Difference Between DBA and LLC: Everything You Need to Know
When considering the difference between DBA and LLC, a limited liability company, or “LLC,” is a legal body that is separate and distinct from its owners.3 min read
What Is the Difference Between a DBA and an LLC?
When considering the difference between DBA and LLC, a limited liability company, or “LLC,” is a legal body that is separate and distinct from its owners. A “DBA,” or “doing business as,” is merely a name owners use to conduct their business and has no legal force. It is not the legal name for the business; it is just the name the owners want to use to identify their business. However, if someone forms an LLC, the name of that LLC is the legal name for the business and must be used on all formal applications and forms, such as tax filings and business licenses.
While each state has its own laws governing LLC creation, unlike DBA requirements states don't require the creation of a business. The business owners will need to decide whether an LLC's structure is beneficial to them.
Also, a business owner does not receive personal liability protection from a DBA. An owner of an LLC, on the other hand, is not connected to the company in terms of liability. However, he or she is not regarded as a separate taxable entity and, therefore, must pay taxes on the LLC's income on an individual level.
Personal Liability Protection Under an LLC versus a DBA
One of the benefits of forming an LLC is the protection it gives the business owner and his personal assets. Members, or owners, of the LLC will not be personally liable for the LLC's actions. Because it is a distinguishable legal entity, the members' personal assets remain separate from the LLC's assets.
Unlike an LLC, an owner registered with a DBA is not protected and can be held personally liable for any action taken by the LLC. Because the DBA is not a legally distinct entity, the business owners are responsible for all business decisions under the DBA. There is no distinction between an owner's personal assets and those of the DBA.
Fees Associated With LLCs and DBAs
Whether an owner has decided to form an LLC or a DBA, he or she must pay startup costs for filing and regular maintenance costs to keep the LLC or DBA in good standing. Although costs vary from state to state, starting a DBA will be significantly cheaper than starting an LLC within the same state. While a DBA requires a small renewal fee every five years, an LLC requires a tax payment of $800 every year until it is disbanded.
Advantages and Disadvantages of a DBA
A DBA is advantageous if the business owner does not want to create a formal, separate legal entity. It's typically the simplest and least expensive way to legally conduct business under a different name. With a DBA, many businesses can operate with the same pseudo-name in the same state.
Benefits of an LLC
If a business owner wants liability protection for his personal assets, an LLC is a great choice. It also gives the owner some flexibility over how he wants to be taxed. Business owners are also entitled to trademark protection, giving them exclusive rights over their brand name in that state. In addition, unlike a corporation, an LLC is not required to file exhaustive paperwork such as:
- Meeting minutes
- Addendum filings
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