Legal Structures 101: Comparing DBAs and LLCs and Their Implications for Your Business

When starting a business, one of the first decisions you need to make is what legal structure to use. Two common options are a DBA, or “Doing Business As,” and an LLC, or Limited Liability Company. While both allow you to operate a business, there are some key differences between the two.

A DBA, also known as a “trade name,” “fictitious name,” or “assumed name,” is simply a way for an individual or partnership to operate under a name that is different from their own. For example, if John Smith wanted to operate a landscaping business under the name “Green Thumb Landscaping,” he could register a DBA for that name. A DBA does not provide any legal protection or liability protection. The individual or partnership remains personally liable for any debts, liabilities, or legal issues that arise.

An LLC, on the other hand, is a separate legal entity from its owners. This means that the business itself can be sued or held liable for any debts or legal issues that arise, rather than the owners being held personally liable. LLCs also offer tax flexibility and a greater level of credibility and professionalism compared to a DBA.

To form an LLC, you must file articles of organization with the state and pay a fee. You must also appoint a registered agent to receive legal notices on behalf of the company, and you must follow certain record-keeping and reporting requirements. While the process of forming an LLC can be more complicated and expensive than registering a DBA, the benefits of limited liability and tax flexibility can make it a worthwhile investment for your business.

In summary, a DBA is a way to operate a business under a different name, while an LLC is a separate legal entity that provides liability protection and tax flexibility. When deciding which option is right for your business, consider the level of liability protection you need, the tax implications, and the potential costs and complexity of formation. It’s always a good idea to consult with a legal or financial professional before making any decisions about your business structure.