LLC With DBA: Everything You Need to Know
Starting an LLC with DBA is generally more affordable and easier to maintain a good standing than most business structures. But whether an LLC or DBA is best depends on several factors.3 min read
Starting an LLC with DBA is generally more affordable and easier to maintain a good standing than most business structures. But whether an LLC or DBA is best depends on several factors.
LLC Versus DBA
- Personal liability protection for the LLC's owners, who are referred to as members.
- The name of the company being its legal name when conducting business.
- Expanding, selling the business, or seeking funding is easier with an LLC.
If you plan to hire employees or there's a possibility of liability, an LLC offers greater protections than a DBA.
DBA stands for “doing business as,” and it refers to conducting business under an assumed name. For example, if you are a freelancer and operate a website, a DBA allows you to conduct business under your domain name instead of your personal name. Essentially, you can use a fictitious name legally to conduct business.
A DBA alone will not provide the same benefits of an LLC. Instead, a DBA will:
- Leave the individual who registered the DBA open to liability.
- Not be considered a separate legal entity.
However, there are benefits to using a DBA. For starters, once you conduct business under an assumed name, you can then incorporate that name.
Financially speaking, it's also cheaper to conduct business as a DBA rather than an LLC, even though starting an LLC is more affordable than establishing a corporation. DBAs are only subject to two fees:
- The initial registration fee
- A renewal fee.
The renewal fee frequency varies by state, but it is typically every five years. LLCs, by contrast, must pay state taxes, which are more expensive.
If you have a sole proprietorship and don't want to incorporate your business, you can choose a DBA in order to brand your name and promote yourself without having to deal with LLC requirements. Moreover, LLC formalities, such as agreements and bylaws, are not imposed on DBAs. The biggest concern is that DBAs do not have the same liability protections as LLCs.
Filing a DBA as an LLC
As a legal entity, an LLC has its own obligations and rights separate from its members, while a DBA does not have these rights. Whoever uses a “doing business as” name assumes all business obligations, but it is possible to use a DBA as an LLC.
Each state has unique laws regarding business formations and maintenance. For example, once you file LLC paperwork with the state, you must abide by the state's LLC naming requirements before the name is approved. As an LLC, your business can conduct its activities and provide products or services as its legal name.
Since a DBA is not a legal name, it's merely an assumed name under which a business participates in activities such as buying or selling goods and services. To use a DBA, you must register the “doing business as” name with the state, regardless of whether you are conducting business as a sole proprietor or an LLC.
If you already own an LLC and you register a DBA, your LLC has the right to conduct business using both the LLC's legal name and the “doing business as” name. However, you must take action to maintain your LLC and DBA names according to the requirements of your state.
For example, most states require LLCs in good standing to file documents periodically, such as a Biennial Report in Iowa or an Annual List in Nevada. Failing to file these documents can result in penalties and your LLC forfeiting certain rights.
Since a DBA is only valid for a set period of time and must be renewed on occasion, you can lose the name if it expires and another business takes it.
One of the main reasons for forming an LLC is to protect your personal assets from the business's own liabilities and obligations. If you do use a DBA alongside your LLC, make sure you do not confuse the two, as there are specific instances when you should use the LLC's legal name. Since a DBA doesn't provide personal liability protections in any sense, you could leave yourself liable for debts if your business documents use the DBA when the LLC name would have been appropriate.
How to Add a DBA to an LLC
Determine where you need to file a DBA and obtain the fictitious name form from your state agency. Simply fill out the form and file it along with the required fee.
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