Business Type LLC: Everything You Need to Know
The business type LLC refers to a corporation operating as a limited liability company. Within a LLC, there are a variety of different options for your business name that you should know about.3 min read
Filing a DBA
A business operating under a real or assumed name needs to file as a DBA, also known as “doing business as.” This is a requirement if you plan to give your business a name outside of your own personal name, such as John Smith, LLC. Filing a DBA is often done at the local level, but your state may also have some filing requirements.
If you only plan to start a sole proprietorship or a general partnership, you will have to operate under your own name until you file a DBA. If John Smith wishes to start a lawn care business, he cannot name his business Smith’s Lawn Care unless a DBA has been filed.
If you incorporate a business or start an LLC, you can file an application for DBA to do business using a different name from the one that you have currently registered in the state of incorporation. For instance, if John Smith has incorporated under the name Smith and Smith Inc., he may then file a DBA to transact using a name that better corresponds with the type of business so that it is more recognizable, such as Smith and Smith Lawn Care.
Advantages and Limitations of DBA
Sole proprietorships and partnerships have a benefit of filing a DBA, in that they do not have to conform to the same compliance rules with incorporating. The company can simply operate with the desired name. The primary limit to this is that you will have no protection from personal liability or have access to the tax advantages that corporations have.
Filing a DBA will not change the name of the LLC or the corporation that you own. It only provides you with a legal way to operate using a different business name that you can add to your corporation or use independently.
What Is a C Corporation?
A corporation is defined as a legal business separate from the owner that an individual or a group may set up using laws of the state to protect those individuals from personal liability and protecting the owner’s personal assets. When you incorporate your business, you become a “C”corporation.
It is seen as a separate tax payer in the eyes of the law. Money and expenses in a C corporation are taxed independently of the owners. The profits made from a corporation are paid to owners. The owners of the corporation will have to pay personal taxes on these dividends in addition to paying taxes through the corporation, known as double taxation. Due to this, smaller business often choose not to go this route.
You may want to consider a C corporation for you business if:
· You will need financing through venture capital
· You would like profit-sharing between all owners
· You want the earnings of your business to remain in the company to generate growth
· You want to plan taxes more easily by spreading the earnings of the business between the corporation and the shareholders
· You want to minimize Social Security and Medicare taxes and set salaries
· You want to provide medical insurance and other benefits to employees
· You want the option to sell the business easily
· You want to be able to easily account for travel and other expense
· You want to offers stock options
· You want to eventually buy and sell real estate within the business
· You want to decrease the risk of auditing from the IRS
A C corporation is seen as a fully established entity. It is a company that is owned by shareholders. The company itself is going to be held responsible for all the financial aspects of the business rather than the shareholders. The company is taxed as it makes a profit, then taxed an additional time on dividend payments paid to shareholders.
A C corporation is ideal for businesses that have plans to go public in the future. It is also good for businesses that have a lot of capital raised through investments. In addition, a C corporation is good for a business with high liability, such as anything dealing with healthcare or heavy manufacturing.
If you need help with creating your business as a LLC, 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, Stripe, and Twilio.