The paperwork and regulations associated with starting a small business can be overwhelming, and unfortunately, the confusion begins as soon as you start working on a business name. Between picking a a business structure, such as an LLC, and deciding on a fictitious name for your business, there is a lot of paperwork to go through and decisions to make. Fortunately, doing business as an LLC and using fictitious business names, can operate independently of each other, giving you some flexibility, as your business navigates the registration process and works to establish itself in the marketplace.
A "doing business as," or a DBA and a limited liability company are two different ways to refer to a business. Both names can be the same, or two different names can be used for the same business. A DBA is often referred to as a fictitious business name, and is the name most commonly used on marketing materials, advertisements and signage for a business. A limited liability company is a business structure used by a company to govern its operation and distribution of profits and losses to members at tax time. Because the names can be different, you can file formal paperwork registering your LLC using a legal name of your choice, such as John Smith Plumbing LLC, while using a fictitious name for day-to-day operations, such as John's Johns.
Advertisement Article continues below this adOperating as an LLC provides your business with numerous benefits over the sole-proprietorship ownership model. An LLC enjoys limited liability, as the name suggests. Owners of a sole proprietorship can find personal assets seized, when an operation goes under or a lawsuit is settled unfavorably. With an LLC, only the business assets are up for grabs. The cost of registering an LLC varies from state to state, with Louisiana charging $100 to file articles of organization, and $25 to reserve a name, while Colorado charges $50 for filing articles of organization as of October 2018.
An LLC also allows multiple partners to operate a business while maintaining different levels of ownership. If you put up most of the money to launch a business but relied on a partner for the last 25 percent of financing, ownership percentages of 75 and 25 percent can be set up to reflect the initial investment. Similarly, when one partner is more involved in day-to-day operations, ownership levels can reflect the imbalance. When the business files an information return with the Internal Revenue Service, a portion of revenue and expenses are assigned to partners based on the ownership percentages.
Advertisement Article continues below this adA DBA name provides your company with a form of anonymity, which may be important when you are organized as an LLC that is registered as your legal name. A DBA name also allows you the flexibility to change your branding and business persona without organizing a new LLC. The primary DBA cost is a filing fee to process the application through the a state agency. In Texas, the Secretary of State charges $25 for an assumed name, application while the New Jersey Department of Revenue charges for $50 for an application to use an alternate name for a period of five years, as of October 2018.
Because you can have both a DBA name and an LLC name, you need to consider your business branding and how you want to structure your business ventures. If you are a serial entrepreneur or you plan to run several side hustles under the umbrella of an LLC, you may want to differentiate each component of your business empire with a different DBA name. For example, John Smith Enterprises LLC may be your legal name with the state and the IRS, while you operate under DBA names like John Smith Auto Repair, John Smith Auto Parts and John Smith's Towing Service.