FAQs: Understanding the Difference Between a DBA and LLC
Starting a Business in Dallas: Legal Considerations2 min read
Running a business in Dallas can have unique legal implications that need to be understood thoroughly in order to navigate the industry in a successful manner. One of the important legal considerations for business owners is understanding the difference between a DBA and LLC. This article will explain what both of these terms mean, how they are different and how they interact with the state and local legislation in Texas.
A DBA, or “doing business as,” is a name–not a legal structure–under which a business may operate. It is an assumed name, sometimes referred to as a commercial entity name, that is not registered with the state. Any individual or business operating under a DBA assumes risks associated with the name, including, but not limited to, the inability to collect debts, open a business checking account, entering into contracts, entering into tax liens with the Internal Revenue Service, and other risks.
In contrast to a DBA, an LLC, or “limited liability company,” is a legal structure. Establishing an LLC requires registering the business with the Texas Secretary of State. An LLC provides the LLC owner(s) with personal asset protection, eliminates the need to pay corporate taxes on all profits, and eliminates the need to actively be involved in many financial decision-making tasks.
When registering an LLC, Texas requires that businesses include the designation “Limited Liability Company” or “LLC” on all legal documents and with the Secretary of State. In addition, when running a business under an LLC structure, LLC owners in Texas are subject to specific rules based on the type of LLC they establish.
While a DBA may be registered with the local county registrar's office, this is not required in order to operate, and at no point is an individual or business required to register a DBAs with the state or local jurisdiction like an LLC. It is important to note, however, that while a DBA requires a less involved registration process, it still requires the filing of certain forms and paperwork to make sure the company is in compliance with local, state, and federal regulations.
Dallas business owners must consider the pros and cons of utilizing a DBA or LLC. While a DBA is an easy and relatively inexpensive route to go, an LLC provides more protection from the beginning, and if an LLC is already registered, a business may still take advantage of the DBA by adding a trade name. An LLC may also carry a slightly higher annual filing fee in comparison to a DBA.
Contacting a business lawyer is the best way to guarantee thorough understanding of the differences between a DBA and LLC. Using a lawyer who is versed in both state and local laws regarding business operations is incredibly important for Dallas business owners in order to make sure that they remain in compliance with the various rules and regulations. At UpCounsel, our attorneys have an average of 14 years of experience and have been rated and reviewed by clients for their quality of work. We provide tailored legal services to companies of all sizes, whether you need a one-time consultation or an entire legal department.