What is a DBA in business? As a business owner, you may have heard of a DBA without considering what it is about. Not to worry, this article will enlighten you on what it is in business and why you should know it.
Keep reading to understand better.
What Is a DBA? – What Is a DBA In Business
DBA is an acronym for “Doing business as”.
However, it goes further than that.
A DBA is any name a business registers as apart from its legal name.
Unlike a legal business name, it is mainly for branding and does not appear on business licenses and forms like employee payroll and tax returns.
A trading name, a fictitious name, or an assumed name is another way to refer to DBA.
Sole proprietors often use DBAs to operate separately from their legal business names.
For example, a sole proprietor can operate legally as “Kimberly Beauty Home” instead of publicly operating with her default name, “Kimberly Griffin”.
However, if Kimberly should get married and changes her name but wants to retain the maiden name she uses for her business, she can take a DBA.
So, she can bear her husband’s name, but when operating her business, she will do it under her maiden name, “Kimberly Griffin”.
DBAs are essential in several states, as you cannot operate a business without legally registering one.
In some cases, you are expected to include your DBA in official documents such as tax returns of your business.
DBA Is Not a Legal Entity – What Is a DBA In Business
Filling a DBA has often been mistaken for establishing a legal entity of businesses.
However, it should not be so, as they are different.
When establishing a business’s legal entity, you are to file paperwork in the state where you operate your business.
While doing so, you get to decide your business entity.
For instance, you can decide to go for a Corporation (S Corp or C Corp) or an (LLC) Limited Liability Company.
When your business becomes a legal entity, you will no longer be personally responsible for the business.
Yes, you will still be the owner, but the liabilities and the debts will be for the business.
As a result, you are personally protected from business risks.
If your business should be sued, only your business assets will be at risk, not yours.
When you decide not to establish your business as a legal entity, it will automatically be a sole proprietorship.
With a sole proprietorship, there is no legal difference between your business and you.
What this means is that there will be nothing protecting any personal asset of yours.
In this case, you can file for a DBA.
However, filing for a DBA does not give you any protection like filing for a legal entity, as you will remain the same entity as your business.
Filling DBA will only allow you to operate your business under a fictitious name.
DBA is not only for a sole proprietorship, a business with a legal entity and partnership can also file a DBA.
Why Use a DBA? – What Is a DBA In Business
DBA allows businesses to operate under a different name.
Yet, you might wonder why you need to use a DBA.
There are various reasons.
Below are a few reasons for making use of a DBA:
For Getting a Bank Account
Some banks require general partners and sole proprietors to register a DBA before opening a business bank account.
Opening a separate account for your business has several financial perks as you will manage your business finance better.
Privacy Reasons – What Is a DBA In Business
If you run a partnership or sole proprietorship business, your legal business name will be open to the public.
This also automatically exposes your name to the public.
As a result, you will not enjoy privacy.
However, registering a DBA will permit you to operate your business with a different name and remove your name from public records, thereby preserving your privacy.
Marketing Purposes
Marketing your business and attracting customers can be problematic when you use your name to run your business.
This is mostly because your name cannot be enough to tell people about your business and its offers.
For instance, your name is Jean Smith, and you run a car retailing business.
Having your business with your name, “Jean Smith,” will not be good marketing, as your name alone is not enough to make people understand your business.
Hence, registering a DBA will help you create a name to do this.
For example, the name can be Jean Smith Car Retailing.
For Expansion
You can use a DBA if you plan on expanding your business by entering a new field.
Or, if you would like to make a new product or service that is not related to your present business name, you will need a DBA to ensure a smooth transition.
Registering a DBA will ensure that you expand your business in different directions and niches without having issues with other businesses.
You can run different business units under one business when you have those units registered with a DBA.
Establish Credibility
Doing business with personal names sometimes doesn’t come off as being an expert as business names do.
So, registering a DBA with a business-like name can boost your business’s professional image and establish market credibility.
To Match Your Domain Name – What Is DBA In Business
There are cases where people cannot find the domain for the business they registered and intend to run online.
If you find yourself in such cases, you will need to purchase a different domain name, and file a DBA allowing you to conduct business with that domain name.
Also, if you have two or more websites to target different audiences, you may want to get multiple DBAs.
To Make A Business Name Official
If you register a DBA, a public record will be created.
This public record will notify other businesses that you have chosen a name for your business.
It can help you avoid the case of finding out that other businesses are using a similar business name as you.
However, this is only partially guaranteed, as other businesses can use your name in other states.
To Increase Memorability – What Is DBA In Business
Some businesses have names that are not easy to remember either because they are not quite appealing or too long.
In such cases, the businesses can file a DBA of a much resonating or memorable name for the public.
For example, a business’s legal name can be ‘TrustingTheProfessionalHands.’
As you can see, the business’s name is a little long, so remembering it might appear tasking.
So, such a business can change this by filing a DBA for a new name like ‘JustTrust’ instead.
Businesses That Need a DBA – What Is a DBA In Business
DBA is not compulsory for all businesses.
It is just something that benefits most businesses in different ways.
If you are good with running a proprietorship business with your name or using the legal name of your LLC to operate your business, then you may not need a DBA.
However, note that the classification of your business legal entity, local or state policies, and other factors can influence your decision to file a DBA.
You might need to file a DBA when you find yourself in the following cases:
Sole Proprietorship In Need Of Another Business Name
In cases where you want to run your business with another name other than yours, you will need to register a DBA.
As a sole proprietor, your business is unincorporated and is not required to register a formal name or file formation documents with a state.
