What is the Difference Between a DBA and LLC?

There are several differences between a DBA and LLC. A limited liability company, or “LLC,” is a legal body that is separate and distinct from its owners. On the other hand, a “DBA,” or “doing business as,” is merely a name that 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 that 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.

While each state has their own laws governing the creation of the LLC, the creation of a business is not required, unlike DBA requirements. The business owners will need to decide whether an LLC’s structure is beneficial to them.

Generally, a DBA is less costly to maintain, but an LLC offers better benefits and protection. Expanding and selling a business is also easier with an LLC, as well as generating funding.

Personal Liability Protection Under an LLC versus a DBA

One of the benefits of forming an LLC is the protection that it gives to the business owner and his personal assets. Members, or owners, of the LLC will not be personally liable for the actions taken by the LLC. 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 or not an owner has decided to form an LLC or a DBA, there are start-up costs for filing and regular maintenance costs to keep the LLC or DBA in good standing. Although costs vary state to state, starting a DBA will be significantly cheaper than 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 most simple and least expensive way to legally conduct business under a different name. With a DBA, numerous 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 so they have exclusive rights over their brand name in that state.

If you need help deciding between a DBA or LLC, you can post your legal need on UpCounsel’s marketplace.