In the course of setting up and running your business, you’ve probably encountered more new legal terms, tax law, and regulation hoops to last the whole “perpetual existence” of your business. The bad news is that there’s probably more to come that you aren’t even aware of yet. Here’s the good news—you don’t have to learn it all at once.
As a serial entrepreneur, I’ve seen a lot of action on the front lines of running a successful business. So I’m here to clear up the confusion about what a DBA is and why it’s important. Let’s get into it.
Many people believe that in business, DBA and A.K.A. mean the same thing, but that’s not the case. A DBA is much more formal than just an alias for your business. A DBA is a trade name that you register with the state. It provides a way for the public to know details about the real business owner without having to run a business using your real name.
It’s sometimes referred to as a “Fictitious Business Name” or an “Assumed Business Name.” Whatever you call it, the idea started out as a way to provide consumer protection against fraudulent business practices, but there are also plenty of advantages for you, the business owner.
There are a lot of advantages to having an LLC, but having one does add some complexity and cost to running your business. If you opt out of the personal asset protection and tax advantages that an LLC can provide, you may still want access to one key benefit of having an LLC—perception.
In business, it is crucial that your customers take you seriously.It’s all about how you answer the question, “Who should I make the check out to?”
If I say “Brad Hanks,” they’re going to picture me working in my mom’s basement. It would be much better to do business as Competent Consulting, for instance. If I go out and incorporate as Competent Consulting LLC, the problem is solved because legally the LLC is a separate entity from me.
Just like any other person, that LLC can go out and get a bank account, lease office space, etc. But if you’re a sole proprietor without an LLC and want to do all those things under a name that isn’t your own, you have to get a DBA first.
One thing to note: if your business name contains your first and last name, you don’t need to file for a DBA because the company name could be used to identify the real owner of the business.
Although DBAs are frequently used by sole proprietors that want a separate name but not the hassle of creating a new corporate structure, they are not the only kinds of business that can have a DBA.
This may seem complicated, but this is the hardest part, I promise.
LLCs and corporations can also have DBAs. If a business wants to do business with a name that is different from the real owner’s name that business needs to register a DBA. In the case of an LLC or corporation, the real owner is a person in the legal sense only, but the same rule still applies.
There are lots of reasons for a company to get a DBA. Consider ZipBooks: we make accounting software and are an up-and-coming brand in the FinTech industry, but that’s not the real name of the company. ZipBooks incorporated under the name PHLO, Inc. In fact, most business names that you are familiar with are probably a DBA. Sometimes the business name you want to use is already taken, or a maybe a company wants to rebrand.
The takeaway here: you don’t have to setup a new business entity every time you want to do business under a new name.
DBA requirements vary from state to state. Here’s a great resource from the Small Business Association that gives specific instructions for each state. I checked the links and the only state with a broken link was Louisiana. I couldn’t find the form for Louisiana, but you can get some details here (Step 5).
When someone files a DBA, it’s normally circulated in a local newspaper. It lets the community know who the owners are behind a business. You will want to wait to do business under a different name until you get it registered.
Brad Hanks is in charge of Growth at ZipBooks.