Hence, there is nothing to formalise the name you operate with if you file a DBA.
This will help with branding and marketing for your business.
It will also provide you with more security and privacy.
LLCs or Corporation In Need Of A New Public Face Name – What Is a DBA In Business
Corporations and LLCs don’t require a DBA, as businesses like this have registered their names with their local states.
However, they are still allowed to file a DBA if they want to operate their business under a different name than the one they have registered.
This mostly happens when you want to introduce a new service or product; you will need to rebrand.
In other words, you will need to change your business’s public face name.
The best way to do this is to file a DBA allowing you to create a new image or rebrand your image with a new name that goes along with the new product or service.
Generally, any business or business owner can file a DBA for different reasons as long as they need to function under another name.
How To File a DBA – What Is a DBA In Business
Filing for a DBA has several benefits and is quite easy to file.
It involves filling out applications and forms at a country clerk, state secretary, or business registrant in your state.
This doesn’t cost more than $100, and its process is smooth and quick.
People often hear back from where they register within or by the end of a month.
You might be required to publish the DBA you are filling in your local newspaper or to update your business permits in some states.
Understand that the process for filing for a DBA may differ from state to state.
So, you have to find out the guideline for filling a DBA in your state to ensure you know what will happen in your business during that process.
Regardless of the differences in the DBA filling process in different states, several states follow this common process:
- You are to check the database of the state to see if anyone is using your desired fictional name; if it is, then you have to pick another name
- Then, you are to download and fill out the DBA paperwork
The paperwork should contain spaces where you will fill in your legal business name and other relevant details.
- Afterwards, submit your application via mail or online alongside the required payment to the specified address.
- If needed, update your official paperwork, such as your business license to show and confirm the DBA.
The requirements sometimes vary based on your business structure.
So, ensure that you carefully read the state guideline for the type of business structure you have.
If you don’t understand it, you can seek help from a legal practitioner.
How To Select a DBA Name – What Is a DBA In Business
Filling a DBA is serious business because it costs you money and time to file.
Therefore, a lot has to go into selecting your DBA name.
You would be happier and more confident doing business with the fictitious name you select if you put reasonable effort into selecting it.
To ensure that you select well, here are some steps you can take:
Understand Your Need For a DBA – What Is a DBA In Business
Your number one guiding force when selecting a trading name should be your reason for getting a DBA.
People file for DBA for different reasons; one person’s reason varies from another.
So, understand and know your reason for filing for it.
When you do, you will know what you are hoping to achieve with the new trade name.
For instance, your desire to get a DBA is because you want your business name to be more memorable to the public.
Therefore, you will need to go for a name that will be more memorable as it will enable you to achieve your goal.
Or, if you desire a DBA because you need privacy, you will have to opt for a name that does not have a personal name attached.
Once you understand your need for a DBA, you are on your way to selecting the best fictitious name for your business.
Consider Branding
Businesses cannot grow without the external input of people.
In other words, you need customers, clients, investors, and so on to trust and work with your business.
However, that might be difficult if your brand is lacking.
Your business name can draw attention to your brand.
This is because a name gives the first impression even before knowing or patronising a business.
So, when filing for a DBA, consider your business branding.
Remember what your business is representing and sell it to the public with the name you chose to do business as.
Check If The Name is Taken
When you have an idea of what your fiction name will be, you need to ensure that it has not been taken by any business within your county, region, or state.
Several states require this as they will only authorise you to use that trade name in their state, and others don’t.
Regardless, you need to ensure that your research will help avoid issues and confusion later on.
Most states have databases where you can do your search on.
In most cases, the links to a state database can be found on the pages for DBA applications.
Consider Adding a Trademark – What Is a DBA In Business
Several states and counties require that no two businesses in the same state have the same DBA.
So, the name you chose in your state of operation can be protected from being used by other businesses in the same state as you.
However, in some other states, some businesses can still use the names already used as it is allowed.
So, to ensure that no other business uses your business DBA, you can get a trademark.
A trademark will make your business DBA unique to your business.
This will help prevent online confusion when people search for your business online.
It will ensure that your business comes up when searched for on the internet rather than your competition.
Disadvantages of a DBA – What Is a DBA In Business
There are benefits to using DBA in business, but there are also downsides.
Hence, as a business owner, you need to also consider these downsides when desiring a DBA.
These disadvantages are:
No Protection Against Liabilities – What Is a DBA In Business
DBA doesn’t offer any legal protection.
What this means is that you don’t get liability protection when you file for one.
You are not incorporated as a sole proprietor.
As a result, when your business is sued, you are also sued.
Therefore, all your assets will be on the line.
Filing a DBA will not help you to avoid this.
No Exclusive Rights To a Business Name – What Is a DBA In Business
Your DBA name can only be distinctive to your business in the state you operate in.
In other words, other businesses in a different state can choose the same fictional name as you.
You will have no exclusive right to the business name you chose for your DBA.
However, you can work around this by getting a trademark.
This is a separate process from DBA.
Conclusion on What Is a DBA In Business
DBA comes in handy when you need a different name to run your business.
It provides privacy, helps with branding and marketing, and makes expansion easier for your business.
Filing a DBA doesn’t take much, as the process is simple and not expensive.
If you consider filling out a DBA, ensure that you know all the guidelines for the state you operate in.
Also, weigh the disadvantages with the benefits.
When you do, you will know if it is best for you or not.
Furthermore, if the guidelines and regulations are not clear to you, ensure that you seek legal help.
Finally, carefully select a DBA name that you’ll be happy and confident doing business with.
