Definition of "DBA (Doing Business As)"
Doing business as, or DBA, means an official moniker for your enterprise or company. Regularly, a DBA is a state certificate serving as a registration name and issued under a company’s or principal’s address, where the actual business is conducted. We can also define DBAs as fictitious or made-up trade names.
What do DBAs imply legally?
DBAs do not qualify as business structures or individual legal entities. You must know that such business entities do not supply your asset protection or provide liability protection.
On the other hand, business owners with DBA can accept payments legally. Secondly, they can open bank accounts. Then, they can market their business, services, and products under an additional yet fabricated name. It is crucial to understand how DBAs are different from LLCs.
What does a limited liability company (LLC) stand for?
An LLC is a widely-known, flexible, and straightforward business structure. Starting an LLC establishes your brand credibility and asset protection. For this reason, we recommend it for small companies and entrepreneurship. A limited liability company acts as a legal entity and is separate from its owners.
Most importantly, it keeps the proprietor’s valuables secure if a lawsuit is filed or in the event of an unpaid business debt.Furthermore, the US government does not tax an LLC’s profit, and the owners pay tax on their earnings once.
An LLC offers limited liability protection, straightforward maintenance, and pass-through taxation.
Why is Doing Business As beneficial?
With such a restricted scope of action, you may wonder why DBAs are essential. DBAs can help you enhance your distinctive business label, such as your real estate branding. Moreover, it can genuinely contribute to your business growth.
Did you know you can also use a DBA as an informal business structure?
Suppose you invent a creative brand name. Then, you can apply for a DBA to protect that specific business name from being used by others.
Examples of Doing Business As
Let's look at a real-life example of a DBA. For instance, you run a company called Morty's Extraordinary Real Estate. Then, later you decide to shorten your company's name in MERE. You can choose even "Friendly Realtors Dowtown," because clients in the neighborhood know you by that name. A Doing Business As will enable you to legally do business as such.
Note that you won't benefit from liability protection if you're a DBA's sole proprietor. In other words, suppose your business gets dragged into court. In that case, your personal assets won't be provided with legal protection or insurance. Secondly, your business assets, such as cash and realestate, won't be protected either.
Should real estate investors choose LLC or DBA?
What are the primary differences between an LLC and a DBA? As we already mentioned, a DBA won’t protect your personal assets as it has no legal force, unlike an LLC. As an aspiring real estate investor, you must decide how to run your business through a DBA or LLC.
Starting an LLC costs more than a DBA, reaching even $2,000, depending on the state. On average, maintaining an LLC costs an annual fee of $500 to $1,000. On the other hand, you can launch your DBA for $500 or less. Then, there's no extra annual cost.
In your decision, you must look at the personal assets you wish to protect. Suppose you're a rookie with only a few valuables to watch and purchasing your first rental property. In that case, setting up an LLC might not be worthwhile. Suppose you have many assets to protect, such as a retirement account or equity in your home. In that case, you should definitely go with an LLC. Don't hesitate to contact your real estate attorney for more information and expert legal advice!
Final thoughts
The fundamental idea is that everyone runs their business under a recognizable name. However, it may not be the venture's official name. Companies can set up a DBA under a nickname entirely different from the brand. A DBA functions as a placeholder to claim official use and registration of a specific name, so no one else can use it.
Remember, though, that you get no name separation (unlike at LLCs) and taxadvantages with a DBA.
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