Filing a DBA versus Forming a Corporation or LLC
Sometimes, naming a business can be tricky.
For a start, you may conduct several kinds of activities under
the aegis of one company, which makes choosing and using a
descriptive name more complicated. Alternatively, you may
want to use your own name – but over the years, you
might find the company outgrows it, either because your business
ventures into other fields, or because you’ve incorporated
a lot of other people as partners into the venture.
In such circumstances, usually people opt for filing a DBA.
It’s nothing but an acronym for “Doing Business
As” and it allows you to file a fictitious name or some
other assumed name in place of the earlier version. You can
also decide whether instead of DBA, you want to opt for a
corporation or LLC.
What are the requirements of DBA filing?
Usually, DBA filings are done at county level or sometimes
at state level. If you’re in a sole proprietorship or
a general partnership, the company name is the same as the
owner’s name until a DBA is filed. For example, Richard
John has a hair salon business under the name of ‘Richard
John’ and he wants to change it to ‘Hair Today,
Gone Tomorrow’. This requires on his part to file for
a DBA. And it’s not just sole proprietors, but also
corporations or LLCs, which can opt for filing a DBA if they
are changing the name that was initially registered. The DBA
filing allows the business to use the changed name while trading,
though there are no formal or official restrictions to using
the earlier name. Thus, if Smith & Bromley Law Practices
want to change their trade name to ‘Sue, Grabbit &
Run’, they just need to file a DBA so that the new name
can be used for trading.
One thing to note is that if you’re trading as a sole
proprietor, DBA filing doesn’t provide you with the
benefits that forming a corporation or LLC would. A DBA is
merely for conducting your business with a newer name. The
same applies to filing a DBA if you’re trading as a
corporation or LLC.
The benefits of forming a corporation or LLC
For forming an LLC or incorporating your business, you need
to take some appropriate steps. The relevant documents of
your organization should be filed with the respective state
agencies, and for sole proprietorships and general partnerships,
opting for forming a corporation or could be sensible, as
these structures provide a certain amount of security to business
practice that the sole owners lack. Here are some of the benefits
to found in the forming of a corporation or LLC:
- The owner is protected against debts incurred during
trading, by limited liability protection.
- Certain tax exemptions are active only with corporations
- Gaining credibility with potential customers, suppliers
and employees is easier with corporations and LLCs
than sole proprietorships.
- Gaining capital for the business is easier. In
fact, in some states, for bigger businesses it is
mandatory to produce an LLC seal or corporate seal
to the bank concerned, in order to secure loans.
It’s important to give due consideration to these factors
before deciding whether to file for DBA under sole proprietorship,
or whether to make your business more secure by opting for an
LLC a or corporation.