What is a DBA Business License: Everything You Need to Know
What is a DBA business license? Basically, a doing business as (DBA) license allows you to transact business using a name other than your legal name.3 min read
2. Why Do States Require a DBA License?
3. Registering Your DBA
4. Benefits of DBA Registration
What is a DBA business license? Basically, a doing business as (DBA) license allows you to transact business using a name other than your legal name. Not every state requires a DBA license, but you should be sure to research the rules in your state before attempting to do business with a fictional name.
What is a DBA?
A DBA is a company's operating name, which is different from the company's legal name.
When a company does business using a name other than the legal name listed on its registration documents, this is known as “doing business as.” Depending on your state, you may need to file a fictitious name or DBA registration before you can do business with a name other than your legal name. States that require a DBA registration do so to protect consumers from bad actors.
When you start a partnership or sole proprietorship, you have the option of picking a DBA name. Completing a fictitious name filing will allow you to use a completely original name for your business. For example, if your name is John Smith and you run a doughnut shop as a sole proprietorship, you could complete a DBA registration so that you can transact business as Smitty's Doughnut Emporium.
Why Do States Require a DBA License?
The main reason that many states require a DBA license is to protect consumers from harm by businesses acting in bad faith. Imagine, for instance, that you've purchased a product and later discover that it is defective, leading you to want a refund. If the business you purchased the product from used a fictitious name, you would have no way of knowing who to contact for your refund if this fictitious name wasn't registered with the state. A DBA license lets consumers know exactly who is running a company, meaning they'll know who to hold responsible if there's a problem.
DBA licenses also provide protections for business owners. For example, when you formally register your business, it will be much easier for you to enforce contracts. Once you register your name, other businesses will not be able to your name.
Registering Your DBA
If you're ready to register your DBA name, there are a few tasks that you'll need to complete. The easiest way to register your DBA is visiting your county clerk's office. The clerk should be able to provide you with the proper forms and can help you with your filing. In some cases, you may also need to file a DBA registration at the state level. In some states, you may need to fill out a document known as a fictitious business name statement, and in others, you'll need to purchase a DBA certificate.
After you have completed your DBA registration, you can complete business activities using your new name, including signing contracts that can be legally enforced.
It's common for small business owners to worry about the cost of completing a DBA registration. While you will have to pay a small filing fee, the money you save in the long run will be well-worth this small initial investment. When you're choosing your DBA name, you should be certain to pick a name that can be easily found and remembered by your customers. The right DBA name can improve your business's profitability.
Typically, corporations do not need to file a fictitious business name statement. A corporation's formation documents serve the same basic purpose as a DBA registration.
Benefits of DBA Registration
Although you may not think it necessary, DBA registration can provide your business with a variety of benefits. Some of the benefits of registering your DBA include:
- Allowing you to transact business and advertise your company using a new name.
- Stopping another business from using your name.
- Accepting checks written to your DBA name.
- Giving your business more credibility.
If you want to open a dedicated bank account for your business, you should absolutely register your DBA name. Generally, banks will won't provide a business bank account until you have presented proof of registration. Having a business bank account is crucial, because it allows you to accept payments made out to your business, and it will help you separate your business financing from your personal finances. Before choosing a bank, you should research requirements for opening an account and find out which services you'll be able to use.
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