Many prospective entrepreneurs and new business owners are often unaware of the concept of establishing a fictitious name for their company. Although this idea may seem unnecessary, or even illicit (given the term “fictitious”), the process is actually and often fundamental step when setting up a business. By adopting a DBA (shorthand for “doing business as”), 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 is this such a common step for many companies? 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:
Are you working with established clients or companies?
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.
Do you offer diverse products or services?
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.
This strategy can be much more effective for certain types of business. 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.
Do you need a marketable business name?
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.
Are you using multiple branding strategies?
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.
Do you need to establish 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.
Swyft can help!
Swyft Filings is staffed with knowledgeable professionals that can help you tailor a business plan to your specific needs. Contact one of our experienced business professional today, and get started with your DBA.