You’ve recently started a business and have started representing your company to customers, vendors, and other entities—but should you do these transactions under your name or look into filing for Doing Business As (DBA)?
DBA is a status that many small and startup businesses use to legitimate their enterprise and establish themselves as an actual company rather than an individual contractor. But filing for this status won’t work for all types of organizations.
Here we cover what it means to Do Business As and the situations when your business needs one—and when it doesn’t. Read on to learn more about DBA and the procedures to follow when starting a new business.
What Is a DBA?
The acronym ‘DBA’ stands for ‘Doing Business As’ and is commonly seen when a person or organization wants to link their company or trading organization to their own name. It is also sometimes referred to as a trade or fictitious name.
A DBA is a way of distinguishing your name and identity from your business entity. Sometimes, it is a matter of preference because of commercial expediency; sometimes, it is purely a legal requirement.
When you form a business, the legal name of that entity will default to your name as the person who owns it unless the business is registered as a specific type of legal entity or the business is renamed and registered with a DBA.
Unless you call your business after your actual name verbatim, you may need a DBA even if your name appears in the title, and it would be obvious who owns or is in charge of the business.
The trade name allows you to conduct business under a name other than your own. It is different from your business’s legal registered name or your name as the business owner, even if your personal name appears in the company title.
In most states, a DBA is essential to starting a new business. Filing requirements vary from state to state and according to the type of business entity.
Which Businesses Need a DBA?
Not all businesses need a DBA. The requirement depends upon the business owner’s preference, the local requirements, and the type of business also described as the legal entity.
Partnerships and Sole Proprietorships
Sole proprietorships or general partnerships need to file a DBA if the company is to operate under a name that is either not your name or your business partner’s full legal name.
The reason for this is that both general partnerships and sole proprietorships are unincorporated—the business and its owners are the same entity. As such, it doesn’t raise a requirement to file entity formation papers or a business name with a state service.
Franchises don’t need a DBA, but franchise owners often file for them anyway to establish a distinct business identity.
Franchisees tend to form corporations or LLCs, but a DBA can link the business to a national or international brand name.
An easy example of this is the fast-food chain Mcdonald’s. It operates on a franchise system, but the organization requires a DBA for every franchisee owner to operate as a ‘McDonald’s.’ The trade name allows the state to understand the business is a franchisee of the larger brand.
Corporations, Limited Partnerships, and Limited Liability Companies
Corporations (including S and C corporations), limited liability companies (LLCs), and limited partnerships have registered their business names and entities with their state, so they don’t need to file a DBA.
However, all these businesses can register a trade name if they want to, which will differ from the title on their incorporation documents.
A typical scenario is when a company wants an alternative name for a specific line or element of its business. The DBA allows the organization to operate a stratum of the business under a new name without needing to form an entirely new business vehicle.
How to File for a DBA
The process of filing a DBA will vary according to the state, county, and city, but they are usually broadly similar wherever you are. You should prepare to file paperwork and fees ranging from $10 to $100.
The application is usually available at the County Clerk’s office or with the state government, depending upon location.
Bear in mind that if you apply for and register a DBA without first setting up the legal entity of your business, then the state will automatically deem your business to be a sole proprietorship.
In the case of a new entity, set up and register the legal entity before you apply.
1. Check Out Your Proposed DBA Name
Always do a simple business name search within your state or jurisdiction to ensure your proposed fictitious name is unique and not used by someone else before you make an application.
Multiple entities can use the same DBA in a state, meaning you have some flexibility. However, it’s worth checking as there can be implications if your name matches or is similar to another company or organization.
It’s also worth checking whether your proposed name is under trademark by someone else. If not, it may be worth considering whether a trademark is something else you to file for to protect your name and brand.
You can visit the US Patent and Trademark Office to check out the name.
Note that a DBA can’t have a corporate ending like ‘LLC’ or ‘Corp’ or ‘Inc.’ These designations give the erroneous impression that your entity has corporate status when it does not.
2. File a Certificate of Good Standing
A Certificate of Good Standing establishes your company as a legitimate venture and is often a pre-requirement for a DBA for an LLC or corporation in some states.
