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DBA in Alabama
If you’re doing business in the Yellowhammer State of Alabama, you’re going to need more than just great products and services. You also need a good name that will create a lasting impression on people as well. A good name will help you draw in more customers, which means more profits.
The names of businesses are influenced by their actual structure. For instance, sole proprietorships and general partnerships use the names of their owners (proprietors) as their official business names. Similarly, incorporated businesses like LLCs and corporations are also affected by this rule, as they use the names they legally register while forming the entities. So, the legal name of your business will be based on the type of business structure you have.
That said, if you want to use another name for your business, you can use a DBA. In this article, we’ll talk about what DBAs are and how you can get—and benefit from—them.
Definition
What Is a DBA?
A DBA, which stands for “doing business as,” is a fictitious name or alias that can be used in place of your business’s real name. By using a DBA, you can establish a memorable and recognizable name for your business, making it easier for customers to identify and remember you in the market.
DBAs are called differently depending on the state. Some refer to them as fictitious names, fictitious business names, assumed names, or assumed business names. In Sweet Home Alabama, they are commonly referred to as “trade names.”
Unlike Alabama LLCs, DBAs are not formal entities. They’re just naming alternatives that cannot be used without an existing business.
Advantages
What Are The Advantages Of A DBA In Alabama?
DBAs give you and your business some helpful benefits. Here’s a quick look at the advantages you get from using trade names in Alabama:
It helps you establish your brand
DBAs are primarily used to establish a unique brand, regardless of your business’s structure. They allow you to choose a name that’s more fitting or accurately representative of your business’s services, products, and identity.
In Birmingham, there’s a popular hamburger shop founded by a man named Milo Carlton called “Milo’s Hamburger Shop.” However, most locals know it simply as “Milo’s Hamburgers” or just “Milo’s.” If Milo’s had been a sole proprietorship without a DBA, it would have been named “Carlton’s” or “Milo Carlton’s.” Thanks to trade names, it was able to use names that were more approachable, resonating better with their customers.
It gives you more privacy
DBAs provide a valuable layer of privacy for business owners, especially for sole proprietorships. Without a DBA, sole proprietors would have to use their personal names on promotional materials like posters, pamphlets, flyers, and even social media posts. However, with a DBA, they can use their registered trade name instead. This allows them to maintain a level of anonymity and privacy, making it easier to conduct business without constantly having their personal names in the spotlight.
It helps you diversify and expand
Businesses looking to expand their reach and introduce new product lines can use DBAs for it. Instead of forming and maintaining a new business entity to promote these new services, you can get a DBA for them, listing the new venture under your existing primary business.
For example, the hotdog chain Sneaky Pete’s, based in Birmingham, wanted to set up stores in various settings. Some locations, situated inside gas station convenience stores, had names like “Sneaky Pete’s Express” or “Sneaky Pete’s On-The-Go.” They even had a more upscale, sit-down restaurant called “Sneaky Pete’s Cafe.” With DBAs, businesses can easily create distinct brand identities for each venture while operating them under the umbrella of their primary business—and more.
It helps with franchising
If you’re looking to purchase a franchise from a well-known brand, you’re going to need a DBA. This is because franchises are often registered with the state under a different name.
For instance, let’s say you want to purchase a franchise from the fast food chain “Jack’s Family Restaurants, LP,” which is more commonly known as “Jack’s,” and you plan to open the franchise in Tuscaloosa. You first need to register the franchise in Alabama using a name like “Jack’s Franchise 240 Tuscaloosa,” then file a DBA to use the name “Jack’s.”
It is used for banking purposes
While Alabama doesn’t require all businesses to have DBAs, banks usually do. This allows you to separate your personal finances from that of your business. Moreover, if you have several ventures, each with its own DBA, you will be able to open bank accounts for them individually.
Disadvantages
What Are The Disadvantages Of A DBA In Alabama?
DBAs bring many benefits to your business, but they do not have many major downsides. Nevertheless, they do have their limitations that could be disadvantageous if you don’t know how to deal with them.
First, trade names do not provide any form of legal protection for your assets. This means that if your business gets sued for valid reasons, such as breaches of contract or injuries resulting from negligence, the court can force you to pay penalties.
With an LLC or corporation type of business structure, you’d be able to just declare bankruptcy or use the assets registered with the company. If your business is a sole proprietorship or partnership, you must get insured to protect your assets from legal action.
Next, while DBAs have to be as unique and creative as possible, they still have to comply with Alabama’s business naming requirements. This means you can’t just use any name that you think of.
DBAs in Alabama must not include the following to be approved:
- Words implying or indicating that your business is used for unlawful purposes.
- Words or terms that are normally used for government agencies, such as “FBI,” “IRS,” “Justice Department,” “Treasury Department,” and so on.
- Words or terms used by banking institutions, such as “bank,” “banc,” “banking,” and so on. You may use these words if you have prior permission from the Alabama Banking Commissioner’s Office.
- Words or terms that could falsely imply your business is engaged in selling insurance. You can use these words if you have permission from the Alabama Insurance Commissioner’s Office.
- Words used to indicate professional designations, such as Lawyers, unless you bring a copy of the license or lettering from governing agencies.
DBA Formation
How To Get A DBA In Alabama
The process to get DBAs in Alabama is very different from that of other states. Fortunately, the steps are similar regardless of your business structure.
Search for your preferred name
Start by coming up with a name you want for your business. Then, visit the Alabama Secretary of State Business Entity Search website to verify its availability. Prepare several names just in case the name you want isn’t available.
Use your preferred DBA name and collect proof of use (called specimens)
After verifying your chosen name’s availability, you have to reserve and use it before formally applying for a trade name.
Once your business starts using the DBA, collect three “specimens” or proof that you’ve used the DBA name. These could be business cards, flyers, posters, and so on. Don’t forget to record the date when you first used the DBA!
File your DBA with the Alabama Secretary of State
After collecting specimens, you must then register your Alabama DBA with the Secretary of State’s office, either online or by mail. You will be asked to provide information including the following:
- The date you first used the business name in Alabama
- The date you first used the business name in any state
- A statement claiming your ownership of the DBA
- Details about your businesses
- Details on how you plan to use the DBA for your business
- If a federal trademark registration already exists for your DBA, a copy of the registration
You will also need to pay the $30 filing fee. Credit cards are accepted.
Costs
How Much Does A DBA Cost In Alabama?
Alabama DBAs are quite cheap compared to other states. While they cost $30 to register, you can use them for five years. If you want to continue using them for your business, you need to renew them after that period. Renewals cost $30 as well.
FAQ
Frequently Asked Questions About A DBA
Here are the most commonly asked questions about forming a DBA:
Yes. You can have as many DBAs as you need in Alabama as long as you go through the process of searching for availability, using the DBAs to collect specimens, then filing them with the Secretary of State. Each one will cost $30 to register and $30 to renew after five years.
No. DBAs are not meant to protect personal assets from lawsuits. They can provide you with a layer of privacy, but that’s about it. You must get insured if you want to have your personal assets covered.
Yes. Cancellations must be made in writing. You will need to submit a notice to the Alabama Secretary of State’s office to have your DBA formally canceled.
Alabama’s DBA renewal process is also different compared to other states’ processes. The process is similar to the registration procedures, however, with the exception being that you will only need to present one specimen (compared to three when you first applied). You will also need to apply for renewal of your DBA at least six months before it expires.