What Are the Benefits of a DBA and When Should You Apply?
The world of business can sometimes sound like a serving of alphabet soup with its abundance of acronyms. As frustrating as that may be, it’s important for you to pay attention and gain an understanding of some key terminology. It can mean the difference between having a legally compliant business and one that’s vulnerable to fines or lawsuits.
DBA (a.k.a Doing Business As) is one of the terms you should know. You may have heard DBA also referred to as “fictitious name,” “assumed business name,” or “trade name.” Do you need one? Let’s dig into some DBA details to help you decide.
What is the purpose of a DBA and should your business apply for one?
You'll need a DBA for your business if you're a sole proprietor who wants to market your company using a name other than your given name (for example, "Garden of Eden's Greenhouse" rather than "Susan Lee's Greenhouse"). In most states, you don't need a DBA if you use your full personal name along with a descriptive term to indicate the type of business you're operating (as in the example I shared above). But you will need one if you want to only use your first name (i.e., Susan's Greenhouse) or use a business name presented as a group (such as The Lee Group).
The requirement of filing a DBA in your state ensures the public will know who is the actual owner of your business—it’s all about transparency. Usually, you need to print an announcement in the local newspaper when you file a DBA. DBAs put business names and owners' identities on the public record. They help protect customers from deceitful entrepreneurs who use fictional names to try to hide the fact that they own their businesses.
Sometimes an LLC or corporation may need DBAs, too. If you have registered your LLC or incorporated your business under one name but want to operate it and market it under a different name, you can file a DBA. For instance, if The Lee Group, LLC wants to operate its business as “Susan’s Greenhouse” so it’s more appealing and understandable to customers, it would file “Susan’s Greenhouse” as a DBA.
Benefits of a DBA
Filing a DBA when you plan to use a fictitious name keeps your business in good standing with the state. If it’s required and you don’t file for one, you may face fines—and I’m sure there are other things you’d rather spend your hard-earned money on!
And for sole proprietors and partnerships that cringe at the complexity and costs of registering their companies as formal legal entities, DBAs allow them to use creative business names without registering as LLCs or corporations. However, I urge you to note that forming an LLC or corporation protects your business name at the state level from other LLCs and corporations trying to use your name. A DBA might dissuade other businesses from using your name, but to ensure your name is protected, you would need to file for a trademark.
Also, filing a DBA will enable you to open a bank account and receive payments from customers to your fictitious name. Most banks will request a copy of your filed DBA before they’ll process your paperwork to open your account.
Where to file for a DBA
Requirements vary. In some states, businesses must register for DBAs through the Secretary of State office or another state agency; in others, DBAs are registered at the county level.
To learn what you need to do in your state, I suggest visiting the Small Business Administration’s (SBA) website or work with an online legal document filing service to ensure you apply correctly.
Other tips on filing a DBA
As soon as you know you plan to use an assumed name for your business, check to make sure the fictitious name you want to use isn't already taken by someone else. Do this before you file your paperwork, so you don't waste time or pay to register a name that has already been claimed by another business.
It’s safest NOT to start using a fictitious name for your business until you’ve secured your DBA. Some states or local jurisdictions, however, might offer some leniency and not penalize you if your use your fictitious name in advance of filing for your DBA—as long as you file soon after using the name.
Also, as with any matter that has legal implications, I encourage you to talk with an attorney to make sure your business has all of its compliance bases covered.
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