great boost to your business. The benefits of a DBA for sole proprietorship are often different from those that other types of businesses have.
Some of the most common advantages are:
Not all companies need a DBA, also known as a “fictitious business name” (FBN). For example, if you have registered an LLC or corporations and are operating under the name listed in the Articles of Organization, you do not need to get an assumed name.
However, if you plan to use a name in your business that is different from the official name, then you must apply for a DBA registration. People should know what business is behind the name of a particular product or service, and the state requires transparency in this respect.
Most states require you to file an application with a specialized state agency to add a DBA to an LLC. Depending on the type of business, a DBA registration may be required at the following levels:
As an additional condition, the publication of an advertisement in a newspaper or legal publication is sometimes mandatory. At the time of this writing, there are only eight such states:
Some states protect the owners of DBA names by refusing to register names that are too similar. And in states like Alaska and North Dakota, you can even get exclusive rights to the assumed name.
At the same time, there are 13 states that do not have any state requirements for trade name registration:
Note that any of these states may offer a DBA registration at the local level of government.
Although the process may vary from state to state, in most of them, to register a DBA you need to follow these steps:
The method of filing depends on state law. Generally, you can use one of three options:
The mandatory fee is determined by the state and ranges from $10 to $100 or more. The exact amount, as well as the method of payment you should find on the official website.
Remember that some states also require you to notarize your paperwork before submitting.
The DBA name registration is temporary. Its duration varies from state to state.
You may also need to submit a new application before the deadline if the information in the previous application has been changed.
Keep in mind that conducting business under the assumed name without being registered is against the law. To avoid any legal problems, you should keep a close eye on the duration of your DBA name and renew it on time.
And now you know all the key information about getting and using a DBA, as well as its specifics in different states.
Of course, a DBA will not fit everyone. You should always make your final decision based on the needs and goals of your business. For example, if you want to get a DBA for sole proprietorship to make your business more memorable, or to separate a new product line from the company’s core business, it will be a great idea.
Entrepreneurs often face a choice between registering for an existing company “doing business as” or opening a separate LLC. Each of these ways has its strengths and weaknesses, so it is impossible to definitely say which one is better.
Thus, one of the most significant disadvantages of the assumed name is the lack of exclusivity. In most states, other companies have the right to legally use a DBA name just as you do. This reduces the uniqueness and recognition of your business, because customers can simply confuse your company and your competitors.
The best way to avoid such difficulties is to register an LLC. Although it requires more time and money than obtaining a DBA, starting a separate business may be worthwhile. By choosing this option, you not only get exclusive rights, but also limited liability protection.
To summarize, a DBA is a unique tool that allows a company to operate under a name that differs from the legally registered name. If used correctly, a fictitious name can be a convenient and quick way to take your business to the next level.