What is the Difference Between a DBA and LLC?

When first setting up a business, choosing a business structure is one of the most critical decisions. How the business is structured can have significant legal and tax implications. This guide will look at what it means to be a DBA and LLC. You’ll be able to answer questions such as the difference between a DBA and LLC, how the two business structures differ, when you might need one, and things to consider when choosing a business entity.

What Does ‘Doing Business As’ Mean?

‘Doing business as’ or DBA refers to the name used by the business, such as an assumed business name or trade name. In this case, it refers to a name that is different from the legally registered name. In other words, when you register a business, the legal name defaults to the name of the person in a DBA or an entity’s registered name in an LLC.

A DBA allows you to operate a business under a different name from the registered name. To acquire a DBA, you must file and comply with your state’s requirements. These requirements vary by state. DBA’s were first established to protect consumers from dishonest business owners who used different names to escape legal troubles.

What is a DBA for an LLC?

To put it in better perspective, a sole proprietor needs to file a DBA if their business name is different from their legal name. Under a sole proprietorship, owners and their business entities are the same.

Do I need to file for a DBA if my business is an LLC?

If Your business is an LLC, you don’t necessarily need to file a DBA. That’s because the name of your business is already filed and registered with the state. However, if you want to do business with a name other than the registered name, you must file a DBA for your LLC.

What is an LLC ‘Doing Business As’?

There are several instances when an LLC would want to file a DBA. LLCs commonly register a DBA name when they want an alternate name for a specific line of business or want to expand the business into different services, stores, or websites.

You can start by using a generic name when forming the entity. You don’t have to form a whole new business when branching out and wanting to operate under a somewhat different name. Instead, you can just file a DBA for the various branches of business. This saves the company a lot of money and time.

What is a DBA Name of Business?

A DBA without a legal business structure defaults to a sole proprietorship. This means that the owners are liable for the business activities. Your personal finances could be at risk if your business fails or if a lawsuit is brought against you. To avoid using a surname as the business name, you must acquire a DBA for your sole proprietorship.

When Should You Switch From a DBA to an LLC?

There are several reasons why you might want to switch from a DBA to an LLC.

• Liability Protection. An LLC offers some liability protection by completely separating the business from the owner’s personal assets.
• Privacy. Since sole proprietors are registered using their surname, LLCs offer a little more privacy since they are registered in the business entity’s name. Business owners can more easily keep their identity secret with LLCs.
• Professionalism and Credibility. An LLC looks and sounds more professional than a sole proprietor DBA.
• Branding. LLCs can use their legal name as their brand name. Sole proprietors have to file for a DBA to use a name other than their surname.
• Expansion. As mentioned before, LLC business owners can operate multiple branches of the business under one business entity without forming separate companies by registering each branch under a different DBA.
• Website. If you ever want to spill over into e-commerce and launch a website, you can list your LLC company’s domain name as a DBA instead of forming a separate e-commerce business.

So, what is the difference between a DBA and an LLC? The most significant difference between a DBA and an LLC is that an LLC is the business structure assigned when forming a new legal business entity, and a DBA is a process for changing a sole proprietor’s business name to something other than a surname or changing the name of the LLC to something other than the name the business was registered in.

Getting the Most Out of Entity Optimization

If you are a small business owner and are looking to see what the legal and tax implications are based on your business structure, tools such as Corvee tax planning software help taxpayers quickly find the strategies available to them based on the structure of their entity. Learn more about how Corvee automatically helps you make the best Entity Optimization decisions by signing up for a demo today.