Does a DBA Need a Business License?
Does a DBA need a business license? When you start a small business, there are many steps involved.4 min read
Does a DBA need a business license? When you start a small business, there are many steps involved. Before you open your doors, you need to ensure all the legalities are taken care of. This includes a business license and a legal name. Most businesses, especially sole proprietorships, opt to use an assumed business name. This fictitious name is often called a DBA, which means “doing business as.” You may or may not need a DBA, but almost all counties require you to have some type of business license. These are technically two separate items and processes, although both are important and necessary to operate.
Who Needs a Fictitious Business Name?
In a majority of states, sole proprietorships use their own name as their business name and therefore are not required to have a fictitious business name. Something like Smith Shoes or Jack's Cleaners are likely ok because they involve the individual and are representative of the owner. The name could be used without any government approval.
If someone wants to use a name that has no association with their own legal name, like South Street Restaurant or Old City Garden Supplies, then the individual would be required to register a DBA with his or her city or county.
Corporations and LLCs already have to register with the state. If they do business under their official legal names on file, there is no need for a DBA. However, if they want to do additional branding with a different name for a specific line of products, they would need to get a DBA for the cities or counties where they plan to operate using the assumed name.
How Many Name Registrations Are Required?
State law varies on the number of name registrations they require. In California, a business is only required to file for a DBA in the counties where its places of businesses or its offices are located in. If the business is centralized in one location, they would only need to register in one California county. In contrast, Illinois requires businesses to register an assumed name in every county where it conducts business. This means you could be required to register with multiple counties even if you only have one office.
DBA Filing Requirements
Before registering your name, you must verify that it's available and not already in use. Some towns and cities might have a DBA database online that you can double-check against, otherwise you may have to call the clerk's office so they can manually check. You will find that states also vary on whether the application form is online or not. It's typically a one-page document that requests basic information like:
- Business owner names.
- Business name.
- Business address.
- Other contact info.
The filing fee can vary as well, typically around $20 to $50 depending on which city you are filing in. It's also only good for a specified term, usually somewhere around four years. The risk if you don't file for the appropriate licenses can be hefty. You may be subject to a fine of around $300 a month for the time period that the violation occurs.
Even Etsy Sellers Need Licenses
Etsy is a popular option for entrepreneurs to start selling online. It is a niche website that allows people to sell handmade digital and physical goods. Anyone has the ability to open an account, and you don't necessarily need extensive sales or retail experience. Sellers aren't required to maintain inventory, there are no startup costs, and there is a great pool of active buyers. Depending on your state and what you are selling, you may still be required to get a business license and have other permits. County and municipality rules may vary, as well.
Etsy's global community has grown to two million active sellers and over 35 million active buyers. During the last quarter of 2017, Etsy reached nearly $1.02 billion in gross sales. Aside from the obvious chance to make a lot of money, it's also easier as you don't need to hire a specialist to create your website. You open an account, upload photos from product shoots, and add some other details to open a store.
Most Etsy sellers are concerned with making cool products and fail to consider what requirements there are to run an online business and what the tax implications are. Some states will require you to pay sales tax on all Etsy sales, even if it's deemed a hobby. Even if it's only a hobby, you may need a license.
If you need help with DBA filings and business licenses, you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts 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, Stripe, and Twilio.