DBA Under LLC: Everything You Need to Know
A "doing business as," or DBA, under LLC helps a lot of business owners to properly manage their finances and to ensure that their business and personal finances are separate. Here are things to know on how to add a DBA under an LLC.4 min read
2. LLC Formation
3. DBA Registration
4. How to Add a DBA to an LLC?
5. Do You Need a DBA or LLC?
6. Maintaining LLCs and DBAs
7. Personal Liability
A "doing business as," or DBA, under LLC helps a lot of business owners to properly manage their finances and to ensure that their business and personal finances are separate. Here are things to know on how to add a DBA under an LLC.
What Is a Limited Liability Company (LLC)?
Before anything else, Limited Liability Company (LLC) is a way for business owners to avail the pass-through tax advantages and to prevent personal liability for their business's debts. LLCs are required by state laws to have their operation under the legal name mentioned in their Articles of Organization. To ensure that the public will identify and distinguish the company's legal structure, an LLC's legal name should be unique from other businesses operating in the state.
With regard to forming an LLC, every state has its own policies and requirements such as naming requirements. The LLC name indicated on the filed document submitted and accepted by the state will be the legal name of the new business entity. The company needs to ensure that all legal documents involving the LLC should indicate the legal name filed and approved by the state. Some of these are tax filings and applications for business licenses and loans.
A "doing business name," or DBA, is a fabricated name used by a business to identify its products and services. A single LLC entity can operate with multiple businesses using a DBA. For a DBA to be used legally by the business owners, they are required to register the name in accordance with state laws where the business operates. A penalty is imposed on businesses when they fail to register a DBA prior to operations. Since multiple DBAs can be registered under a single LLC, each of the DBAs needs to be registered separately. One of the imposed rules on using DBA is to ensure that there will be no two businesses having the same DBA. In addition, some state laws require that a DBA should only be registered once in a state with a state-level registration system.
How to Add a DBA to an LLC?
Registration of a DBA or a fictitious business name depends on the state where it operates. For some states like New Mexico, Kansas, Alabama, and Mississippi, filing for a DBA is not required by state law. For a comprehensive enumeration of requirements on filing a DBA, a list is provided by the U.S. Department of Commerce. Here's the process on how to register a DBA:
- Get copies of a DBA registration form.
- Accomplish and complete the DBA registration form and don't forget to provide the details of your LLC.
- Submit it to the appropriate agency.
On the registration process, you need to provide more than one DBA name you intend to use. These alternatives will be used just in case the name has already been chosen by a different company. Apart from the mentioned steps, one is also required to state other information like personal details, name, and address including information about your LLC such as the registered agent and office address of your LLC. Submit the DBA registration form to the appropriate agencies on the state, country, or local government. Getting a DBA registered depends on the state but usually costs from $10 to $50, as of 2010.
Do You Need a DBA or LLC?
An individual operating as a sole proprietor might want to get a DBA under his name so he can do business transactions using a business name. If clients are required to paychecks using a business name and not your own, then a DBA is required. Having a DBA will force your personal and business finances to be separate, which will be a great help during tax filings.
Maintaining LLCs and DBAs
For LLCs and DBAs to continue their operations, they need to comply with state laws to ensure proper maintenance and use of LLC and DBA. Some states have added requirements such as filing a Biennial Report in Iowa or an Annual List in Nevada. Failure to comply might lead to the forfeiting of rights to business or monetary penalties. DBAs are valid for four to five years but need to be renewed upon its expiration to ensure that other business won't use it.
The main reason for forming an LLC is to protect your personal assets from the liabilities of the business. One should also be wary when using a DBA in conjunction with an LLC for you not to confuse the usage of the business's legal name (LLC) and the assumed name (DBA). This is important because a DBA doesn't provide a personal liability protection and an individual might find himself responsible for business debts if legal documents are sealed in a manner that confuses whether you or the LLC is using the DBA.
This segment requires legal consultation to ensure smooth dealings and avoiding problems in the future. If you need help with setting up your DBA under your 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, Menlo Ventures, and Airbnb.”