What is a DBA?
Are you thinking of operating your business under a different name? Fortunately, it’s easy to do this and doesn’t even require you to incorporate a new company. All you need to do is to file for a DBA.
If you’re thinking, “what is a DBA?”, then you might recognize them by a different term – trade names. It’s how one company can manage multiple brands, as many large corporations do.
In today’s article, we’ll answer the question, “what is a DBA name?” then discuss the reasons why you need one. We’ll end with some tips on how to file for a DBA successfully.
What is a DBA?
A DBA, meaning “doing business as”, is a name used by a company other than its legal name. It’s similar to a person’s nickname and, thus, doesn’t replace your legal name in any way. You can’t use your DBA name when filling out anything official, like government and tax forms.
The most significant benefit of a DBA is that it allows you to use a more favorable name. That’s because your business’s legal name (the one you used to register it under the law) might not always be the best name to represent your brand in the market.
In the United States, a DBA filing is required before you can operate under a new name. This is due to consumer protection. It prevents unscrupulous firms from avoiding financial obligations or lawsuits by hiding behind a different name.
Advantages and Disadvantages of Using a DBA name
One of the clear advantages of a DBA company name is that it can give you a branding advantage in the market. Firms often have long or unappealing legal names that don’t resound with their audience. Having a short and exciting DBA name can make your company much more memorable to your consumers.
A DBA name is also useful if you have various brands and prefer to keep them under one firm for easier management. If you’re a construction firm that wants to set up an interior design agency, for instance, a DBA is a way to do it.
Finally, a DBA can help mitigate any damaging publicity against your legal business name by separating the two. If things go awry, it gives you the freedom to register a new DBA name and start fresh.
There are, however, some caveats with DBAs that you also need to know.
The biggest problem with DBAs is that, unlike a legal business name, you don’t have exclusive rights to a DBA name unless you register it as a trademark. Some states also require the DBA to be filed and renewed in every city or county the company does business in.
Types of Businesses that Need a DBA Name
For most businesses, a DBA is not required by the federal and state government. There are, however, some firms that need it for more than just branding.
A perfect example is a sole proprietorship or partnership. By default, these businesses use the owners’ names as the legal name, which isn’t always ideal. Owners typically want to separate their personal name from their business name. Aside from privacy, it allows the owner to open a business bank account separate from their personal account.
A franchise is another business model that often requires a DBA. A local franchisee legally can’t use the franchise’s brand name (like McDonald’s or Subway) when incorporating their business, so they would need a DBA to be able to use them.
Tips on How to Get a DBA Name Successfully
The requirements and application process on how to file a DBA varies by state or country. Fortunately, filing is straightforward enough that you can do it on your own without any legal assistance. You simply go to your county’s clerk office or state office, pass the required paperwork, and pay a fee ranging from $10 to $100.
To increase your chances of a successful filing, here are a few tips to keep in mind.
First, check if your desired DBA name or a similar one isn’t already existing. It can create potential confusion if you share your trade name with another business. Also make sure that your DBA doesn’t include corporate designations like “LLC” or “Inc”, which most states don’t allow as it can be misleading for consumers.
Next, if you’re registering a DBA for an LLC or corporation, most states require that you present a certificate of good standing. The document can be obtained from the secretary of state.
Lastly, carefully check the requirements for renewal and plan ahead. Most states and counties set a fixed time that a DBA is valid before it needs to be renewed. You might also need to renew your DBA if there are any changes in your original business filing, such as a new address or legal name.
Are You Ready to Do Business as a DBA?
Filing for a new DBA name is a good strategy if you’re expanding your business into a new market. Another is having enough capital to finance your operations. Schedule a one-on-one consultation with L3 Funding and see how our flexible terms and competitive merchant funding rates can help you with the latter.