In part 2 of this series, we discussed how to incorporate multiple businesses under a single “umbrella” LLC by filing multiple DBAs or fictitious business names. Many people often have questions about filing a DBA registration to create a fictitious business name. And many just simply ask, what is a DBA?
The DBA is often misunderstood, but it can be a valuable way to structure a business and gain some protections of your rights as a business owner. However, you need to make sure you know the limitations of a DBA to protect your intellectual property and trademark rights.
What are the benefits of filing a DBA for your business?
- Compliance: Filing a DBA allows you to legally use a business name without incorporating as an LLC or corporation.
- Business banking: Filing a DBA enables you to get a business bank account in the name of your business and take payments in the name of your business, even if you haven’t formed an LLC.
- Flexibility: DBAs are easy and affordable to file, so they offer great flexibility to suit the needs of your expanding, evolving business. For example, if Jane Doe Cookbooks, LLC launches a new website, they can file a DBA for “JaneDoeCookbooks.com” which would keep that site’s business activities covered under the umbrella protection of the original LLC. If Jane Doe Cookbooks, LLC starts offering private chef services, online cooking classes, or starts selling cooking supplies, they could easily file DBAs for each of these new ventures under the same overall LLC.
What are the limitations of filing a DBA?
- Filing a DBA is not the same as trademark protection: If you file a DBA, you have the right to use a business name, but you don’t have the right to prevent anyone else from using that same business name. If you want a higher level of protection, you need to register a trademark.
- Lack of tax benefits: A DBA is not a corporation, so merely filing a DBA that is not part of a “corporate umbrella” like an LLC will not give you any special tax benefits. If you are “only” doing business as a DBA, any money your business makes passes through to your individual tax return and is taxed accordingly. If you want to get the tax benefits that go with having a corporate structure, you would need to form an LLC and file taxes as an S-Corporation (or other corporate entity, which have different tax treatment). Be sure to consult with your attorney and/or professional tax adviser before you make a final decision on a choice of corporate structure.
Filing a DBA can be a fast and effective option to make your business “official” while providing some benefits, but be sure you are aware of the limitations of this business name designation. As with so many other business decisions, the fastest, cheapest solution is not always the best. But filing a DBA can be helpful for structuring multiple businesses as long as they are all integrated under an overall LLC or other corporate umbrella.
The DBA can be a valuable way to structure a business and gain some protections of your rights as a business owner.