Benefits of Having a DBA: Everything You Need to Know
What are the benefits of having a DBA? A DBA is a name that a business goes by that is easily recognizable but does not include your legal name.3 min read
2. Disadvantages of DBA
Updated November 2, 2020:
What are the benefits of having a DBA? A DBA is a name that a business goes by that is easily recognizable but does not include your legal name.
Filing for a DBA can help keep the process of starting your new business simple while reducing start-up costs. This means that you will not have to keep up with the formalities and requirements of maintaining an LLC or corporation, such as record-keeping requirements. However, you may want to convert your business to an LLC or corporation once it is up and running profitably.
A DBA, also known as "doing business as" or "d/b/a," is a fictitious name that your business publicly goes by but that does not include your legal name.
DBAs are not business entities. However, registering your DBA with the relevant local government agency can provide flexibility and help streamline your business' operations. For example, a fictitious name could make your assets vulnerable to abuse unless your business is organized as a limited liability company or corporation.
The DBA can be a valuable way to ensure some protection of your rights as a business owner, but the concept is often misunderstood. In order to protect your trademark rights and intellectual property, make sure you understand the value and limits of a DBA.
Advantages of DBA
- Low Cost: A DBA sets up your business' alias in a relatively inexpensive way. Once the fictitious name has been registered with the county clerk or other local authorizing body, it is the legal name of the business (although note that the specific filing requirements vary by state and local jurisdiction).
- Versatility: If you have already established an entity such as an LLC or corporation, you can use fictitious names instead of creating new entities by simply registering the fictitious name for each new business. The original business then serves as the anchor for your satellite businesses to grow.
- Protection of Privacy: Registration of a DBA is particularly valuable for sole proprietors and partnerships who do not want their individual names on public-facing materials, helping to protect your privacy.
- Flexibility: Because state law requires businesses to operate under a distinguishable name within state boundaries to avoid confusion, your business name may not be available in states where you would like to expand. Registering a fictitious name solves this problem by allowing expansion into markets where the legal name of the business is already being used.
- Value: Using a fictitious name helps your business to develop brand awareness by making it easier to market under a catchy DBA and to sell retail stores without losing the name rights to your business.
- Compliance: Registering a DBA means that you can use a business name legally without incorporating it as a corporation or LLC.
- Banking: Filing a DBA makes it easier to set up a business bank account in your business' name.
- Affordability and Ease: DBAs are both affordable and easy to file, providing greater flexibility for your start-up or expanding business. For example, if your LLC starts different business activities, you can easily file for a DBA for each of your new ventures under the same LLC.
Disadvantages of DBA
- Geographical Restrictions: You will need to file individual DBAs in each new state, country, or city where you want to do business (although separate filings for counties or cities may not be necessary when you file at the state level).
- Protecting Your Name: While a DBA allows your business to use a recognizable name, it does not protect your personal assets like a copyright or trademark would. For example, a DBA would not separate your personal and business assets like an LLC or corporation. Registering multiple DBAs can also raise suspicions around potential fraud.
- Maintenance Hassles: Filing a DBA creates hassles around maintaining the registration, which must usually be renewed every few years. Some states also require that the fictitious name be registered in every county in which you're doing business.
- No Trademark Protection: Filing a DBA allows you to use that business name, but it does not prevent others from also using that name. For that level of protection, you will need to also register a trademark.
- No Special Tax Benefits: Unlike a corporation, filing a DBA that is not part of an LLC or another 'corporate umbrella' will not give you any special tax benefits. Your business' revenues will be passed on to your individual tax return and taxed accordingly.
If you need help with a DBA, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.