If you want to run a successful business, you have to come up with a strong business name. And if you run your business under a name that’s not your own, you need a “DBA” (“Doing Business As”). The good news is that if you create a DBA, you can use just about any name you like as long as another firm isn’t already using it.
When Don’t You Need a DBA
If your name is part of the business name, you don’t need a DBA. So if your name is Jim Smith and the name of your business is Jim Smith’s Ice Cream Parlor, you don’t need a DBA. Even if your establishment’s name is Smith’s Ice Cream Parlor you might not need the DBA because part of your real name is included in the business name.
What is the difference between your business’ DBA and its legal name?
The legal name of the business is the name of the legal owner. For example, if you own a sole proprietorship, the legal name of the business is your name. If a partnership or LLC runs the business, the legal name of the business is the partnership or LLC.
But again, you can run any business under a different name if you like. That’s where the DBA comes into play. So, if Jim Smith’s Ice Cream Parlor is owned by Jim Smith as a sole proprietor, the legal name of the business is Jim Smith. The DBA is Jim Smith’s Ice Cream Parlor. If the ice cream shop is owned by JS Ice Cream Incorporated, that is the legal name of the business, but the DBA is still Jim Smith’s Ice Cream Parlor.
What is a DBA and what does it do?
When you operate a business under a name other than your own, you are in effect using a fictitious name. If you want to open bank accounts and sign contracts, you must use a DBA. When you file a DBA, you are giving notice to the community that you are “behind” the business. In effect it is you doing business, but you are doing business as (or under the name of) someone or something else. That’s where the “doing business as” expression comes from. Once you establish the DBA, you as legal owner will be responsible for anything it does or any contract it signs. That’s why banks and other companies won’t do business with you until you complete this process. They want to make sure they have recourse to you in case something doesn’t work out.
How do you create a DBA?
You create the DBA by simply publishing a special notice in a local newspaper and filing some documents. It’s a very simple process. You can also use a service like LegalZoom to do this for you. Either way, it’s pretty inexpensive. But you must file and advertise your DBA before you use the name. Some states or counties require that you do so 60 to 90 days prior starting to operate your company.
To be exact, there are 4 steps you must take in order to complete the DBA process:
1. Some states or counties require you to do a name search to make sure the name is not being used by other companies.
2. File the proper forms with the county or state agency. Every state has its own requirements.
3. Publish the name in a local newspaper.
4. Obtain proof of proper registration and publication.
What protection does a DBA provide?
Not much. As I said above, the DBA registration provides no protection from small business liability. And if you think the process protects your exclusive right to use the business name, think again. The only way to protect your exclusive right to use a business name is to trademark it.
When you are just starting out in business, you may be tempted to operate in your own name rather than create a partnership, LLC or corporation. If you anticipate a low cash flow at first, it may not pay to go through the expense of incorporating or setting up an LLC. But if you forgo setting up an LLC or corporation, you may expose yourself to personal liability. Setting up a DBA does not shield you from any of that potential liability.
Did you set up a DBA? Was the process different than described above? What would you do differently?
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