The initials DBA, which is the term for an assumed business name, simply stand for “doing business as.” A DBA, sometimes called a fictitious business name or trade name, is used by individuals who wish to open bank accounts or to receive income under a name other than their legal name. The term “legal name” is used here to mean one’s personal name, such as “John Smith.” Filing a DBA is much less expensive than incorporating, and may be all that is necessary for the small business owner. For instance, if John Smith wishes to own and operate a pizza restaurant, instead of creating a corporation for the entity “John’s Pizza,” he can simply file “John Smith DBA John’s Pizza,” and he is in business.
While the main advantage of a DBA is the cost savings for a small business, the main disadvantage is personal liability for business debt. If your business fails, you do not have a corporate umbrella to protect your personal assets. This means that you can be made liable personally for the debt of your business and could lose any personal assets that are not otherwise protected. Another disadvantage is that you do not have any legal protection for the name you have chosen and some other entity can open a business under the same name.
However, while filing a DBA does not necessarily protect your chosen name from the use of others, it is still a good idea to check through other corporate and DBA names before choosing a name for your business so that you do not choose a name that has been used by several other businesses in your area. Remember when choosing a name that your business name is an important asset in branding your product or service and you should be sure to choose wisely. Obviously, the best names will be easy to pronounce and easy to spell, but not necessarily very common. Be sure to pick a name for the long haul, because you don’t want to have to rename your business once you’ve got everything in place.
Once you have a DBA, should your business grow, you may want to incorporate at some point. Also, if you intend to open up several business ventures or franchises, you could set up a parent corporation and then file a DBA for each of the smaller businesses. Obviously, this would be much less expensive than incorporating each franchise separately. While it is not always necessary to seek the advice of an attorney to file a DBA, if your plans include an eventual incorporation, you may want to consult an attorney prior to initially setting up your DBA.
Obtaining a DBA is handled differently in each state and is sometimes accomplished at the county level. Therefore, the necessary forms and fees are different depending upon where you live, so you will need to contact the Secretary of State or other state agency to determine exactly what to do to register your DBA. There could even be a requirement to publish your new DBA in a local paper and file proof of the publication.