If you are opening your own business or expanding your operations, you might be wondering “What is the difference between a DBA and an LLC?” While an LLC or limited liability company can register to do business under another name, so can many other business entities. As we compare the benefits of using DBA vs LLC business names, it is important to understand that one does not replace the other.
What Is a DBA (Doing Business As)?
A DBA allows a business owner or board of directors to legally register a trade name that they will do business under. The common reasons for filing a DBA (doing business as) registration are:
- Creating an offshoot of an existing business
- Launching a new product or service
- Rebranding without creating a new company
- Expansion into a state or region where their business name is taken
What Is an LLC (Limited Liability Company)?
Registering your business as an LLC or Limited Liability Company is establishing a legal structure for your business. One step beyond a sole proprietorship, organizing as an LLC provides you some personal limited liability protection from debts accrued by your business.
After forming an LLC or another structure like a corporation or partnership, you could then decide to register a DBA for branding purposes or other sound business reasons. Using a DBA business name does not change your level of liability protection; that is determined by how your business is structured.
Comparing a DBA vs. an LLC
There are differences and similarities between using an LLC or a DBA to name or rebrand your business. As you consider a DBA vs. an LLC for business naming, these factors might affect your decisions.
Similarities Between a DBA and an LLC
- You can operate your business in your state under your registered LLC name or under a registered DBA name.
- You can advertise, use signage, set up bank accounts, and enter into contracts using both your LLC or DBA business names.
- Using a DBA does not change your tax liabilities, liability protections, or responsibilities for annual reporting.
Differences Between an LLC and a DBA
- Using a DBA as a sole proprietorship does not provide the limited liability protections of organizing as an LLC.
- Organizing as an LLC creates a separate legal entity, while registering a DBA does not.
- An LLC limits your personal liability for business obligations. A DBA does not give you any additional liability protection.
- Filing a DBA usually requires a one-time registration fee, while your LLC or other business structure will have annual or biannual filing requirements.
- Creating an LLC or other business entity with your state will give you exclusive rights to use that business name, but, depending on the state, DBA names do not come with exclusive rights.
The Advantages and Disadvantages of an LLC vs. a DBA
The benefits of a DBA include:
- Inexpensive and easy to file
- Less paperwork and annual responsibilities
- Does not change tax status
- Offers privacy over using your primary business or personal name
The advantages of forming an LLC include:
- Creating a separate legal entity to do business
- Offers some liability protection over operating as a sole proprietorship
- Prevents other businesses in your state from registering the same name
- Offers some flexibility and tax advantages over a sole proprietorship with DBA
Distinctions to Remember About Using a DBA vs. an LLC
- A DBA is not a business structure like a sole proprietorship, LLC, corporation, or cooperative.
- A DBA does not change your tax status or your liability protections; these are determined by what your state requires from your business entity.
- A DBA is a valid way to create an offshoot of an existing LLC or to rebrand your business without changing how the business is structured.
Should Your Business Use a DBA?
Changing the name of your LLC, partnership, or corporation is a difficult process and should not be the first choice when DBA is a good option. Filing for a DBA is fast and easy and usually inexpensive. If you are already using a name for business purposes that is not a registered business name, then you should consider filing the paperwork to make it official.
Most states require you to register a DBA before you do business and create contracts using anything other than your own legal name or a legally registered business name. If you own a franchise location, your agreement might also require you to register as a DBA. You can avoid legal headaches by taking care of this as soon as possible.
Another great reason to use a DBA name is when the type of business you run changes direction or expands into new territory. Even if the name you use is registered in another state, you can usually operate there under a DBA unless the name is trademarked.
Protect the Good Name of Your Business
You will need to file both kinds of paperwork with your secretary of state or county clerk to form an LLC or register a DBA. You can also use a state authorized filing service to simplify the process. At FastFilings, we offer an easy-to-use online portal and business filing services that simplify the process of keeping up to date.
For a small fee, we error check and rush processing on all of your submitted forms, and we can provide sales tax forms, wholesale licenses, and certificates of good standing that might be required. Let us help prepare your government documents and register your business today for a hassle-free business filing experience.