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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 and LLCs.
  • 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.

 

 
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