All DBAs Are Not Created Equal
A “DBA” or a “Doing Business As” is an assumed or trade name that a business may operate under as an alternative to its registered name. Similar to a nickname, a DBA can be a useful recognition tool when a business’s legal name does not properly identify the business’s relation to the public. More often, DBAs are nonessential and overused.
Why a DBA Can Be Wrong for Your Business.
• A DBA Is Not Legal Protection – A DBA does not provide the same liability protections and tax benefits as a registered business entity, such as a corporation or LLC. This means that DBAs do not a substitute for registering a new business. As a result, sole proprietors and general partners are still personally liable for all business conducted under a DBA.
• You Do Not Own Your DBA – While filing a DBA allows a business to operate under a trade name, it does not provide the business with ownership of that trade name. If a business registers under the same name as your DBA, the registered business acquires that name unless you have proper trademark protection.
• DBAs Do Not Always Add Value – Customers or clients associate your brand with specific goods and/or services. If your business has goods and/or services that categorically fit under your registered business name, a DBA is likely unnecessary. The more general your business operations, the less need you have for a DBA. A better alternative to filing multiple DBAs is registering your business under a name that encompasses your current and predicted future business operations.
Why a DBA Can Be Useful to Unregistered Businesses.
Since sole proprietorships and general partnerships (“unregistered businesses”) do not have separate legal business names, they are required to operate under the owner’s or partners’ personal name(s) if a DBA is not filed. Therefore if Jane Doe, a sole proprietor, wants to name her business “Flower Boutique,” she will have to file a DBA, or else she must operate business under the name “Jane Doe.”
• Additional Reasons for Unregistered Businesses to File DBAs:
i. Privacy – A DBA may provide privacy to an unregistered business owner who wants to separate personal identity from the public’s relation with the business.
ii. Most Banks Require DBAs – Since unregistered businesses do not have separate legal identities, many banks require these businesses to file a DBA before opening a business bank account.
Why a DBA Can Be Beneficial to Some Businesses.
In some circumstances, a DBA can provide a registered business with an opportunity to establish brand recognition and expand to different markets. However, as long as registered businesses operate under their registered names, there is no legal reason for them to utilize a DBA.
• Brand Recognition – Your brand name identifies the goods and/or services that your business provides to the public. Though uncommon, sometimes your legal business name may not be the proper source identifier for a specific good and/or service. For example, Taylor Industries, LLC may want to file a DBA for the name “Taylor-Made Clothing” because “Industries” is too general to identify the sale of clothing.
• Establish Your Business in New Markets – Whether you want to provide new goods and/or services to the public or you want to expand your business to new geographic markets, a DBA may be a strategic marketing mechanism for your business. This strategy is beneficial if your legal business name is too similar to other business names in the same market.
How Can We Help?
Taylor Law is here to help you evaluate the value of a DBA for your unique business operations. Ping us at info@taylorlawdc.com.