You might have a great business name, but is it legal? Or is it just a façade that could fall down when pressed by a legal issue such as a lawsuit? That depends on you, and your state, and the simple matter of registering your business name as a DBA — “Doing Business As” name.
Most states require you to register your business name, even if you’re just a self-employed individual. The penalties for failing to register vary from state to state. Missouri will fine you $1,000, New Hampshire won’t let you advertise, and Colorado will shut your business down. No matter the penalty, most states require you to register as soon as you start doing business.
Even if you’re not required to do so by law, it makes sense to register your business name. You might find it difficult to enforce a contract or sue a supplier or client for non-delivery or non-payment if the paperwork uses an unregistered business name.
It’s simple to find out the requirements of your state and your business, and it’s simple to register your business name as a DBA if it’s required. Here’s everything you need to know.
What counts as a business name?
If you’re a self-employed independent contractor, your state and the IRS will define you as a sole proprietor by default, dealing with you simply as an individual. But if you use a business name of some kind, the state can no longer identify you as an individual, so you will usually have to register the name as a matter of public record.
This public record is important in a well-regulated business environment so consumers can discover the owner behind a business name.
The most common exception to the need for a DBA is if your full name is part of your business name, such as “Jack Frost Ski Rental.” If you use a shorter name, like “Frost Ski Rental,” you likely still need a DBA because the name doesn’t fully identify the owner. In most states, when Jack Frost files a DBA as the business owner, the public record will show “Jack Frost DBA Frost Ski Rental.”
Why use a DBA business name?
Most business owners use a DBA name, and spend time coming up with one they like. Independent contractors often choose to use a business name because it looks more professional in business communications, especially with estimates and billing. And, of course, there are numerous marketing advantages.
Even as a sole proprietor, most banks want to see your DBA record when you open a separate business bank account. Everyone likes to know who the person is behind the name they’re dealing with.
If you’re in one of the half-dozen states that don’t require registration of a business name, you won’t need to register. But every state has a way to register a business name voluntarily, and it’s a good idea. Registering the name is one of the steps to protect it from infringement and keep your branding unique.
How to file a DBA
Look for your state’s website, which should provide a lot of business information in an easy-to-read format, and will be a valuable resource for many business issues beyond DBA filing. A simple search should clearly spell out who must file a DBA, what forms to use, and where to file.
Some states may refer to this filing as a “trade name,” a “fictitious business name,” or an “assumed name.” If your state requires you to file in the county where your business is located, but sure to check the website for the county clerk, too.
All states require proof of your identity and some may require that proof to be notarized. Some states might also require a notice of your filing in the local newspaper of record. In many cases you can do all this online.
You’ll need to make sure your chosen business name is available in your county or state. Your state government website should provide searchable lists of registered names in their records.
The fees involved in registering a business name are nominal, and the registration typically lasts for a long time, but be sure to check the renewal requirements for your state.
Assumed names for corporations and LLCs
The process described above applies if you operate as a sole proprietor. If you’ve formed a corporation or an LLC, then you’ve already filed paperwork that identifies who stands behind the business.
However, if your corporation or LLC does business under a different name from the one you registered with your state government, you will also need to register that assumed name. For example, if “JF Holdings LLC” does business as “Jack Frost Ski Rentals,” then that LLC needs to register its assumed name with the state or local government.
Seeking more protection?
Registering your business name is a good idea, and knowing the requirements of your state’s laws is essential if you are earning income as anything other than an employee. However, the DBA is only a matter of public record. The filing does not offer any other legal protections or advantages.
To seek liability limitations, hire employees, operate across state lines, separate your personal assets from business risk, and for countless other things, you should explore creating an LLC or corporation.
The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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