What is the difference between DBA, LLC, and Sole Proprietorship?
When the time comes to register your business, you'll need to choose between a sole proprietorship, a partnership or a type of corporation, such as an LLC. You may also consider a DBA, which is not a business structure per se – it stands for “doing business as.”
If you’re unsure about how DBAs work, you’ve come to the right place. In this article, we’ll breakdown what a DBA is and the how and why of filing one.
What is a DBA?
A DBA stands for “doing business as.” It is not a business structure, but rather it allows companies to do business under a secondary name.
If you’ve just opened a business, the first thing you would do is choose your business structure, which you can find out about here. Once you choose a business structure, you may choose to register under a secondary name in which to do business. In that case, you would file for a DBA.
If you don’t register your business under a specific structure, you are automatically labelled a sole proprietorship. This leads many sole proprietors to file as DBAs, which we’ll discuss shortly.
Who needs a DBA?
A DBA is most commonly used by sole proprietorships and partnerships. Since sole proprietorships and partnerships are not separate legal entities from their owners, they need to file a DBA unless they want to do business under their own name.
For example, if Jerry Brown opens up a sandwich shop and wants to do business under Jerry’s Sandwich Shop, he will have to file a DBA; otherwise, the business name will default to Jerry Brown.
Other business structures like corporations or LLCs can also file DBAs, but it is not as common.
DBAs and LLCs (limited liability company)
LLCs already have to register their business name when they open the business because LLCs are separate entities from the business owner. They can still file a DBA, but it’s not required.
The most common example of owners of an LLC filing a DBA is if they are expanding a new part of their business and want to call it something more specific to that new function. For instance, a construction company in New York that is opening offices in California may tack on ‘West’ to the end of their name to signify that this is the area of the business that handles west coast contracts. So Wagner Construction, for example, would become Wagner Construction West for marketing purposes. Legally, it would be Wagner Construction DBA Wagner Construction West.
Filing for a DBA
Each state has different requirements when it comes to registering for a DBA, but you can generally expect to pay anywhere between $10 to $100 in filing fees. (The exact cost may also depend on your type of business.) Once you have completed the registration, you can legally operate under the secondary name and do things like open a bank account and take on new contracts under your new name.
When filing a DBA there are some name restrictions based on the type of business you are. LLCs must include ‘limited liability company’ or LLC at the end of their chosen name. Sole proprietorships and partnerships cannot use words like corporation or limited liability in their name.
For more specific requirements on filing a DBA, check your state’s guidelines.