By: Brad Nakase, Attorney
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Leah and Ben have been best friends since childhood, and they have always shared a passion for designing clothes and shoes. When they were ten, they used sharpies to draw designs on each other’s sneakers. Both took Home Economics in school, where they learned to sew and create their own fashion. Both went to fashion college, where they decided that after they graduated they would create their own apparel company, becoming worldwide fashion moguls. With a lot of hard work, their dream came true. Ben and Leah began an apparel company called Liebe, a play on both their names. Over the years, Liebe grew, earning success around the world. Five years ago, Ben and Leah made the decision to incorporate. Ever since, their company has grown into a giant conglomerate with stores in the U.S., Europe, and the Middle East. Because the company has grown so large, Leah suggests to Ben that they divide it into separate brands: one for shoes, one for clothes, one for bags, etc. The corporation will retain the original legal name, but the smaller brands will have a “doing business as”, or DBA. Leah thinks that separating the brands under different creative names will help each brand develop its own personality, suiting different clientele. Ben agrees, and the two look into registering DBAs for their business.
A DBA, otherwise known as a “doing business as,” is a fictional name that an entrepreneur creates for his or her business. This name is separate and distinguishable from the company’s legal name. A business is free to use several DBAs to represent separate brands. That said, in most states it is necessary to register the DBA with the state to ensure that no other businesses have the same name.
Any business in California, regardless of size, scope, or purpose, can register for a DBA. You can be a sole proprietor who runs an ice cream shop or the owner of a major corporation. Whatever the business, an owner can apply for a DBA. Even though a DBA is a fictional name, legally it is recognized as representative of the real business. While it represents the business, it does not affect the company’s structure or taxation.
Why might a business choose to have a DBA?
Typically, a DBA is used for marketing reasons. A creative brand name can attract customers by being easy to remember or identifiable. It may also be more indicative of the company’s purpose or offerings that the business’ legal names. To reference our example from above, Liebe Incorporated does not reflect the purpose of Ben and Leah’s company. Customers would not know what one of their stores sells, especially when the company is developing different brands. Liebe Apparel or Liebe Footwear is easily understood and recognizable.
Depending on the state, a business may or may not need to register its DBA. However, even if a state does not require registration, it may still offer the option to register a “trade name” to prevent naming disputes. In states where DBA registration is required, rules vary by state. Generally, sole proprietorships and general partnerships have to register their DBA at the county clerk’s office. Because corporations and LLCs already file their articles of incorporation or organization with the state in which they operate, they also must file their DBAs at the state level. To check each state’s registration requirements, a business owner can refer to the list available on the Small Business Administration’s website.
Registering a DBA with the state in which one’s company operates only prevents disputes with companies that want to use the same name in that state or specific county. If the company does business outside that county or in other states, then a business owner may wish to consider registering the name with the U.S. Patent and Trademark office. Trademarking the name will protect it nationally. However, it is not necessary to trademark a DBA prior to using it. If one intends to trademark a DBA, he or she should check the Trademark Office’s database to check that no other business has already trademarked the name. Registering a trademark is a lengthy and expensive process. Simply checking the database to ensure that one’s name is not taken does not guarantee approval of the trademark. That said, it is good practice to first check in order to avoid potential conflicts.
Filing for a “doing business as” or DBA, a fictitious trade name, is an excellent marketing opportunity for entrepreneurs. Not only do DBAs provide marketing benefits for a company, but they also increase confidence among customers. It is not expensive to file for a DBA and little paperwork is required. It is even possible to file for a DBA online for a small fee.
According to the Small Business Administration, the process for filing for a DBA depends on the state in which a company operates. In most states, it is only necessary for a business owner to go to the nearest county clerk and complete a form that includes the proposed trade name. A DBA license typically costs between $10 to $100.
When a company does business under a DBA, it must have an identification number for tax reasons. An owner can choose to use his personal social security number, but this is not the most secure method as it exposes the owner to identity theft. It is a better idea to apply for a federal Employer Identification Number (EIN) with the Internal Revenue Service (IRS).
Registration requirements vary by state. Some states, like Arizona, do not require companies to register their chosen DBA. That said, even in states that do not require registration, it is still common practice to register a DBA. This is because doing so reduces the likelihood of several businesses trying to use the same name. Sometimes, depending on the location, a business must publish a notice of a DBA in a local newspaper.
It is also possible to register a DBA online instead of at a physical location. An online DBA filing service will check the DBA for errors and then file it with the relevant government agency. Some services can also check the proposed DBA by running it through a database of other DBA names and trademarks. These services might also be able to post a notice in a local newspaper.
