Understand the Difference Between a DBA and an LLC

You can register a DBA or an LLC to do business under a new name, but only an LLC offers liability protection.

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When you start a business and want to offer your services under a name different than your own, you have a choice: you can register a "doing business as" (DBA), or you can form a business, such as a limited liability company (LLC). A DBA is not a type of business, but a registration that serves only one purpose – it gives you the ability to do business under a new name. If you form an LLC, you will enjoy benefits beyond name registration, such as limiting your personal liability for the debts of the business. If a name registration is all you need, you can avoid the LLC fees and legal responsibilities, and simply register a DBA.

What is a DBA?

A DBA, also known as a fictitious business name, assumed name, or trade name, is a registration you file with your state, county, or city licensing agency to do business under a new name. If you own a sole proprietorship or a partnership (meaning you did not form your business by filing paperwork with your state), you must register a DBA before you can offer services under a name different from that of the owner(s). If you own a corporation or an LLC, you must file a DBA before you can do business under a name different from the name you listed on your formation paperwork.

DBA registration does not provide benefits for the owners (apart from the ability to use a new name). Instead, it protects the public, who have the right to know who owns the business in case they want to bring a lawsuit against it. After you register a DBA, the public can look up the business name in a government database and find out that you are the owner of the business.

What is an LLC?

An LLC is a type of business that does not exist until the owners file formation paperwork with the state. It is a separate legal entity, meaning the LLC owns property and enters into agreements as the business, which keeps the business affairs separate from the owners' personal affairs.

DBA vs. LLC

As discussed below, some of the benefits and responsibilities that come with forming an LLC, and not a DBA, include:

  • limiting your liability for the debts of the business
  • trademark protection for your business name
  • paperwork and filing fees for registration and maintenance, and
  • tax filings and options for tax treatment.

Limited Liability Protection

Unlike a DBA, an LLC offers liability protection, which means that if someone sues your LLC, your personal assets like your bank account, car, and home will usually not be on the line to satisfy the debt. A DBA registration does not offer liability protection, and if you do not form an LLC or another type of business that provides liability protection (such as a corporation), you will remain personally responsible for the debts and obligations of your business.

Trademark Protection

If you want to keep others from using your business name to sell their goods or services, you should consider trademark protection. A DBA registration does not offer trademark protection, which means that someone else can use your business name, even in the same city as your business. If you register an LLC, you can prohibit anyone in the state from using your business name. To protect your name on the national level, you can register your name with the United States Trademark and Patent Office.

Registration and Maintenance

DBAs and LLCs are simple to register and renew. For both, you file paperwork with the state and pay a filing fee. Typically, you must file renewal paperwork to maintain the registration, on an annual or biannual basis. The registration processes and fees for DBAs and LLCs vary by state, and in most areas, you will find that the cost to form an LLC is higher than registering a DBA.

After you register a DBA, you can continue to run your business the same way as before you filed, without risking your registration. On the other hand, after you form an LLC, you must treat the company as a separate business, or you could lose your liability protection. This means keeping your personal assets separate from your business assets and following corporate formalities such as creating and following an operating agreement. Click here for more tips on how to run your LLC while protecting your liability.

Tax Considerations

When you register a DBA, your business taxes and filing requirements will remain the same. For example, if you owned a sole proprietorship before you registered the DBA, you would continue to report your income and losses on your personal tax return.

If you form an LLC, you will have new tax considerations, including filings with the IRS and your state tax agency, and the option to elect corporate tax treatment. In some states, LLCs must pay franchise tax. To learn more about tax considerations for LLCs, see How LLC Members Are Taxed, and check with your state tax agency to determine your local requirements.

Can an LLC Get a DBA?

You might register a DBA for your LLC when you want to expand your business. As discussed above, if you want to use a name other than the name you listed on your LLC formation paperwork, you must register a DBA. For example, if you own a dog walking LLC called "Happy Tails, LLC," and want to start a landscaping company within the same LLC and under the name "Happy Lawns," you would have to register a DBA.

Because DBAs do not offer liability protection, the assets of your dog walking business will be on the line if anyone sues your landscaping company. In order to protect the assets of the dog walking business from debts of the landscaping business (and vice versa), you could register a new LLC for the landscaping company. Forming a separate LLC means additional filings and fees, but it would allow you to keep the assets of each business protected from debts and liabilities of the other business.

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