Does Your Small Business Need to File a DBA?

Like many other entrepreneurs before you, you decided to make a leap into self-employment. You likely did so on your own, as a one-person shop — and when you began, the priority was probably to just make your idea work.

You needed to be profitable enough to cover your expenses, pay taxes, and have something left over to use in your personal life, too. Many people don't make it through this initial stage, so kudos to you!

But now that you've made it this far, it's time to ensure you're operating properly as a business entity — taking care of minutiae you had decided to worry about later. One of those details is filing a DBA, which stands for "Doing Business As." A DBA is the operating name of a company, which can be different than the legal name.

If you're a sole proprietor, your business' legal name is your name. That might work well for you if you're an independent contractor or freelancer who wants to build a brand around your own name. Many writers, artists, and consultants do this.

However, if you want to operate and market your business under another name, then you might want to file a DBA. This document allows you to run your business under what's essentially a fictitious name, one that won't be registered as its own entity or require you to change your tax filing status.

How to Tell If You Need to File a DBA

If you run a small business but haven't created a legal entity for that business, it might be smart to file a DBA. While this document won't provide legal protections — you'd need to go through the process of registering your business as a separate legal entity to receive those — it does allow you to operate under a name besides your own.

Here's an example: Let's say John Smith wants to start a landscaping company. He already has all the equipment and can handle a number of customers on his own. He puts a sign on his trailer that hauls his equipment, proclaiming his business as "Superior Landscaping by Smith."

This is a fictitious name because John files as a sole proprietor, so from a tax and legal perspective, his business' real name is John Smith because he is the business. John should go and file a DBA that allows him to operate his business with the name "Superior Landscaping by Smith."

The DBA doesn't change John's legal status, but it does help make it clear that there's some separation between John the person and John the business. In addition, it also allows him to open bank accounts and sign contracts using the name he wants to give his business.

You might want to file a DBA even if you've already established your business as a separate legal entity through another type of business structure. If you're an LLC, a DBA can provide further proof that you are not your business, which can help enforce the legal protections your LLC is supposed to provide for you.

Ultimately, you need a DBA no matter what kind of business structure you currently have if you plan to do business under a different name than what's legally registered. If you plan to expand into subsidiaries or similar but different product lines or fields, you may need a DBA for each branch of your business if you brand and name it something other than its legal name.

Our friend John, for example, may need multiple DBAs if he one day expands into home maintenance ("Superior Repairs by Smith") and car washing ("Superior Shines by Smith"). Each arm of the business may need a separate website and branding — and each might need a DBA to stay compliant with the law.

How to Get Started

Creating a DBA is a simple process, but the tricky part is that requirements depend on local regulations. Check with your state and local governments to find out exactly what's required.

The cost for filing also varies by county and state, but the fees are usually fairly small. In Monroe County, New York, for example, it costs $33 to file an individual DBA.

The best way to determine how to get started is to do a search for "file a DBA in [your city]." Look for a city or county clerk page for further instructions and resources.

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Wednesday, November 7, 2018