When a business files a DBA, it does not automatically own the trademark rights to the name. In order to trademark a DBA, the business owner has to register the name with the U.S. Patent and Trademark Office and the relevant secretary of state. A business owner can research if a name is available by checking the U.S. Patent and Trademark Office’s database of registered DBAs. There are also online directories with databases for specific states.
A business’ name is essential to a company forming a unique brand. It is important to note that filing a DBA in one’s home state does not prevent a business in another state from using the same name. Having a trademark for a specific name can offer more legal protection in one’s state and across the country.
Filing a DBA only means that the business is allowed to operate under a name different than the official legal one. A business owner can register the business name as a trademark in his or her state, which would stop other companies from using the same name or a similar one. It is also possible to register a national trademark, which would give a business legal protection on a national basis. This is relevant to companies that do business in multiple states.
While a “doing business as”, or DBA, is a great advertising method, there is a potential issue that could arise. Using a DBA incorrectly on business contracts can get one’s company in legal trouble.
To avoid legal issues, a business owner using a DBA should sign contracts indicating both the legal and DBA names. For example, let’s say Mary Rose Allen has opened a baked goods company under her name, but she uses the DBA Mary Rose’s Cookies. If she signs a business contract, she should sign it as “Mary Rose Allen, DBA Mary Rose’s Cookies.” If the company is a corporation or LLC, then the owner should use the company’s official legal name and the DBA.
When it comes to filing a DBA, each state has its own requirements as to what qualifies as an acceptable DBA. For instance, a sole proprietorship cannot have a DBA that includes “Inc.” or “LLC” because the abbreviations suggest an inaccurate legal structure. It may also be necessary to search through a DBA database to ensure that the name is original, and that no other business is already using it.
Corporations that branch into other sectors may also want to register a DBA. For example, perhaps a robotics company wants to start producing kids’ toys. The company may decide to launch the toy line under a DBA to keep it separate from its main business. The DBA will not affect the business’ structure, nor will it affect its taxation. A DBA does not affect liability. This means that if a sole proprietorship files a DBA, the company’s legal status remains the same, and the owner’s personal assets remain vulnerable in the event of a lawsuit.
When it comes to using a DBA on a legal document on contract, a sole proprietor or partner with the authority to sign will sign using their own name. They will then ass the “doing business as,” or DBA, name. An example would be “Natasha Smith, DBA Nata’s Jewelry Emporium.”
If an individual is representing a corporation or LLC, then using only a DBA presents risks. Let’s imagine that there is a corporation called Tech Giant Inc. that does business under the name Awesome Appliances. If the corporate agent signs a business contract as an agent of Awesome Appliances, then a court could argue that Awesome Appliances doesn’t exist. The better move is to sign as the agent for Tech Giant Inc., DBA Awesome Appliances.
When it comes to writing checks, using a DBA name is completely fine. However, the business’ bank account should be prepared to recognize this. The DBA name should be added to the bank account. This means that if someone writes a check to a company’s DBA, it can still be cashed.
When a corporation registers a DBA, it intends to use a name different than the one used at the time of incorporation. States have different names for DBA: trade name, fictitious name, or assumed name. It is common for states to require registration of DBAs, but some states do not require their registration.
If a corporation operates in a state that requires registration of a DBA, then any name it does business under must be registered with the state. For example, if Eliana’s Fine Jewelry Corp. decided to branch specifically into earrings, the registered name is too general. Perhaps Eliana would like to create an earring brand called “Eliana’s Piercing Shop.” If Eliana does not want to incorporate a second separate business, then she will need to register a DBA.
Where a DBA is registered will depend on the specific state. Often, DBA filings will be handled by the Secretary of State’s office. Some states, however, require that companies file the DBA with the county clerk instead of filing with the Secretary of State. Some require both: filing with the state and also with the county.
Corporations should first check the state’s business database to ensure that the DBA has not already been taken by another company. Some states will then have a company file online. Others require completed paper forms. These forms will often require the name of the corporation, the proposed DBA, and the signature of an authorized agent of the corporation. There is also a registration fee.
There are benefits to registering a DBA. By registering it, other companies will be aware of its use, and in the event of a dispute, the registered company will have a stronger claim. It should therefore be noted that registration alone does not protect a name. Registration can, however, be powerful evidence in a lawsuit. It can prove that a company has been using the name for a longer period, which can serve as legal protection.
