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Tiffany has recently started her own hair salon in Los Angeles, where she manages a team of six hairdressers. Currently, the business is called by its official, legal name “Tiffany Strauss,” the owner’s name. This is because Tiffany runs a sole proprietorship. However, Tiffany has heard that she can file for a DBA, or “doing business as” name. This fictious name will offer a better description of her business. She decides to file for the name “Tiffany’s Trims,” which she believes will better inform customers of the services she provides. Tiffany files the DBA name with the state of California so that she can begin using it.
When a business owner creates a company, that business has a legal, or true, name. When the business is classified as a sole proprietorship or general partnership, then the legal name is the name of the business owner or owners. If the company is classified as a corporation or limited liability company (LLC), then the legal name is the name provided on the formation document. This formation document may be the articles of incorporation or articles of organization depending on the entity type.
If a business owner decides to do business under a different name, then this name is known as the DBA name. A DBA, or “doing business as,” is known as an assumed name, a trade name, or a fictitious business name. A company can have as many DBAs or trade names as it likes. However, most states have laws requiring that DBAs be registered and filed with the state. Otherwise, an individual can only conduct business under his or her legal name, and corporations or LLCs can only conduct business under the name provided on the documents of formation.
Registering a DBA informs the public that a person or business is engaging in business under a name that is different than its legal name. Therefore, laws related to DBAs are considered consumer protection laws. This registration is necessary so that consumers are aware of the actual owners of the businesses with which they engage. In short, it is about transparency.
There are many advantages to doing business under a DBA name, which will be reviewed later in this article.
Registering a DBA name and doing business under it is not the same thing as creating a company or business entity. If an individual registers a DBA with the state prior to forming a proprietorship, LLC, or corporation, then the state will automatically recognize the business as a sole proprietorship. If the owner wishes to form an LLC or corporation, therefore, this process must be done prior to filing for a DBA name.
If, however, the owner is pleased with being recognized as a sole proprietor, then he or she may conduct business in that state using that fictitious name. However, as a sole proprietor, the owner will not have any liability protection and will be responsible for the company’s debts and obligations. What does this mean? If someone sues the company, then the business owner may lose his or her personal assets (home, car, personal savings) in a judgment.
By contrast, forming a limited liability company (LLC) or corporation offers the owner or owners of the business liability protection. This means that the corporation or LLC is responsible for the business’ debts and obligations, not the owner. The business and the owner are thus legally separate. After forming an LLC or corporation, a business owner is free to file for a DBA different than the name listed on the company’s formation document. This step requires filing the relevant DBA registration documents with the state. After they are approved, the business may operate under that fictitious name, rather than its legal name.
It should be noted that if a business owner plans to extend the company into other states, foreign qualification will be required for each additional state. Corporations and LLCs, as well as other business entities, are forbidden from operating in other states without first being qualified. If a business attempts to operate in another state without qualifying, there will be penalties. When a company chooses to operate in another state, its name will be the one written on the company’s certificate of authority. If the business owner wishes to use a different name, he or she will need to register the DBA name in that state by filing the relevant documents.
Using a DBA name offers many advantages to businesses. Some of these reasons for using a DBA name will depend on business type. For example, a sole proprietorship may have different reasons for using a DBA than a corporation or limited liability company.
Some of the popular reasons for filing a DBA name include the following:
It is common for business owners to not want to use their personal name as their business name. This is of particular interest to sole proprietors and owners of general partnerships. If a business does not file a DBA, then the business’ name will automatically be the same as one’s personal name. A business owner’s personal name will therefore appear on any public records in which the business is recorded. It may be that, for privacy reasons, the business owner wants to keep their personal name private. In this case, a DBA is a wise choice.
Sometimes, a business owner may want a more unique name for their company than their personal name. For instance, if Jane Doe owns a nail salon, her business’ name is technically Jane Doe. However, she may want to file a DBA to have a name more descriptive of her business. Using a DBA, she could name her business Jane’s Luxury Nail Spa.
Registering a DBA therefore offers not only more privacy, but also more originality. The business name will be more interesting and descriptive of products and services. This is important when trying to attract customers.
To open a business bank account, a company must have a DBA. Often, banks will require that sole proprietorships and general partnerships register for a DBA in order to open an account. The bank will ask to see the DBA filing or the assumed name certificate as proof of the registered name.
Perhaps a company is planning on entering a new line of business, and their current name is not reflective of the new focus area. Many times, companies will register a DBA name when they branch into a new market or offer new products and services. It can be beneficial to have a more descriptive name. For example, if a clothing company called “Spring Fashions” decided to branch into winter clothing, the name would no longer be appropriate. The company may choose to file a DBA, calling its new winter brand “Tundra Apparel.” It is therefore a good idea to have a DBA for different parts of a business.
A business may file a DBA so that it can perform transactions using its domain name. This may be a good tactic if the company name is not available for use as a domain name. Some businesses may wish to operate a secondary website in addition to their main one. For example, let’s say a business sells clothing that is targeted to older women. The business decides to branch into teen clothing. The business realizes that young adults will not want to visit the same website as their mothers and grandmothers to buy clothes. Therefore, the company registers a separate website as a DBA to target their younger audience.
Using a DBA name can improve the reputation of sole proprietorships and general partnerships. This is because the name may better suit the business, giving the impression of professionalism and experience.
By registering a DBA name, a business owner is notifying other businesses that the particular name is in use. This is because the DBA becomes a part of public record. However, it is important to remember that in some states, filing a DBA does not protect a business from someone else registering the same name.
If a company’s legal name is difficult to pronounce or remember, a DBA may be a more user-friendly option. It is wise to have a name that is easy to say and to type into a search engine.
The reasons for filing a DBA will depend a lot on the business entity type, the specific industry, and strategies regarding company growth. It is a good idea to consult an accountant or business attorney to discuss whether registering a DBA is the right choice for one’s company.
In order to conduct business under a DBA name, a business owner needs to fill out and file the relevant DBA forms and submit a filing fee. After this is completed, the business owner will receive a DBA certificate. When it comes to filing, a company m ay be able to file with the county clerk’s office or with a state agency. It is necessary to confirm which governing authorities accept DBA applications in the states in which one is doing business. Depending on the state, there may be slightly different requirements for DBA filing. Research, therefore, is critical.
In some states, for example, DBA filings are completed in different offices for sole proprietorships and general partnerships. Corporations and LLCs have their DBA paperwork handled in separate offices. The forms themselves may also be different.
Once a company receives its DBA certificate, it may begin conducting business using its new fictitious name.
When filing a DBA, there are some further points to consider:
Learn more about: Business | Corporate | Employment Law
See all articles: Business | Corporate | Employment
See all articles: Business | Corporate | Employment