What is DBA, and When Does Your Business Need One? How to File for it?
The DBA, short form for “Doing Business As” is quite an interesting concept in the world of business. Where there is business, there needs to be trust as well – and this is precisely what a DBA aims at, by making it mandatory for certain businesses to register themselves as a DBA entity. By getting a DBA registration done, the business essentially ties itself legally to the owner, so the owner may be accountable for the actions the company takes. You could say that this mechanism is a deterrent for those businessmen who attempt frauds under fictitious names by establishing dummy businesses.
The DBA is publicly announced in the print media (like newspapers) whenever a company registers. Essentially, you would notice a whole column in your daily newspaper under any of the following names:
- “Doing Business As”, or d/b/a
- “Trading As” or t/a
Such columns in the newspaper make people aware of the name of the person behind a business. However, not every business needs to apply for a DBA. There are certain classes and categories of businesses for which DBA is mandated. The rules are clearly defined; let’s try to understand the mechanism of DBA through reading up on the following points:
- What is DBA
- Reasons to Get a DBA
- Businesses That Need a DBA
- How to File for DBA
- Advantages of Filing for DBA
- Additional Interesting Things to Know About DBA
What is DBA?
You may have come across businesses with inventive names, such as “Toodle’s Oodles Noodles,” or “Jiminy Cricket Trinkets” – all these businesses have owners behind them. However, the names of their owners aren’t evident from the names of these businesses. Therefore, in order to improve transparency and let the general public know about who is running Toodle’s Oodles Noodles or Jiminy Cricket Trinkets, the business owner needs to file a Doing Business As form, and register his business there.
Quintessentially, Doing Business As is a way for the government to let people know the person responsible for a business, in case it isn’t already evident from the name of a business. If Toodle’s Oodles Noodles, say, was owned by a man called John Doe, then John would need to get a DBA filed. Had he named his business John Doe’s Oodles Noodles, he wouldn’t have had to file a DBA because his legal name would then already have been evident from the name of his business.
A DBA tethers a business to a real person whose identity is made known to the public. This makes it simpler for the legal processes to proceed on the business should the need arise. There actually are legit reasons to file for a DBA that makes total sense. Let’s understand what they are.
Reasons to File for a DBA
For the sole reason that you need your business to have a contextually appropriate name, and a creative one too, there is a mandate to file for DBA. Here are a few other reasons that you need to get the DBA paperwork in order for your business.
It is The Simplest Way to Register Your Company / Business
Forming an LLC or incorporating your company when the time comes is going to involve a great deal of paperwork, legal footwork, and expenses. Filing for a DBA is the antithesis of this – it is rather economical to register the name of your business this way and with the bare minimum paperwork involved with not many hours invested into it.
DBA Lets You Operate Multiple Businesses
Borrowing from the example earlier, let’s say Toodle’s Oodles Noodles wishes to expand into a separate franchise of Toodle’s Dunky Dumplings. Instead of having this new franchise separately incorporated as a corporation, John Doe can simply file a DBA for his new business and keep operating the way he has been. This cuts out a lot of paperwork and expenses from the picture.
DBA Helps You Stay Within Legal Compliance
Since many businesses across the world do not have the names of their owners in them, it creates legal issues in case the business faces litigation. There are contractual troubles that could possibly get complicated because the name of the business hasn’t been recognized legally. Filing for DBAs ensures that your business has legal compliance.
DBA Helps You Separate Your Business from Your Name
Some business owners just don’t prefer to have their name plastered on advertising and marketing content about their business. Whether a creative, contextual name is needed, or whether the owner would rather not want his name up there with the brand’s – a DBA can help keep matters separate.
DBA Helps You Claim / Block a Business Name
To file a DBA, the name of your business should be unique and previously unregistered. By filing for a DBA for your business, you announce it to the world, claiming it to be the handle you will run your business as. Other businessmen cannot legally claim this name once you register.
DBA Helps You With Business Banking
Many banks require you to furnish your DBA before they let you open and operate a business account with them. In such cases, taking out loans for business development and growth can only be made possible when you have a DBA.
You can Pitch to a New Market Using DBA
Many businesses use DBAs to run under different names in different consumer pools to help capture a broader spectrum of consumers. This is a neat trick if you leverage digital media. You can have multiple websites under different, creative names to appeal to different consumers, regions, or parts of the globe.
Business That Need a DBA
It isn’t necessary for all the businesses in the world to have a DBA. There are certain legal conditions to meet which certain business owners need to register their companies with DBA. Let’s see which companies need to get a DBA filed.
Sole Proprietors of a Firm, or a Firm under Partnerships
Businesses that operate under the format of sole proprietorship or a partnership between people need to file for a DBA, in case the name of their business does not include the full, legal name of those who own it (the sole proprietor in case of a single owner, or one of the partners in the case of a partnership firm).
Since such firms are not incorporated legally, and there are no legal entity documents involved, a DBA for such a business is necessary, even after acquiring a valid business license.
Franchises
Franchises are essentially an extension of the same corporation into various regions through “Agents” or other businessmen who legally agree to sell the Franchiser’s products under their business. Things being so, the franchisee is simply doing his business under the name of the franchiser. This creates an opportunity for the franchisee to register himself as a local business in the region through filing for a DBA, even though franchises are already incorporated, and a DBA is typically not needed.
This helps the business owner operate under the name of the franchise he bought through the DBA. For example, you buy a franchise for Krispy Kreme donuts, and to run your business as such with this name, you file for a DBA.
