What is a DBA?
A DBA is merely an application made to the express in which you request license to utilize a different name than the name your commercial enterprise legally registered for and obtained. Think of a DBA security as a permission slip granted by the state for to you call your occupation ( or a line of your existing occupation ) a unlike name. A DBA is not a discriminate business entity. And more importantly, it does not offer the small business owner any indebtedness protection any ! A DBA very is the acronym for “ doing clientele as ” and it represents a assumed name certificate for you ( if you are a sole proprietorship ) or your business entity.
Why File for a DBA?
There are many reasons why a business owner may choose to file for a DBA or assumed name security after they have started a business. many times, they plainly don ’ t like the original name chosen or it doesn ’ t align with the sword trope for marketing purposes.
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many business owners besides believe if they add multiple businesses to their original business, that they should file a DBA certificate for each new commercial enterprise. While this may be necessity and desirable, it ’ s identical authoritative to understand that there is no legal separation of liability between each of these businesses with separate DBA certificates ! Should something go wrong with one of the operations marketing under a DBA and held under a individual clientele entity, all lines of business may be in hazard !
The miss of legal separation with a DBA is an authoritative point, so lease ’ second base on balls through an example : Jonathan starts a restaurant called Jonathan ’ randomness Barbecue, Inc. We ’ ll keep it bare and assume that he doesn ’ t own the build or property. rather, he is just renting space. After operating for several years, many of his customers suggest he begin to do cater. He hires a commercialize ship’s company who designs a new logo for his provide commercial enterprise. Jonathan is astir and running, however the name differs from his restaurant Jonathan ’ s Barbecue, Inc. Jonathan chooses to file for a DBA for the new line of business “ Jonathan ’ s Catering. ” In this character, if at some point in the future a awful accident occurs while delivering the provide services under the Jonathan ’ s Catering line of business, all of the assets owned by Jonathan ’ sulfur Barbecue, Inc., a well as its income, would be in hazard. The rationality for this is the DBA “ Jonathan ’ s Catering ” is merely another asset owned by Jonathan ’ sulfur Barbecue, Inc. If Jonathan wanted to separate the liabilities ( the risks ) in the two lines of clientele ( his Barbecue, Inc. restaurant and provide ), he should consider forming another business entity ( an LLC, corporation or partnership ) for the cater commercial enterprise
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What are the Benefits of Registering a DBA for your business?
- Compliance: Filing or registering a DBA allows you to legally use a business name without incorporating as an LLC or corporation.
- Business banking: Filing a DBA enables you to get a business bank account in the name of your business and take payments in the name of your business, even if you haven’t formed an LLC.
- Flexibility: DBAs are easy and affordable to file, so they offer great flexibility to suit the needs of your expanding, evolving business. For example, if Jane Doe Cookbooks, LLC launches a new website, they can file a DBA for “JaneDoeCookbooks.com” which would keep that site’s business activities covered under the umbrella protection of the original LLC. If Jane Doe Cookbooks, LLC starts offering private chef services, online cooking classes, or starts selling cooking supplies, they could easily file DBAs for each of these new ventures under the same overall LLC.
What are the limitations of filing or registering a DBA?
- Filing a DBA is not the same as trademark protection: If you file a DBA, you have the right to use a business name, but you don’t have the right to prevent anyone else from using that same business name. If you want a higher level of protection, you need to register a federal trademark.
- Lack of tax benefits: A DBA is not a corporation, so merely filing a DBA that is not part of a “corporate umbrella” like an LLC will not give you any special tax benefits. If you are “only” doing business as a DBA, any money your business makes passes through to your individual tax return and is taxed accordingly. If you want to get the tax benefits that go with having a corporate structure, you would need to form an LLC and file taxes as an S-Corporation (or other corporate entity, which has different tax treatment). Be sure to consult with your attorney and/or professional tax adviser before you make a final decision on a choice of business entity structure.
Filing a DBA can be a fast and effective option to make your commercial enterprise “ official ” while providing certain benefits, but be certain you are mindful of the limitations of this commercial enterprise name appellation. As with so many other business decisions, the fastest, cheapest solution is not always the best. But filing a DBA can be helpful for structuring multiple businesses vitamin a long as they are all integrated under an overall LLC or other corporate umbrella .