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When you are starting a business, you may not want your company's legal name as the brand name. You may prefer something more enticing. Something more brand-able.
That's where DBAs comes in. It is the easiest way for a business to legally register a trade name.
Sole proprietors love DBA. Not just sole proprietors, DBAs are used a lot by LLCs and corporations as well.
Let's see what a DBA really means and when you should use it.
DBA, Doing Business As is a new name that is registered by a business when it wishes to operate under a name other than its legal name.
Legal names are usually not customer friendly. Not really ‘marketable’. DBA offers an alternative where businesses can very easily register brand names.
For example, "123 SpaceCool Tech LLC" is the legal name of an LLC. It can register a DBA "SpaceKiddos" if they want to launch a new brand, instead of changing their legal name.
If you want to modify your legal name to be more customer-friendly, it is a long process.
Think of DBA as the legal nickname for your company.
It is not separate from your company. Just a new name.
That's why registering a DBA doesn't give you any additional protection. If someone sues your DBA, they're essentially suing your company. There is no difference between the business and a DBA from a legal point of view.
In different states, DBA is referred to by different names — trade name, fictitious name, or assumed name.
Alright. Let's now look at when to use a DBA.
That's not allowed. It is mandatory to register as a DBA when you are operating under a new name.
Don't worry, it's not that hard to register. It's usually just a form at your local county clerk's office.
And after you register your DBA, you can use it on your website, visiting cards and every other place where you're promoting your business.
It is your operating name now.
When it comes to a couple of places, you need your legal name:
DBA was originally introduced to protect consumers by revealing who the real owner of a business is. This is so that dishonest businesses don't operate under a false name and trick customers.
As an extension of this, even now, some states require businesses to put out a newspaper ad announcing their DBA. It helps the community know who the real owner is.
And if a consumer wants to know who is behind a DBA, they can find that out from the secretary of state.
Having a DBA doesn't change your tax obligations. You pay taxes according to your business entity.
Meaning: You'll pay taxes like an LLC if you're an LLC. You'll pay like a corporation if you're a corporation.
Even if your business has multiple DBAs and bank accounts, you don't pay taxes separately for each of it.
Below are some of the common tax rates applicable to the entities behind a DBA.
Some of these numbers will vary depending on your exact business situation.
Take this only as an approximate figure.
A DBA is registered with the local or state government or both. It depends on where you are located.
For example, California and Texas require you to register a DBA on each county where you're doing business. In Maryland and Colorado, you register with the state agency. For Virginia, it is both.
But it's not that hard nor expensive to register.
In general, these are the steps:
It is important to emphasise that DBA does not protect the business name.
If you're looking to create a new brand that needs legal protection, you should consider forming an LLC or a corporation, along with trademarking your business name.
But during the initial days of any business, it is wise not to spend too much on trademarks.
That's when you can use a DBA to test, build and expand your business quickly.
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