Legal Entities
Normally, a company that is incorporated as LLC, S corporation, or a C corporation typically does not need to file for a DBA registration. This is because they are already registered legal entities with licenses to business under the name that they operate with. However, things get complicated when such a business wishes to operate a separate business that showcases, say, an exclusive product line. In such a case, the new company would be a whole business in itself and would need to be incorporated and registered as such. However, the process of incorporation is long, tedious, and requires a lot of paperwork.
In such cases, the parent business is then required to register this new entity under the DBA system to continue to operate. Let’s understand this better with an example. Say that John Doe decides to dedicate his Toodle’s Oodles Noodles to selling noodles only, and separates the rest of the Asian cuisine into a separate business, Toodle’s Asian Flavours. In such a case, while Toodle’s Oodles Noodles may still be incorporated, John would need to file a DBA for his new line of delicacies which would operate under the name, "Toodle’s Asian Flavours".
How to File for DBA?
Filing for a DBA is fairly easy and doesn’t require much paperwork. Let’s study the entire process in detail.
- First of all, the DBA requirements depend a lot on where your business is. The requirements depend on the state, city, and county of your business, and also on the structure of your business (sole proprietorship or partnership, franchise or others). Normally, a fee anywhere between $10 and $100 is likely to be incurred at your county clerk’s office or at the state government office
- Some states require the DBA filer to place an ad in the local newspaper regarding the fictitious name of the business. This is in lieu of the public announcement mandate that some states follow, so it is best to look up what applies to your business where you live
- In filing for a DBA, you must ensure that your business name is unique and that it doesn’t include any phrases or names that may work to cause confusion regarding the business
Let’s now explore some handy tips that will help you file your DBA easily.
- If your business is an LLC or registered as a corporation, and you wish to file for a DBA, you would need to furnish a certificate of good standing. This certificate basically tells the authorities that your business has a good standing in the market; this certificate can be obtained from the office of the secretary of the state
- The importance of filing for DBA is seen in the fact that your business could be facing severe fines upon regulatory infringement if it has been operating unregistered so far
- Each time there is a change in the top-suite personnel setup of your business, you may need to file for a DBA again. For example, if yours is a partnership business and the partner whose name is in the business name quits, you are required to file for a new DBA
- In another similar case, some states require your business to renew the DBA after a stipulated period of time. In other words, in these states, the DBA is time-bound and has an expiry date
- The payment methods for DBAs differ by region. While in some places online payments are acceptable, you may need to send in money orders or cashier’s cheques in other locations
- In case you are confused about the paperwork or the entire process of filing for a DBA, it is better to hire help instead of filling out the forms with mistakes in them. Consult a lawyer, and hire a professional to help you with filing
Advantages of Filing for a DBA
Doing Business As has many advantages once a business owner registers his business for it. In addition to gaining a license for creativity, having your name removed from the brand name for respecting privacy, and claiming the rights to the business name, many other advantages follow. Let’s see what they are.
DBA Gets You a Business Bank Account
Keeping the finances separate is extremely important for a business owner. Private money and business money should never be mixed – and this can be made possible by registering for a business account using DBA. Not only does it help you keep your finances separate, but gives you certain financial protection should extreme situations arise:
- Your personal finances will be safe even if your business is failing
- Your personal credit score won’t be affected even if there are bad loans on the business
- Your personal assets will stay protected and excluded from those of the business in case there is litigation in tow
DBA Keeps Your Compliance in Place
Legal compliance is a serious matter, and a DBA helps your business stay compliant with all the legal requirements a business must meet. While the business owners enjoy protections in a business that is an LLC or an S or C corporation, such protections do not apply to the businesses operating under a name that is different from what they have been incorporated with. For example, if John was to sign contracts as Toodle’s Asian Food instead of Toodle’s Asian Flavours, it could create legal problems, and the contract would then stand questioned. Furthermore, the repercussions could be far more serious.
Applying for a DBA helps keep such things in order.
DBA Helps You Expand Your Business
If your business is ready to expand into new industries, you can do so using a DBA, instead of taking the long, tedious route of going through incorporating as an LLC or S- or C corporation again. Using a DBA, it is much simpler to register another name for the separate business as a legal entity under the name of which you operate.
In addition to cutting down on the cost of registering a company, you also gain time and simplicity by taking the DBA route.
DBA Empowers You to Build a Brand
Using a company name that reflects the products or services that are on offer makes better sense rather than just naming it “John Doe’s Business”. You gain the license for creativity and the freedom to choose any name for your business. DBA helps you create an identity in the market for your business, by way of letting you operate under a name that is an image of your business.
Conclusion
Doing Business As is an important registration that businesses need to obtain in order to be legally compliant. It also helps them to expand easily and be creative with naming their businesses. DBA can be obtained from the county clerk's office or from the state government.
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Key Takeaways
DBA stands for "Doing Business As". If you run a business that does not contain your full legal name in it, then you are required to apply for a DBA. It needs to be applied for by the following types of businesses:
- Sole proprietorship firms
- Partnership firms
- Franchises
- Other legal entities like LLCs
By applying for a DBA, a business owner is basically announcing that the business is operational under his ownership. It can be seen as a reassurance for the public to know who is behind the activities conducted by a business. If a business operates under an assumed name and does not have a DBA, there could be serious legal and contractual repercussions. Additionally, the owner's assets could stand to be at risk from the company's risks and failures.
A DBA helps to keep businesses sorted and functioning well. All said and done, the primary purpose of a DBA is transparency regarding the owner and his business.