Understanding DBAs and How They Can Be Dangerous for Your Small Business #infographic

 

Understanding DBAs and How They Can Be Dangerous for Your Small Business #infographic

Many small business owners believe like they can get by and therefore opt to run their business with a DBA ("Doing Business As") tag, often referred to as a fictional business name or trade name, without creating an LLC.

It is better than nothing to use a DBA name for your company, which gives you a more "official" business name that you can place on business cards and on your business website. It helps provide an aura to your organization that is different from merely doing business under your own name.

The benefits usually end there, though. A DBA name does not give you any special safeguards and can also be dangerous if you do not have a corporate framework set up for your company, such as an LLC or S Corporation.

There are a few key reasons why it can be dangerous to run the company with a DBA:

Lack of Naming Rights: Using a DBA would not grant your company name official rights to you. Anyone registering a legitimate business company will take the DBA name if you have not formed a business and assigned it the name of the DBA. It does not grant you any permanent rights to the company name only because you have been using the DBA name, even for years.

 Here at Incfile, we sometimes hear from clients who tell us stories like, "I've had this company name for 10 years" as a DBA name, but because they never formally registered an LLC or formed a company by that name, and never took action to mark the company name, the DBA name was not "theirs" officially and was thus able to be taken by a rival.

The response for most individuals is no, unless you choose to run your organization under a name other than LLC. For certain persons who use a DBA, it means they operate as a sole proprietor. (Jackie Jones, for instance, works as a sole proprietorship graphic artist, and she likes to do business as "Jackie Jones Designs.")

In this case, with a sole proprietor, the DBA is a normal person's addition. Although if you act as an LLC or corporation, then the enterprise is regarded as a independent legal body that is distinct from the individual or persons who own it.

As mentioned earlier, if your LLC has a name that is not applicable to part of your business, and you want to provide a different product line or different service area, a DBA is useful for an LLC.

Let's imagine, for starters, you own a company called Joe's Handyman Services LLC and you want to start providing plumbing services and general mechanical services. Filing DBAs for these various types of services would allow you to retain your current LLC without a new business company needing to be created. "With" Joe's Mechanic Services "and" Joe's Plumbing Services, "you can keep your current LLC and file DBAs, but both are included in the same LLC 's overall umbrella.

This helps you, under a new name, to extend your offerings and perform business, but also be covered under your current LLC. "For example:" Joe's Handyman Services LLC DBA: Joe's Mechanic Services. "This means that under the same LLC name , the company is able to provide several business lines.

Jane chooses to file a DBA named "Jane's Home Staging and Photo Services" for this new line of operation. In this situation, filing a DBA will help a business owner establish a different name for one part of her organization, without having to set up a separate LLC or other business structure.

Understanding DBAs and How They Can Be Dangerous for Your Small Business #infographic

infographic by: www.incfile.com

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