You’ve decided to start your own business! Congratulations! Now what?
First things first – you will need to learn about the various ways you can choose to conduct yourself. Are you alone in this endeavor? Do you want to form an LLC, a corporation, a partnership? Unless otherwise specified, the default assumption is that you will conduct business as yourself, under your own name.
It’s likely, however, that part of the fun of starting your own business was coming up with the name! (And maybe part of the hard work — coming up with a brand identity.) So what happens if you don’t want to incorporate, form an LLC, or do business using only your name? Enter the DBA.
What is a DBA?
In most states, conducting business under an assumed name requires registering a “DBA,” or “doing business as.” (Alternatively referred to as “operating as” or “trading as.”) This simply means that you are notifying the state, and its citizens, of your business pseudonym. Depending on your state, you may need to register with your county clerk, the state, and/or publicly publish a notification. (It is important to note that registering a DBA does not create a trademark for your company, and that you will need to do this separately.)
Why Choose a DBA?
A DBA is the easiest and most cost-effective way for sole proprietors (i.e. freelancers) and other small businesses to choose a company name without incurring the expense of incorporating. It allows you, the business owner, to create a brand and an identity without jumping through unnecessary and expensive legal hoops.
(When you incorporate or form an LLC, you will have an opportunity to choose a new business name and will not need to register a DBA. However, DBAs can be used by corporations or LLCs in order to rebrand or introduce new products and projects under one single corporate umbrella.)
Designating a DBA will also assist you in setting up company bank accounts and staying compliant with the law.
One of the (many) important steps in starting a company is to set up new bank accounts, designated for company use, and independent of your personal finances. Many banks require proof of a DBA before you can do this or receive payment in your company’s name. As such, the sooner you file a DBA, the sooner you will be able to cash that hard earned money!
Filing a DBA will also help to ensure that you can enforce contracts signed on behalf of your company, and that your contracts won’t be invalided due to naming issues. Without a DBA, any contract signed under your company name may not be enforceable in court (should it come to that). This will be particularly important as you start to contract with vendors and clients and potentially encounter failures to pay or perform as agreed upon.
If your state requires that you file a DBA, it’s also likely that it imposes penalties if you fail to do so. Some states will impose fines, refuse to hear any dispute related to the company in court, or even have your business shut down. At worst, depending on where you live, it may even be a misdemeanor to fail to file, which could have catastrophic consequences on your ability to fundraise or operate cleanly in the future.
All in all, if you are an individual or a relatively simple small business, your best option may be to operate as a DBA; it’s simple, straightforward, and will give you the branding and accounting capabilities you need without the extra steps that you don’t. If you do choose to go this route, make sure you know your state’s requirements and seek advice for any questions.