If you’re opening a new company, expanding an existing business or looking to start a freelance gig, you might be wondering whether you should register your company as a “doing business as” (DBA) or a limited liability company (LLC).
But it’s not really an either-or choice.
Although both options allow you to do business under a different name from your birth or legal one, it’s important to understand that an LLC is a business structure, and a DBA is essentially a registered nickname for your already established business.
Both can impact how you run your company, and you should know the similarities and differences so that you can make the right decision for your business.
LLC Vs. DBA: Definitions
The two acronyms often confuse fledgling entrepreneurs. Let’s start with the basic definitions and a few examples.
What Is a DBA?
DBA is short for “doing business as.” A DBA is an official fictitious name, assumed name or trade name that allows you to operate your business under a name other than your legal name.
If you operate a sole proprietorship or partnership, you’re required to use your legal personal name(s) as the name of your business. However, you can manage your business under a different name by registering a DBA with your local Secretary of State.
Since a DBA is basically a nickname and not a business structure, it does not provide the same legal protections you would receive from an LLC or any other business structure.
In addition to sole proprietorships and partnerships, DBAs are also commonly used by franchise business owners. Say a local business owner wants to open a McDonald’s franchise. That person may register the company legally as Amy’s Food Group LLC but use a DBA to operate and market under the McDonald’s brand.
Our DBA guide dives deeper into what DBAs are and how to file for them.
What Is an LLC?
An LLC, or limited liability company, is a legal business structure. LLCs protect the owner’s personal assets from the company’s debts. An LLC is treated as a separate entity from the owner(s), creating a financial barrier between them and the company.
Limited liability protection is one of the main reasons small businesses choose to operate as an LLC. This means that if you own an LLC, a creditor could only go after your company’s assets—but not your personal ones. An LLC can be owned by one or more people.
As an LLC, you operate your business under the name of your LLC, and you must establish a separate business bank account and use your company name when interacting with clients or customers.
LLCs can also file for a DBA and use a trade name that is different from the company’s name and the owner’s personal name. For example, the owner of Mana Bakery LLC may opt for a separate trade name to test out a new branding or marketing strategy for its new CBD cookies. Thanks to a DBA, the owner can do that without using the Mana Bakery name if they don’t want to.
For advantages, disadvantages and a deeper definition, see our guide to LLCs.
DBA Vs. LLC: Similarities and Differences
Yes, a DBA and an LLC allow you to operate your business under a different name, but that’s where the similarities end. Here’s a closer look at where they differ.
The process of setting up a DBA is much more straightforward than an LLC. You pay a one-time fee and aren’t required to fill out annual paperwork or a separate tax return.
However, it’s important to remember that registering a DBA does not mean the name you chose is trademarked. Someone else could trademark this name, creating complications for your business down the line. Still, a DBA can afford your business flexibility and credibility without going through the trouble of the paperwork and fees of establishing an LLC.
In addition, a DBA does not change the tax requirements of your company. If you register your sole proprietorship under a DBA, you’ll be subject to the same tax filings you were before registering your DBA.
On the other hand, an LLC is a business structure that is a pass-through entity, which means that the income or losses of the company are paid for through the owner’s personal returns. Opening an LLC is a more extensive process. The main reason to open up an LLC is for legal protection, if there are multiple people in your company, or if you want to take advantage of the tax benefits available on a local, state or federal level.
As a result of establishing an LLC, you will also register your company under a separate name. For example, Sam could open up an LLC for his personal training practice called “Living Well LLC.” He would accept payment as “Living Well LLC” and he would operate under this name.
In terms of cost, a DBA doesn’t have the recurring operation fees of an LLC. Typically, opening a DBA requires a one-time formal filing fee which usually costs under $200. For an LLC, you can expect to pay between a few hundred to one thousand dollars in registration fees in addition to recurring yearly fees and other fixed expenses.
When Should You Use a DBA?
DBAs can be helpful for myriad reasons and can allow business owners to operate under a different name without the headache of legally changing the name of the company.
As a sole proprietor, you may want a designated DBA for your company so that you may market and operate your business under a different name from your personal one.
A DBA is also a good solution if you already run a company, including an LLC, and want to branch out of your current offerings with a different name. For example, if you own a dog walking business and decide to expand to selling dog treats, a DBA will let you sell dog treats under a separate name while operating under your original business structure.
As mentioned above, DBAs are also useful for franchise business owners who borrow the names of well-known national or regional brands while owning the franchise location themselves.
Frequently Asked Questions (FAQs)
If you run a sole proprietorship as a DBA, you can always open up an LLC if you decide the business structure makes more sense for your company.
A DBA is not required for an LLC. When you open up an LLC, you’ll register a company name. However, you may use a DBA for your LLC to expand your business and operate part of it under a name other than your original business name.
Do I need an LLC for my online business?
You don’t need an LLC to run an online business. That being said, some people choose this business structure when they are opening or expanding an online company for the legal protection it offers.
The process for filing a DBA is straightforward and simpler than opening an LLC. You’ll be able to do this online, and you can expect to pay a one-time fee of under $200.
Forming an LLC is a relatively easy process, though it does require more paperwork and expenses than a DBA. You can either open an LLC online or with the help of an attorney or lawyer. In our guide to setting up an LLC, we broke down the process into seven simple steps.
