What does DBA stand for and how does it differ from LLC and sole proprietorship?

Starting a business comes with a slew of important decisions, not the least of which is choosing the right business structure. Whether you're considering a DBA (Doing Business As), an LLC (Limited Liability Company), or a sole proprietorship, each option has its own advantages and caters to different business needs. From liability protection to tax implications and administrative duties, understanding these differences is crucial for your success.

Keep reading to see what sets these structures apart and discover which one might be the best fit for your business venture.

Understanding business structures: LLC, sole proprietorship, and DBA

Choosing between a LLC, sole proprietorship, and DBA hinges on your needs for liability protection, tax preferences, and simplicity in administration. A DBA is simply a name under which you conduct business, offering no legal protection but allowing brand flexibility. An LLC provides limited liability protection, safeguarding personal assets against business debts, and it offers tax flexibility, allowing profits and losses to pass directly to owners' personal tax returns. In contrast, a sole proprietorship is the simplest form, where the business is indistinguishable from the owner, making setup easy but exposing the owner to personal liability for all business obligations.

See more details on each structure below.

Details on LLCs

What is an LLC?

📌 An LLC, or Limited Liability Company, is a popular business structure due to its flexibility and the protection it offers its owners from personal liability. This means that personal assets such as a car, house, or savings remain protected in the event the business incurs debt or is sued. LLCs are perfect for small to medium-sized businesses and combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. Learn how to set up your LLC in this beginner's guide.

Who needs an LLC?

Choosing an LLC is advantageous if you seek liability protection while keeping the administrative simplicity of a sole proprietorship or partnership. It's ideal for those who plan to own property or assets under the business that could become liabilities, like restaurants, rental shops, or manufacturing units. It's also suitable for businesses that plan to raise investment without incorporating. 

📢 Related: 3 Reasons your LLC needs small business insurance

Details on sole proprietorships

What is a sole proprietorship?

The simplest form of business is a sole proprietorship. It refers to a business owned and operated by a single individual without any separation between the business and the owner. You are entitled to all profits and are responsible for all your business's liabilities, losses, and debts. This structure is straightforward to establish, with minimal paperwork and few legal costs.

Who needs a sole proprietorship?

This structure is suited for individual self-employed contractors, consultants, or small business owners who prefer to start with minimal bureaucratic overhead and tax simplicity. If you're engaged in low-risk businesses and wish to test your business concept before formalizing the structure, a sole proprietorship is a straightforward starting point.

📢 Related: Useful information on the best insurance for sole proprietors

Details on DBAs

What does DBA stand for?

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 read more 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 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.

Related: 3 Ways to protect your business name

Where DBAs and LLCs (Limited Liability Company) overlap

As you explore your options, you may wonder how does a DBA work under an LLC? LLCs already must register their business name when they open the business because LLCs are separate entities from the business owner. 

You may also be wondering: Do I need a DBA for my LLC? With an LLC, you 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.  

How to file 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.

📌 Read more here for more specific requirements on filing a DBA.

Insurance essentials for DBAs, LLCs, and sole proprietors

💡✍️ Running a business comes with its fair share of risks—from liability issues to property damage and beyond. That's why securing the right insurance isn't just a precaution; it's a vital part of your business strategy. Regardless if you operate as a DBA, LLC, or sole proprietorship, having the right type and amount of insurance ensures that unforeseen circumstances don't jeopardize your hard work. Protect your business, safeguard your assets, and keep your operations smooth, no matter what comes your way.

Get a quote today for small business insurance.