A Certificate of Good Standing is also referred to as a Certificate of Status or a Certificate of Existence. It demonstrates that a company has registered with the state, is up to date on state registration fees and document filings, and is legally permitted to operate as a business.
A Certificate of Good Standing usually has an expiry date. It must be up to date when you file for a DBA.
3. Submit Application Documents
You may be able to file online with the correct fee. Some states require notarized documentation.
If an online portal is unavailable, you’ll need to file the DBA in the county or state where the principal business address is located.
4. Hire a Business Attorney
Most people can handle filing themselves, but if your situation is complex, you may need professional help. Hire an attorney or a filing expert to guide you through the process.
5. Renew the DBA
You’ll need to renew an existing DBA in many states after a set period.
Suppose the information given in the original application has changed. A change might include a change in the officers for a corporation, the members of an LLC, or the partners in a general partnership. In that case, you may need to file a fresh DBA.
6. Understand the Rules for Operating in Other States
If your business takes off and starts expanding to other states, you will need to file a new DBA application in each new state if you want to use one.
Your entity’s legal name in the new state will be the name on the company’s certificate of authority. You must register a DBA in each new state if you want to use a different name.
What Happens After DBA Registration?
Most DBA applications take around four weeks to process. In some states, it is a requirement to publish information about the DBA, usually an advert in local newspapers, for a prescribed amount of time.
This announcement, sometimes called a fictitious name ad, should appear in the public domain within four weeks of receiving the application approval.
Advertising the name fulfills a ‘public notice’ requirement. It also gives the local area and consumers an official announcement of your trade name and gives proper notice to other local traders and company owners of who you are.
There can be other requirements post application approval, and a state will advise applicants about this.
Remember, that a DBA can have an expiration date on it, so it will need to be renewed. Any significant company changes can also trigger a requirement for a new application.
Do I Need a DBA if I Use My Own Name?
If your business uses your actual name and is not fictitious, then there is no need to file for a DBA. The company name must match your name with no additional text.
Do I Need a DBA to Start a Business?
Some legal entities require a DBA before starting a business; others do not—it depends on the business structure and the state where you operate.
A DBA officially allows your business to operate under a different name legally. This name is not yours or the corporate name of your business on file and is noted in the official documents of incorporation and registration.
When To Use DBA?
A DBA may be prescriptive, so it is a legal requirement. Still, many businesses opt to file a DBA even when there is no legal necessity, as this has many potential advantages.
How To Use DBA?
Using a DBA is usually to comply with a state legal requirement and/or the type of business entity. However, it can offer a commercial advantage even if it is not legally required.
An established business that wants to develop a specific product line or offshoot service can usefully deploy a DBA. It can create a distinct identity without the time and expense of launching a completely new company.
A well-known figure can launch a business linking their fame and reputation to the merchandise using a DBA. This strategy can work well if the goods’ brand name is different from the individual, and without a DBA, there would be no evident and lucrative connection.
What Does a DBA Allow You To Do?
A DBA presents lots of advantages to the business owner. Apart from anything else, it creates legitimacy for your business brand.
A DBA will allow you to run a legally registered business that you don’t have to operate under your name. For a sole proprietor, this allows the choice of a name that is engaging, explanatory, and representative, much better than just using their personal name.
When you file a DBA, you will receive an EIN—Employer Identification Number. You will need an EIN to open a business bank account if you operate a sole proprietorship or a general partnership.
Separating your personal and business finances not only looks professional but also makes bookkeeping and paying taxes easier. It will protect your personal assets in the event of a business failure.
Some clients may require that a DBA is in place before they agree to a contract with your business. Additionally, commercial lenders may insist upon one before offering business loans.
Multiple firms also can operate under one ownership by registering a DBA. It avoids the hassle and cost of creating a new separate business entity every time they want to diversify.
A DBA can allow you to operate under your company’s domain name, which is helpful if you are launching a website. It also solves that perennial problem when your company name is unavailable as a domain name.
The concept of a DBA is pretty straightforward, but sometimes the actual process of filing for and using it requires expert advice.
Contact MI Tax CPA for help setting up your small business or start-up company. We can offer professional and informed advice, from choosing the correct legal entity for your business to filing for a DBA and navigating the different tax regulations for small and startup businesses. Let MI Tax CPA be your silent business partner and empower you for a lucrative future.