You may have noticed, as a consumer, that some companies go by different names. You may even be wondering how you might do the same for your business. The answer lies in something called a DBA. And if you’re asking “What is a DBA?” you’re at the right place.
By the end of this article, you’ll get a better understanding of the DBA meaning, which businesses need one, how to set one up, how taxes work with DBAs, and more. You’ll also find some examples that’ll help illustrate how DBAs can benefit a business.
What is a DBA & What Does It Stand For?
DBA is an acronym for Doing Business As. This refers to the customer-facing name that a business uses that is different from its legal name. When opening a company, a business owner will have the option to register a DBA with their state, city, or country.
A DBA is sometimes referred to as a trade name or operating name. It is not the same as the legal name used in the company’s official documents.
Do I Need A DBA?
Some states require business owners to register for a DBA when opening a business. A DBA is recommended for certain types of legal entities.
In sole proprietorships and partnerships, the owners’ names would be registered as the legal business name. A DBA would be beneficial for sole proprietors or partnerships if they want to conceal or protect their individual identities and conduct business with a different operating name.
Franchise owners should also obtain a DBA. Normally, the franchisee would first register their LLC or corporation under a legal name of their choice. For example, Jane Doe may register her company as Jane Doe F&B LLC. Her DBA would be “Wendy’s”, to align with the brand.
A corporation or LLC may also opt to register a DBA. For these business entities, a DBA may serve as an operation name to distinguish a new division or branch of the business. Doing so helps them save money from having to establish a new entity and file a separate tax form. Additionally, a company undergoing a rebranding has the option to change its customer-facing name by filing a DBA.
One of the conditions for DBAs, however, is that only corporations may use the words “corporation”, “Inc.”, “incorporation”, or “corp.” in their DBAs. No LLC or sole proprietorship is allowed to use these words in their business name, fictitious or not.
What Are Some Examples Of DBAs?
Let’s say John Doe opens a Thai restaurant. John Doe registers his legal entity as “Doe Eateries LLC” with the state and the IRS. His DBA is the name of his Thai restaurant, Thai Temptations. All his customers know the place as Thai Temptations because it’s on his restaurant signboard, social media profiles, and the Yelp reviews say the Pad Thai is to die for.
Or, if Sole Proprietor Layla Morgan wants to provide her freelance wedding planning services, her sole proprietorship would be legally registered with her full name, Layla Morgan. However, as a sole prop, she must file a DBA. So, she conducts business as Layla’s Lovely Weddings. This helps protect her personal identity.
When filing tax forms or legal documents, companies may need to spell out their DBA. For example, Doe Eateries LLC DBA Thai Temptations, or Layla Morgan DBA Layla’s Lovely Weddings.
How To Set Up A DBA
Setting up a DBA is an inexpensive and easy procedure. First, you need to decide on your DBA name. You should do some research at this point because you can’t file a DBA that’s already in use by a different company.
Then, you need to check with your state laws. Some states require businesses to register fictitious names. The fees also vary from state to state but you can expect to pay from $5 to $150 per name. You can register multiple names, too.
If you prefer not to shoulder the burden of paperwork, you can outsource this to agencies that specialize in filing DBAs. They can get it done in minutes for a fee. While you’re at it, it’s also a good idea to check if you need to renew your DBA regularly, and if so, how often.
Registering a DBA does not mean you have registered for a business. Your business needs to be registered with the Secretary of State and then you can obtain a DBA.
How do taxes work with a DBA?
This may come as a surprise to some, but having a DBA does not affect how a company does taxes. This is because a DBA is just an operation name and not a legal business entity of its own.
When you are filing your taxes, use your company’s Employer Identification Number (EIN). Simply follow the tax procedure as stipulated for your legal entity’s tax classification, whether that is a sole prop, partnership, LLC, or corporation. Be sure to report any DBAs used on your tax forms.
How do I transfer my DBA to an EIN?
It is not possible to transfer a DBA to your EIN (Employer Identification Number). Remember that a DBA is just a fictitious name. You do not need to apply for a new EIN if your business registers a new DBA.
An EIN is assigned by the IRS to identify a business for tax purposes. This means that each business only needs 1 EIN, no matter how many DBAs they have. If you are changing your legal business name, you do not need to file a new EIN either. You do need to inform your state and IRS through written notice.