A DBA or “doing business as” is the assumed name that a company uses instead of its legal name. You’d typically use a DBA when you prefer not to use your name or the registered name of your business.
Like all the other types of business filings, there are numerous drawbacks and benefits of DBAs. Also, the laws for DBAs vary from state to state. For instance, some states wouldn’t allow two businesses to use the same DBA.
However, these changes don’t undermine any of the benefits that you’d still get.
Let’s quickly jump into the various benefits of DBAs that entrepreneurs get when they file for one.
Benefits of DBAs You Must Know
Here are the many benefits of DBAs that every entrepreneur must know before filing for one.
1. Easy Compliance
When you want to start a business, you need to get it registered. The process for this can be complicated for the average entrepreneur as you’ll need to select from a wide range of business structures.
One of the biggest benefits of DBAs is that you’re saved from all the trouble of establishing a limited liability company (LLC) or a corporation. Instead, the DBA allows you to use your business name legally.
This is a win-win situation for you as you’re saved from all the compliance efforts and can still use the business name.
2. Can Open Business Bank Accounts
One of the most essential requirements for any business is a business bank account. It lets you keep your business finances in a single location and also allows you to receive and send money.
While you’d typically need to establish an LLC or corporation to get a business bank account, you’re saved the trouble if you opt for a DBA. You can open a bank account for your business even with a DBA.
Given that the process of establishing a DBA is simpler than that of an LLC or corporation, you’ll also be able to open a bank account for your business quickly. This proves to be one of the major benefits of DBAs.
Flexibility is yet another important benefit of DBAs. As DBAs are easy to file, you can choose to establish multiple DBAs for your business while keeping them all under one umbrella LLC or corporation.
This can come in handy especially when you’re branching out your business into different states or industries.
- Different States: Just as the rules for companies vary with the state, so do the business names. While your business name would be unique and distinguishable within your state, that might not be the case in other states.
In such a situation, registering a DBA can be helpful as you can expand your business into other states even when your legal name is being used there.
- Different Ventures: If you’re branching out, it’s recommended that you keep all the business activities separate for each segment. This can help you manage them better and also understand how they’re performing individually.
While establishing an LLC or corporation for each of these could prove to be challenging, you can get a DBA done with relative ease.
As a result, you can have new ventures with different names, but all will be clubbed under your original LLC or corporation.
However, for all of this to work, you need to establish an LLC or corporation in the first place. As the process can be challenging, you can reach out to agencies like GovDocFiling who can get it done for you.
4. Low Cost
If you’re cash-strapped or starting out with a small budget, establishing a full-fledged LLC or corporation can prove to be slightly expensive. On the other hand, the cost of setting up your DBA is fairly low.
This, coupled with the ease of getting the fictitious business name, is one of the biggest benefits of DBA.
A DBA typically has only a registration fee and a renewal fee. On the other hand, an LLC would often require the payment of state taxes as well, which would add to your expenses.
Similarly, the running costs of the DBA could well be lower than those of LLCs or corporations as well.
5. Privacy Protection
If you’re a sole proprietor or partnership firm, you may want to keep your individual names away from all the public-facing materials. However, that wouldn’t be possible with the regular structure.
DBAs can help hide individual names behind the fictitious name, thus protecting your privacy. You can use the DBA in all of your public-facing materials and documents, which, in turn, would mean that your names would never be revealed directly. This is one of the major benefits of DBAs for entrepreneurs.
6. Build Brand Awareness
When you have a DBA, you can leverage it to develop brand awareness for your business too. All you need to do is get a catchy DBA name that will be easy for your audience to remember and then start promoting it.
This way, you will still hold the rights to your business and be able to market it under a different name.
A DBA can be advantageous for both new entrepreneurs and existing business owners. It’s relatively easy to establish and also more affordable than forming an LLC or a corporation.
Also, it can help you with compliance as you can start doing business with a DBA too. As a result, it’s also possible to open a business bank account using it.
Additionally, DBAs offer a lot of flexibility in terms of branching out your business into different states and industries. You can also leverage the DBA to build brand awareness if your brand’s registered name isn’t catchy enough.
Finally, you can protect your privacy by using a fictitious name if you’re a sole proprietor or have a partnership firm. You can use the fictitious name to promote your business without revealing your identity.
Do you have any questions about the benefits of DBAs mentioned above? Ask them in the comments section below.