Your business’s name is a customer’s first impression of your company. On top of being noticeable, your name needs to be legal. Some businesses must file a DBA name to stay compliant with state laws. What is a DBA, and does your small business need one?
What is a DBA?
A doing business as (DBA) name is an assumed name that’s different than your company’s legal name. A DBA can also be called a fictitious name or trade name.
Your need for a DBA name will depend on your type of business structure. Other factors that could determine if you need a DBA include your location and banking needs.
When you need a DBA name
Certain companies should file for a DBA name with their state. If any of the following situations apply to your business, you need a DBA.
#1: Sole proprietorships and partnerships
You need a DBA if you run a sole proprietorship or partnership and want to call your business something other than your name. As a sole proprietor or partner, your legal business name is automatically the same as your name. For example, a sole proprietor’s name is Jim Smith. His business’s legal name is Jim Smith.
In some states, sole proprietors and partners can use their name plus a description of their products or services without a DBA. For instance, Jim Smith can call his business Jim Smith’s Tree Service without filing a DBA in certain states.
Some sole proprietorships and partnerships need a DBA if the business’s name implies a group. So, if Jim Smith wants to call his company The Jim Smith Group, he might need a DBA.
A DBA is also necessary when the business only includes your first name. In our example, Jim Smith needs a DBA if he wants to call his business Jim’s Tree Service.
A DBA helps sole proprietorships and partnerships stay legal. And, filing for a DBA is much less complicated and expensive than incorporating.
A DBA is not a separate legal entity but simply another name you can call your business. A DBA won’t protect your business’s name from being used by others. You need a trademark to get that kind of protection.
Your personal name alone does not help customers understand what your business does. By filing a DBA, you can clarify what products and services you offer.
#2: Corporations and LLCs
When you incorporated or formed an LLC, you chose a legal name to operate under. You need a DBA for your corporation or limited liability company (LLC) if you want to do business with a name that’s different from your company’s legal name. You might want a DBA to maximize your reach with certain target customers.
Let’s say you own a business called Hannah’s Baked Goods. After being in business for a while, you notice that cupcakes far outsell your other products. To draw in more sales for your most popular items, you could register the DBA name Hannah’s Cupcakes.
#3: You want to open a business bank account
Sole proprietors and partners who want a business bank account must show the bank their DBA name. You will need to register the DBA before you apply for the business bank account.
As a small business owner, you can use a business bank account to separate your company’s finances from your personal funds. A business bank account helps you organize accounting records, avoid overspending, and accurately file taxes for small business.
If you are a sole proprietor or partner, you need a DBA to accept payments under your fictitious name. You need to open a bank account under the DBA name. Let’s say your customer makes a check out to your DBA. You can’t cash that check with your personal bank account. The name on the account must match the name on the check.
#4: You want to expand
As your business grows, you might decide to add new products or services. Sometimes, your business’s name doesn’t represent your new items.
For example, you own a company called Matt’s Tire Shop. You want to also offer muffler repair services. No one will know that you offer those services with your current name, so a DBA might be necessary.
Forming a separate legal entity is often time consuming and expensive. Unlike incorporation, you don’t have to create a separate legal entity with a DBA. A DBA minimizes paperwork and costs as you grow your business.
If you’re a corporation or LLC, a DBA lets you run several businesses without making a separate legal entity for each company. For a sole proprietorship or partnership, a DBA allows you to use a new name without forming a corporation or LLC.
How to get a DBA
The rules for registering a DBA vary depending on your location. Check with your state’s department of revenue for specific instructions. To get a DBA, you will have to fill out a form and pay a registration fee.
Depending on your state, you might need to publish a notice about your DBA in the local newspaper. You must show proof that you announced the DBA to your state. The announcement helps prevent customers from buying from fake businesses. The newspaper listing shows the public the owners of companies operating with a DBA.
You should make sure the DBA name you want to use is not taken by another company. Most states don’t let you use a DBA name that is close to another business’s.
