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Having a DBA — or “Doing Business As” name — for your small business can help when it comes to connecting your fictitious company name to your product or service. It can also be used if you are a sole proprietor or opt to form a business entity such as a Limited Liability Company (LLC). But how does a DBA work for those who choose not to form a legal business entity compared to those who do? And is there a limit to the number of DBAs that you can form? Let’s look at these questions, as well as when and how using DBAs can benefit your small business.
Operating Mulitple Businesses Without an LLC
Although the Limited Liability Company (LLC) is one of the most popular types of business entities formed each year — with a growth rate of 20.3 percent in the last 5 years — the current number of LLCs to sole proprietorships in the United States is fairly even. (As of 2021, there were approximately 21.6 million LLCs and 23 million sole-proprietorships.)
Most self-employed individuals fall under the category of sole proprietor at some point. If you are a sole proprietor or independent contractor, the business is yours, and unfortunately, there is no separation or distinction between your personal assets and your business assets.
The good news is that whether or not you’re an incorporated or unincorporated business entity, you can still work under a fictitious or assumed name, more commonly referred to as a DBA or "Doing Business As." Having a DBA for a sole proprietorship will help brand your product or service and give it its own distinct name as opposed to keeping it directly linked to the name of your business, which may just be your own legal name.
Whether you are a sole proprietor or have started an LLC, the steps of obtaining a DBA are similar. And the good news is that you can obtain multiple DBAs for your businesses depending on what your needs are and how your business grows.
For example, if you are a party planner and want to expand into baking cakes, cookies, cupcakes, etc., you can apply for a DBA and promote your new venture: Goodies-n-Sweets. Now if you branch off again and focus on entertainment, you can brand a new side of the business and form Clowns-n-Town. Now, as fun and easy as this might all sound, there are some implications involved by not having an LLC, with the main risk that there is no distinction between your personal assets and your business assets, making you vulnerable to a lawsuit.
Operating Multiple Businesses with an LLC
As opposed to operating a business as a sole proprietorship, the main benefit of forming a business as an LLC is that it offers legal protections and separates a business owner's personal assets from the company's assets. Though the process of forming an LLC is more involved than working as a sole proprietor, for many, the benefits are worth the steps for creating this type of business entity.
If you operate more than one business, forming multiple LLCs will also help protect the other businesses by keeping potential liabilities segmented. This will help keep liabilities from spreading the risk of litigation to other businesses that you may own. The company debts will also not affect or be linked to personal assets.
Can I Use the Same DBA Name for Two Entities?
For most states, two businesses will not be allowed to use the same DBA. Doing so will cause confusion, especially when the fictitious names are in the same industry. In order to use a DBA for your business, you must submit an application. Just make sure that your fictitious name isn't already taken!
You can also use your DBA in multiple states, as long as you have an LLC in those foreign states. You can use the same fictitious name or tweak it to reflect specific locations. For example: Gold Coast Goodies-n-Sweets (California), Island Goodies-n-Sweets (Hawaii), East Coast Goodies-n-Sweets (New York), etc.
How Many DBAs Can You Have?
The short and to-the-point answer is as many as you feel you need for your business. There is no limit to the number of DBAs that you can have, but make sure to check your Secretary of State's website to make sure.
Again, the benefit here — especially as it relates to sole proprietors — is that you can conduct business under the name of your DBA as opposed to your legal name. For LLCs, it gives the opportunity to expand branding and also operate a part of the LLC in a name different than what appears on the entity’s original incorporation documents.
Filing for each DBA comes with a cost, which will vary by state or county. DBAs will help improve the visibility of your product and service and target a specific market. For example, Pete’s Party Planning business also advertises as Goodies-n-Sweets as well as Clowns-n-Town. And as the business grows, there may be a need to branch into other directions. Just keep in mind that you'll need to file separately for each DBA.
The Benefits of Having Multiple DBAs
Simply put, the benefits of having multiple DBAs under one LLC are that you are able to grow and target your business better. This works just the same for a sole proprietorship. However, there are risks and benefits for both of these types of entities.
Some key pros of having a DBA for your sole proprietor business can include:
- Targeted branding: Your product or service will resonate with key markets and you’ll have the flexibility of branching out and promoting your services to these specific client groups.
- Privacy protection: You are no longer advertising your name but rather are now promoting the business under a “fictitious” name.
- Added credibility: Lets clients and customers know that the business has the necessary experience and capabilities to meet their specific needs.
Cons for a sole proprietor include:
- Filing and maintenance costs: Filing for a DBA can cost as much as $50 per application, but that varies by state.
- Liability risks: These can spread to different segments of the business under separate DBAs.
- No exclusivity to the business name: Unlike a trademark, a DBA does not protect the assumed name that you are operating under. In fact, companies in other counties or states may use the same name. Your DBA name cannot be used in your legal paperwork either, which may lead to confusion with clients, vendors and creditors.
Although a number of these pros can also apply with multiple businesses under one LLC, one distinguishing factor and benefit in a limited liability company is that it protects private assets by keeping them separate from the business. So if the LLC is sued, the liability is limited to the LLC. This factor alone may be reason enough to consider incorporating your business.
Peter Mavrikis is an author and editor with over 25 years of experience in publishing. He has worked as the Editorial Director for Barron’s Educational Series, as well as Kaplan Test Prep, where he ran the test prep, foreign language, and study guide.
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