LLC vs. DBA: What Are the Real Differences?

0

LLC vs. DBA: What Are the Real Differences?

If you’re starting a business, there are probably a couple of three-letter acronyms you’ve heard: the LLC and the DBA. LLC stands for “Limited Liability Company” and DBA stands for “Doing Business As.” Although these terms are often mentioned together, they’re very different.

We’ll explore each one and explain the similarities and differences between LLCs vs. DBAs. You’ll understand the pros and cons of each and whether a Limited Liability Company or a Doing Business As name is a better choice for your new venture.

What Is a “Doing Business As” Name?

A “Doing Business As” (DBA) name is also known as a "fictitious” name, "assumed" name or a “trade” name. You file a DBA when you want to conduct business under a different name than what your business is normally called. 

If you want to do any of the following under a different name than your normal business name, you should get a DBA:

  • Interact with clients
  • Sell to customers
  • Market your business
  • Build a website
  • Promote your offerings
  • Provide products or services

For example, if you’re a sole proprietor called Steven Smith and you wanted to offer services under a brand like “Trust Works Client Management,” you would file a DBA to do so.

A DBA doesn’t change anything about your business other than the name it conducts business under. 

Not ready to form a business entity yet? Get a DBA instead.

When Sole Proprietors Might Get a DBA

The “default” name of a sole proprietor’s business is the sole proprietor’s name — most often, that is shown on their tax return. Sole proprietors who want to use a different name than their own name would file a DBA.

When Partnerships Might Get a DBA 

The “default” name of a business composed of two or more partners will often simply be the last names of those partners. Partnerships that want to use a different name instead of their own last names would file a DBA.

What Is a Limited Liability Company?

A Limited Liability Company (LLC) is a “separate business entity” that can be created by one or more people. You create an LLC at a state level by filing certain documents with the Secretary of State.

An LLC provides several advantages over a sole proprietor or partnership, including:

  • Liability protection: Any business assets are owned separately by the LLC, not by the owners. This means any liabilities of the LLC do not generally have any impact on the individual owner’s personal assets.
  • Simple taxes: An LLC does not pay taxes itself; instead, any taxes “pass through” to the owner’s tax returns. 
  • Enhanced reputation: An LLC requires some effort to set up and maintain and can be a good way to build a reputation with suppliers, clients and others.
  • Preferential tax treatment: In some cases, an LLC may choose to be taxed as an S Corporation, which can lower the amount of tax that it pays. 

There are three main types of LLC:

  • A single-member LLC that’s owned by one person.
  • A multi-member LLC that’s owned by two or more people.
  • An LLC that’s treated as an S Corporation for tax purposes. 

Are a DBA and an LLC the Same?

No, a DBA affects only the name of a business, whereas an LLC affects its entire structure. You can quickly and easily file a DBA, whereas an LLC takes a little bit more effort to set up and run. DBAs are different from both single-member and multi-member LLCs.

LLC vs. DBA Pros and Cons

A DBA is just a change of name, whereas an LLC is an entirely separate business. The only aspect of your business that a DBA changes is the name that it does business under. In contrast, an LLC brings in new requirements such as filing an annual report, being a party to contracts, requiring a Registered Agent and several other areas

  • DBAs are fast and easy to set up, with no ongoing compliance requirements.
  • LLCs do require more effort to create and do have ongoing requirements.
  • DBAs are filed at the local, county or state level.
  • LLCs are only formed at the state level.
  • DBAs do not need to file an annual report, whereas most LLCs do.
  • LLCs require you to have a Registered Agent; DBAs do not.
  • DBAs do not get any preferential tax treatment, whereas some LLCs do.

llc vs. dba

How Do I File a DBA?

You can file a DBA by completing some paperwork and filing it with your local, county or state authority. The details of where to file your DBA do vary depending on where you’re located. Alternatively, Incfile can file a DBA on your behalf

How Do I Create an LLC?

We have a complete guide to forming an LLC by yourself. Alternatively, Incfile can start an LLC for you for free.

What Can an LLC Name Itself?

An LLC has a wide range of options on what to call itself. You don’t need to limit the name to be similar to the names of the owners. Because you have a lot of options in what to name your LLC, if you choose carefully, you might not need to do business under a different name. This means your LLC may not need a DBA to conduct business.

Do I Need a DBA for My LLC?

If you have an LLC with a specific name but want to trade under a different one, you can file a DBA for your LLC. This works similarly to how you would file a DBA as a sole proprietor or partnership. For example, if your LLC is called Blue Widget Manufacturing LLC, and you want to trade under “Green Appliances,” you could file a DBA to do business under the new name. 

Does My Business Need a DBA or an LLC?

Here’s how to decide if you need an LLC or a DBA.

  • If you’re a sole proprietor or a partnership, and you just want to do business under a different name, then all you need is a DBA. 
  • If you want liability protection, to potentially enhance your reputation and the possibility of preferential tax treatment, then form an LLC.  
  • If you have an LLC and want to do business under a different name, then your LLC can file a DBA.

How Does a DBA Differ from an LLC, Tax-Wise?

A DBA makes no difference to the way that your business is taxed. If you’re a sole proprietor, partnership or LLC, then a DBA does not change how you’re treated for tax purposes. 

An LLC is treated as a “disregarded entity” for tax purposes. The LLC itself is not taxed — instead, the profits of the LLC “pass through” to the tax returns of the owners and are taxed there. This means:

  • A sole proprietor and a single-member LLC are taxed in exactly the same way by filing a Form 1040 tax return with an attached Schedule C and Schedule SE. A DBA does not change the tax treatment.
  • A partnership and a multi-member LLC are also taxed in exactly the same way, by filing a Form 1040 with a partnership schedule and by filing a Form 1065.

The only time that an LLC would be treated differently is if you have elected to have the LLC taxed as an S Corporation. Then you would file a 1040 and a Form 1120-S. You cannot choose to be treated as an S Corporation if you have only filed a DBA.



We hope that’s cleared up what you need to know about LLCs versus DBAs. Remember that Incfile can help you out, whether you want to file a DBA or start a $0 LLC.

Form Your LLC @ $0 + State Fee. Includes Free Registered Agent Service for a Full Year.

0
Paper List

Like What You're Reading?

Get fresh monthly tips to start & grow your LLC.

Related Articles

  • 32 Side Hustles from Home That Pay More Than $100 an Hour
  • 15 Items You Can Easily Flip for $100-$5,000 in Profit a Month
  • A Giant List of Self-Employment Ideas
  • 11 Out-of-the-Box Side Hustles for Women to Make an Extra $1,000 a Month
  • How to Pay Yourself as an LLC Owner
  • What Is an LLC? Super-Simplified Infographic
  • So You Moved? Follow This Guide to Moving Your LLC to Another State
  • If You're Not a U.S. Citizen, Can You Get an EIN for Your Business?
  • Understanding DBAs and How They May Be Beneficial to Your Small Business
  • 15 U.S. States with the Lowest State Fee to Start a Business Today
  • Are Non-U.S. Residents Allowed to Own a Corporation or LLC?
  • Need a Physical Address for Your Business?
  • 5 Virtual Address Services for Your Small Business
  • How to Create and File an LLC for Free
  • LLC vs. S Corp: Which Is Right for Your Business?
  • S Corp vs. C Corp: Differences and Benefits of Each
  • ​Do LLCs Get a 1099 During Tax Time?
  • Series LLC vs. LLC: Which One Do You Need?
  • PLLC vs. LLC: What You Need to Know
  • 7 Home Business Ideas That Double as Tax Write-Offs