DBA: Is it a good business strategy for you?
DBA, also known as ‘doing business as’, is a common naming strategy for many businesses. A DBA can also be called a fictitious name, assumed name or trade name and allows an organization to do business under a name other than its legal, registered business name. Requirements for establishing DBAs vary depending on the type of organization (i.e., sole proprietorship, general partnership, limited liability company (LLC), or corporation) and location.
Why choose a DBA?
There are many reasons it may be advantageous to register a DBA, including:
Legality
Corporations and LLCs are required to operate under their names as registered in their articles of incorporation or other formation paperwork. They must register a DBA if they want to operate under a different name. The rules are less stringent for sole proprietors and general partners, but they must also register a DBA in certain cases. In addition, some banks require a DBA to open a business checking account.
Privacy
For sole proprietors and general partners, the legal business name must include the full name or names of the owners. For those who’d prefer not to have their names fronting their business, a DBA provides the option to choose a different name under which to operate. A DBA may also make sense if the business owner’s name is long, hard to spell or difficult to pronounce.
Creativity
A DBA can let organizations create a distinctive name for their business. One that stands out from competitors while offering a unique pairing to your brand. A DBA allows naming flexibility that connects directly with your style, company mission or whatever you deem significant in your business.
Flexibility
A DBA can be useful for those who’ve already established a business and want to expand their offerings. For example, a landscaping service may want branch out and offer services like house painting or concrete repair. So, an LLC called “Springfield Landscaping Service” could register DBAs like “Springfield House Painting” and “Springfield Concrete Repair” without establishing a new LLC.
In addition, a DBA can provide opportunities to leverage niche marketing and enhance local appeal. A business could have been set up to target a specific demographic but wants to reach out to another while maintaining its special relationship with the original group. A DBA would allow the business to market the same services to a different subset of people. For example, a business offering local river tours under the name “Sunlight Senior Cruises” could register a DBA for “Margarita Night Cruises” to attract a younger crowd. Additionally, adding a service area’s location to the business name could attract more consumers who are embracing the “shop local” ethic and may even help with online searches.
Limitations of a DBA
Although a DBA may offer a host of potential benefits, it is not the same as a business registration and does not confer any legal protection in and of itself. To add protection, an organization should consider the following:
Establishing an LLC. Sole proprietorships and general partnerships may want to consider switching to an LLC structure. Requirements vary by state, but generally it is necessary to file with the secretary of state’s office to register the legal name and articles of organization. An LLC shields the owner(s) from personal responsibility for the organization’s debts. (Registered corporations already provide this protection.)
Trademarking the name through the U.S. Patent and Trademark Office. Registering a DBA does not provide trademark protection; another entity could use the same name without legal repercussions if the name isn’t trademarked. Should the business want to trademark at the state level, contact the specific state.
How to file for a DBA
The requirements for registering a DBA vary from state to state, in some cases even down to the city or county level. Generally, a business must register the DBA with the state’s secretary of state office and pay a filing fee. A few states do not require a DBA be filed to operate under a different name. On the other hand, some cities and counties require a physical or principal place of business. And, while most DBAs are perpetual, some do expire and must be renewed every 2 to 10 years again depending on state requirements. You’ll want to be sure you check with the secretary of state’s office where you plan to do business to ensure you are meeting all regulations and requirements.
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