Many prospective entrepreneurs and new business owners are often unaware of the concept of establishing a fictitious name, or DBA (shorthand for “doing business as”), for their company. Although this idea may seem unnecessary, or even illicit (given the term “fictitious”), the process is actually and often a fundamental step when setting up a business. By adopting a DBA, any business is legally allowed to represent itself with a name different than the one that they have established with the state (unless it is trademarked or already in use).
Why would you need a DBA?
While the specific reasons for taking on a DBA vary from business to business, a DBA may be the right choice for you. Read ahead for the most common, and notable reasons:
The most comment reason for filing a DBA:
Informal business owners (those operating under a sole proprietorship or general partnership) are forced by law to operate their business under his or her (or their, in the case of partnerships) personal name(s). While this can be advantageous for certain types of professionals, or for businesses that rely on personal networking, this personal identification requirement may cause some issues with developing credibility. If you are facing this issue, you may think your only option is to formally incorporate, but these business types can establish a DBA to conduct business under a preferred name instead of a personal one.
The ability to open financial accounts
- Some banks or other financial institutions require sole proprietors or general partnerships to have a DBA established before they will be allowed to set up an account. Even if you wish to continue conducting business under your personal name(s), you will still need to have a DBA before some institutions will open an account for your business.
- If your company markets the same product to two distinct types of consumers, with separate marketing strategies for each, establishing a DBA can be the ideal solution for effectively reaching both demographics. A DBA allows you to conduct business with each type of client under a name that directly appeals to them. For example: Your company is actively marketing a product to retailers and directly selling the same product to consumers. It would be wise to establish two separate marketing initiatives, one that appeals to each of these markets. Establishing a DBA would allow you to sell to both of these types of consumers under two distinct names.
Public announcement of a name
- Filing for a DBA does not prevent other organizations from using the name, but it will deter savvy marketers from trying to compete with it. This can be beneficial for businesses that have long term branding or marketing plans.
Diverse product or service offering
- Filing a DBA might be ideal for your company if you are looking to market two seemingly unrelated products or services. This allows you to conduct business under one name for one offering, and then use another fictitious name for the other.
- Here’s an example of a DBA being used to help a business diversify: A tech company wants to offer IT systems to businesses, but also sell high end home theaters to private consumers. The company could use one name for its IT business clientele and another name for its consumer-based operations, but still just operate one company. This eliminates the need for two payrolls, two invoice systems, and two tax returns.
Working with larger organizations
- For a variety of reasons, many larger organizations will only contract with companies that operate under a formal business structure. However, sole proprietorships or general partnerships can occasionally meet this requirement by simply filing for a DBA, which allows your business to present itself as something other than just the owners’ personal names. This can mask the fact that the company is not officially incorporated. As long as any services rendered or products that are supplied are satisfactory, this rarely causes any issues. Even so, it should be noted that it is never advised to intentionally mislead a potential, or current, client in any way.
Increasing name availability
- Many times, a state will say that a name is not available for a new company because it is too similar to another company name already registered in the state. That doesn’t necessarily mean the law prohibits the use of the name. A company can register at the state level under a very generic name that is available and then file a d/b/a to operate under its cooler DBA. Conversely, just because an individual or company obtains a DBA, it does not necessarily mean the company has all the legal rights to use that name in all locations. Nevertheless, many companies exercise this strategy to operate under a name the state won’t let them use when they formally registered the LLC or corporation.
If you’ve already adopted a more formal business structure, a DBA may still benefit you. Your product or service could be marketed differently to different demographics. Having a DBA would allow you to reach each group with targeted marketing.
The process of filing for a DBA
Where to file
Depending on where your business has been formed or incorporated, you may need to file for your DBA at either the state, county, or possibly even the city level. It should also be noted that you would need to acquire a DBA to operate locally if your business was established in a foreign state.
How to file
The first step when filing for a DBA is to do a preliminary check for name availability in the jurisdiction in which you will be filing. If the name is available, you will then need to fill out the required paperwork with the appropriate agency, and then pay any related fees. Some jurisdictions will also require that you publish a notice (or notices) of your company’s new alias.
What name should you use?
A DBA cannot be used to mislead the general public in any way. Because of this, you cannot use any terms that would lead the public to believe that you operate as a business structure under which you have not officially filed. For example, a sole proprietorship may not use the terms “company” or “incorporated” in its DBA, as this would send the message that the business was formally incorporated when it, in fact, is not.
Are there any publication requirements?
Some states do require that any business that acquires a DBA run a public notice in a local newspaper. Depending on where you are located, the exact details will vary. Our DBA filing service includes the fulfillment of any publications that your local jurisdiction requires.
The limits of a DBA
Do DBAs ever expire?
In many areas, DBAs do not have any set expiration dates. If you are located in an area where they do, you will receive official notice well in advance, and typically be given the option to renew.
How many DBAs can I have?
A business can have any number of DBAs. As long as none of the names violate any restrictions, and are properly acquired, you are free to file without limit.
Swyft can help!
Does it seem like securing a DBA might be beneficial for your business? Our experienced professionals are here to talk you through your options, and then help you put your plans in motion! Contact us today!