Running a successful small business requires strategic planning and consideration of the cost-benefit tradeoffs of many decisions. One of these decisions includes your business structure and the name under which you will operate.
This article provides a general overview of a naming option known as a DBA, or “Doing Business As,” as well as some facts worth examining as you weigh your options around a business name.
What is a DBA?
A registered DBA refers to the operating name of a company, as opposed to the legal name of a company. The term DBA is interchangeable with “Fictitious Business Name”, trade name, or assumed name. This designation allows sole proprietors or partnerships to conduct business under a name other than their personal name or formal business entity name.
The Pros and Cons of Using a DBA
Registering a DBA for your company provides several benefits, but it may also come with downsides. Each business owner should determine what option fits their needs best.
Because your personal information is associated with your legal entity name – and not with your DBA – many small business owners value the added privacy this ensures.
Unlike with legal entity names, states allow multiple businesses to use the same DBA. This means that choosing a name comes with fewer restrictions and grants an owner the ability to clarify their business function or purpose. As an example, a company could use Aperture Photography Supplies as their legal entity name, but register their DBA as LogixLens. Such a designation allows for more specific marketing or more clear communication of a company’s unique value proposition.
However, keep in mind that the owner of a DBA does not have exclusive rights to the name. To protect the name, one must register for a trademark.
It is important to note that a DBA does not afford the same personal liability protection offered by an LLC or corporation. Because a DBA isn’t a separate legal entity, the business owner is responsible for all actions taken and decisions made under the DBA. In this sense, a DBA is not a substitute for choosing the correct entity structure to insulate the business owner from the general risks and liabilities associated with their operations.
The Option of Multiple DBA’s
It may make sense, in some circumstances, for your business to file multiple DBA’s. Reasons could include greater control of a businesses’ branding strategy or to gauge which names and messages resonate most with your target market. A company may also choose this option in the event they wish to have certain departments operate under their own names for ease of financial or organizational purposes.
Every state and county will have different rules for how many DBAs a business can register and each filing will require a separate fee and application.
Filing Requirements and Additional Costs
Along with varying application procedures, some states may require the placement of a DBA name ad in the local newspaper for a determined amount of time. The filing requirements for filing a DBA vary from state to state and municipality, so be sure to first procure the information from your local government office or website. Familiarizing yourself with the application process will ensure your DBA is legitimate.
While there are costs associated with filing a DBA, the fees are much lower than those required to establish an LLC or other business structure and tend to be no more than $100.
Take time to analyze what business naming convention and structure is optimal for your organization. With the slew of options available, you are sure to find the right fit.