What is a DBA (Doing Business As) and Do You Need One?

A DBA, also called a fictitious business name, a trade name, or an assumed name, stands for "doing business as." It's used to call a company by a name that's different from its legal, registered name (the name registered with the state or local government when the company was formed).

What Is a DBA?

DBAs are like the different versions of given names used by all sorts of folks, from presidents (Joe Biden is a Joseph) to billionaires (Microsoft's Bill Gates is really a William). But unlike a James who calls himself Jim or a Katherine who goes by Kate, business owners have to jump through some legal hoops before they can use a different name for their company.

Once a company has registered its name, that name can't be tweaked or changed the way people often alter their names, because governments and other jurisdictions need a consistent name so that they can identify the owner of a business if problems arise.

Owners must register a DBA before they can use a name different from their official name, and most states impose fines for using a DBA that hasn't been registered. Additionally, using an unregistered DBA on contracts and other legal documents could invalidate those agreements.

Which Businesses Need to Get a DBA?

The owners of limited liability companies (LLCs) and corporations are required to choose and register a company name when they file formation documents with the state. (Limited partnerships (LPs) and limited liability partnerships (LLPs) also choose and register a company name at formation.) Because there's no requirement to register a company structured as a sole proprietorship or a general partnership with the government, states automatically assign the owners' names to these business entity types.

The company name registered at formation or the owners' names become the legal, registered name of the company.

The rules for DBAs vary from state to state and by the type of business entity. Let's look at how DBAs work for different business entities.

When Do Sole Proprietorships and General Partnerships Need a DBA

In general, sole proprietors or general partnerships who want to call their companies by a name other than their own names need to get a DBA. Most states allow some deviation, as long as the owner's last name is included in the company name.

For example, if Jane Smith, a sole proprietor, wants to call her yogurt shop Jane Smith's Yogurt Shop, she wouldn't need a DBA. But she would need a DBA if she named her shop Jane's Yogurt Shop, Jane Smith & Friends Yogurt, or Yummy Yogurt Shop (because none of these variations would allow a member of the public to identify the owner of the business).

Here's why the above scenarios would not (or would) require the owner to obtain a DBA:

• Jane Smith's full name is clearly evident in the first example, so a DBA wouldn't be necessary. But it would be nearly impossible to identify Jane Smith if she used only her first name for the business (Jane's Yogurt Shop), and she'd need to register a DBA in that case.
• The addition of "& Friends" implies that the business has additional owners, and Jane would have to register a DBA to clarify who actually owns the company.
• Yummy Yogurt Shop gives no indication of who owns the business, so Jane would need to register a DBA to use that name for her business.

Do You Need a DBA for an LLC or Corporation?

As long as LLCs and corporations use the name the business is registered under, a DBA isn't required. As you'll see below, however, there are occasions when an LLC or a corporation might want to use a different name from the one that's legally registered, and they'll need a DBA in those situations.

When a Business Might Want to Use a DBA

Businesses often choose to use a DBA because it offers certain benefits: Some of the reasons include:

Marketing and branding for sole proprietors. A name like Yummy Yogurt Shop in the example above is more recognizable and memorable for customers than the name of the owner, but sole proprietors might not want to go through the hassle and expense of forming an LLC or corporation just to give their business a different name. Getting a DBA gives these business owners an easy option for achieving their marketing objectives.

Marketing and branding for LLCs and corporations. The business name of an LLC and corporation might not work as well as it once did as a company grows and expands. For example, let's say Roadrunner Cycles, a corporation that manufactures bicycles, decides to expand into cycling gear and other workout apparel. The corporate name gives no indication that the company also makes and sells apparel and accessories, but using a DBA name like Sports Enthusiast Wearhouse for the new division allows the company to separately market the business without forming a separate company. (DBAs usually can't be used to expand into additional states without registering as a foreign LLC.)

Branding for franchise owners. Owners of franchise businesses often register their business as an LLC or corporation under one name and register a DBA using the franchise brand to take advantage of its name recognition. (In these cases, the brand's owner would have no reason to object to sharing its name among its franchisees.)

Speed to market. Setting up a DBA is faster, requires less paperwork, and is typically less expensive than registering a new corporation or LLC.

To get a business bank account. While many banks allow sole proprietors to open a business bank account using their Social Security Number or Employee Identification Number (EIN), some also require you to provide proof that your business name is registered. Registering a DBA allows owners to get a business bank account in those cases.

For greater privacy. Using a DBA allows sole proprietors and general partnerships to separate their business from their personal life.

DBAs Don't Protect Your Name or Give You Limited Liability

It's important to understand that when a sole proprietorship registers a DBA, that act will not separate your personal assets from your business assets in the way that forming a corporation or LLC does. If you are sued or your business goes bankrupt, your personal assets can be used to pay any debts you owe, even though you operate under a DBA.

Another point to keep in mind is that, while some states don't allow two companies to have the same DBA, others don't restrict companies from using a DBA that's already in use. Clearly, you want a unique DBA. To make sure that another business can't use your DBA, you'll need to apply for a trademark.

How to Set Up a DBA

The procedure for getting a DBA varies by state. Check with your state to determine whether to file your DBA registration form with a state agency, like the Secretary of State, or a local government agency like the county clerk, and whether you can file online.

In general, you'll need to:

• Conduct a name search (available on the website of the agency that issues the DBA)
• Get a certificate of good standing if your business entity is an LLC or corporation
• Pay a fee (usually between $10 and $100), and
• Renew your registration periodically (typically every 5 or 10 years).

A few states –California, Florida, Georgia, Illinois, Minnesota, Nebraska, and Pennsylvania -- require you to publish a notice in a local newspaper of general circulation, stating that you'll be operating under a name different from your company's legal name.

Some states require you to operate your business for a period of time before you can apply for a DBA.