DBA Definition: Everything You Need to Know
DBA stands for “doing business as,” and refers to a fictitious business name that someone might use when conducting business.3 min read
2. Why You Should Create a DBA
3. Conducting Business with a DBA
You’ll need to know the DBA definition before creating a DBA for your business. DBA stands for “doing business as,” and refers to a fictitious business name that someone might use when conducting business. Once you have finished registering your DBA, you can use this name to operate your business, along with opening up a business bank account, credit card, writing checks, and doing business with other parties.
If you don’t file a DBA and merely begin doing business under the assumed name, then you might face stiff penalties and fines, including lawsuits. Generally, sole proprietorships use DBAs, since they are easy and quick to form. All types of businesses can obtain a DBA, including limited liability companies, corporations, and partnerships.
Some states require a DBA to be filed to protect others when doing business with the company. Furthermore, creating a DBA will help differentiate you and your business endeavors to prevent personal liability if a lawsuit is brought against your business.
In addition to state requirements, some counties and towns might also require the DBA to be registered. Therefore, even if your state doesn’t necessarily require it, your local municipality might require you to formally register your DBA name.
When naming your DBA, you cannot use terms like LLC, Inc., Corporation, or any other business identifier unless it is actually registered with the Secretary of State. Therefore, if you operate as an LLC, then you can use “LLC” at the end of your DBA name.
How to File a DBA
There are certain procedures for filing a DBA name depending on the state in which you plan on registering the name. Most states provide simple guidelines and require that you visit your county office to register the name and pay the applicable fee, which is generally between $10 and $100. Other states, however, have additional steps that could include putting an ad in your local newspaper to indicate that you intend on using the specific DBA name. Thereafter, you’ll need to show proof that you advertised it in your local newspaper.
Most states require that you file the DBA document before conducting business. Some states require that it be filed within 30-40 days before your first business transaction.
If you do any business through your DBA, your financial institution might also require that you open a business bank account under your DBA name as opposed to depositing or withdrawing funds out of your personal account with the DBA funds.
Corporations don’t usually have to register fictitious business names unless the corporation is doing business under a different name. This is because the documents for incorporation will have the same effect as the DBA documents for sole proprietorships or partnerships.
Why You Should Create a DBA
There are several reasons to create a DBA:
2.Easily identify the goods that are being sold or services being provided
3.Differentiate between your personal and business assets
4.Having a DBA is good for business start-ups
When it comes to credibility, it is important for you to formalize your business endeavors so that customers will be more willing to do business with you. Moreover, vendors and financial lenders are more willing to enter into contracts with your business if you have formalized it in some way. Therefore, if you want to do business but don’t want to create a formal legal business structure such as a corporation or LLC, then you should create a fictitious business name.
Generally, DBAs are good for business start-ups. Once you’ve proven yourself as a start-up company, you can then convert to either an LLC or corporation. Those wanting to offer shares to the public will have to form a corporation, whereas those who want more ownership flexibility but no public shares will want to form an LLC.
Conducting Business with a DBA
Be careful when conducting business with a DBA. For example, if you want to enter into a contract with an electrician, and he goes by the name “John Smith doing business as Smith’s Electric,” you should first ensure that his DBA name is registered. If it isn’t, you might risk having work done by an electrician who not only didn’t register his DBA name, but might not be a licensed electrician.
If you need help learning more about a DBA, or if you need assistance creating 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.