DBA Account Setup: Everything You Need to Know
DBA account setup is an important step in establishing your business. When starting a business, there are a lot of unfamiliar legal terms and acronyms.3 min read
2. Why Should You File a DBA?
DBA account setup is an important step in establishing your business. When starting a business, there are a lot of unfamiliar legal terms and acronyms. There are LLCs, C corps, S corps, and much more. One of the most important acronyms is DBA, which allows you to do business under a different name.
Your DBA, or “doing business as”, is a different name than your own name or the names of any of your business partners. When you create a business, it is automatically named after the person who owns the business. In order to call the company something else, you must register your business with a DBA name.
For example, if John Brown starts a window washing service, the default name is “John Brown” unless he chooses to register the company under another name like “John's Window Cleaning”. Once the DBA is filed, John's name isn't legally connected to his business name.
Who Uses a DBA?
Not every business uses or needs a DBA. However, in some states, all businesses are required to file a DBA. The most common businesses that file for DBAs are sole proprietorships and smaller companies. This is because sole proprietors are the only owners of their companies, and a DBA creates separation between their name and the business.
S corps and C corps, general partnerships, and LLCs don't have to file for a DBA because they registered their business name when they formed their companies. However, these types of businesses can still register a DBA name that allows them do to business under a different name than what they filed in their original paperwork.
This is most commonly done by a corporation or LLC that wants to use a different name for a certain line of business. Instead of having to go through the entire incorporation process again when it wants to expand, the corporation or LLC can simply add a DBA as a new arm to the existing business.
For example, Sally's Computer Repair may want to use a new name for its expansion into cell phone repair and could file a DBA for “Sally's Smartphone Repair." In this case, filing a DBA can save the company lots of time and money over creating an entirely new business.
Why Should You File a DBA?
The most obvious reason to file a DBA is if you don't want your business to operate under just your name. The business name “James Thomas” doesn't tell much about what type of company it is, which makes a DBA useful.
Here are a few other reasons to file a DBA:
- It makes business banking much easier. Issuing and receiving checks for your business when it is the same as your legal name can be incredibly difficult. Without a DBA name, it is almost impossible to set up a business bank account.
- It separates things. Using a DBA separates your personal and business name. This is not only simpler, but it also offers more liability protection against your personal belongings. Filing a DBA also helps make your business compliant.
- It builds your business brand. Every small business owner knows that branding is important. A good business name is memorable and helps people know about your product or service. Using something like your full name doesn't help customers know what you have to offer. Choosing the right DBA name starts your business off on the right foot and helps bring customers in the door.
- It helps you expand. Corporations and LLCs can use DBA names to expand their businesses and venture into new products and areas without having to create an entirely new company for each new product line. If your corporation or LLC wants to expand into multiple offerings, each entity should file for a unique DBA name.
- It is easy. There are a number of ways small business owners can register a business name, but filing a DBA is by far the easiest and least expensive. Instead of having to create a corporation or LLC, sole proprietors can simply file for a DBA name to build their company and professional profile. A DBA helps when interacting with vendors and customers.
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