Understanding DBAs for Nonprofits
Whatever your industry, you’re certain to encounter a ton of challenges even before you get your new company off the ground. After all, the decisions you make during this critical stage will have effects that last the lifespan of your business. So before you leap straight into filing your business as a limited liability company (LLC), it’s valuable to take a step back and assess what type of business entity best fits your goals.
For instance, if your company intends to serve a greater purpose than simply turning a profit, it may be worthwhile to look into starting a nonprofit corporation. For these organizations, any revenue earned either goes back into covering expenses or is donated to a specific goal. Because of the role nonprofits play within the community, some business owners may opt for a Doing Business As (DBA) name to further accentuate their company’s mission. To clarify the relationship between nonprofit corporations and DBA filing, we’ll begin by discussing what it means to use a DBA name.
What’s a DBA Name?
In case you’re unfamiliar with the concept, a DBA name — also known as a fictitious business name — is a term that applies when business owners want their business to publicly operate under a different name than the one legally registered. However, whether or not a business uses a DBA name has no bearing on their legal status — it only grants them the ability to operate with a fictitious name. On its own, a DBA doesn’t carry the same protections or other benefits that a company would enjoy as an LLC or other type of legal business entity.
The reasons behind adopting a DBA name vary, of course. One of the most common scenarios is when a sole proprietor wants to run their business under a name other than their own. From a marketing perspective, a DBA name implies a level of expertise and professionalism that an individual just can’t communicate as well under his or her own name.
Moreover, a DBA can help establish a brand identity and develop a community around your product or service, which can live on even after you’ve chosen to retire or sell your business. Corporations looking to target a specific demographic or expand on a pre-existing business structure or product line may register a DBA name as a simple way to add to their portfolio.
DBAs and Nonprofits
Although you certainly don’t need to use a DBA name for your nonprofit, there is absolutely nothing wrong with using one if you go about it the right way. If your organization’s structure and goals legitimately align with that of a nonprofit, a DBA name could be a good way to market your mission to the public and allow your business the benefits that come along with nonprofit status.
Your DBA name is best viewed as an extension of your organization — it needs to exist in tandem with the integrity and legal requirements of your nonprofit. Remember that your nonprofit must meet the strict requirements to qualify for tax exemption under the federal government’s 501(c)(3) status.
You’ll run into problems if you attempt to apply a nonprofit-type DBA name to an LLC. By seemingly marketing yourself as a nonprofit but not being registered as such, you’d be falsely representing your mission and misleading the public about the structure behind it. To avoid ethical and legal ramifications, be absolutely certain that you only use a nonprofit-style DBA name when the parent company is already registered as such. Doing business as a nonprofit when the company on record is a for-profit LLC will only hurt your future and reputation.
Naming Your Nonprofit
If you do decide to use a DBA name for your nonprofit corporation, you’ll want to be just as thorough in the naming process as if you were setting up an LLC. To that end, you’ll want to keep a few key tips in mind as you settle on a name. For instance, your DBA name should be as specific as possible. Demonstrating your goals in a memorable, understandable way will make it that much easier to communicate your message and attract the involvement of your community. If you work with animals, kids or the military, make sure the overall vision of your nonprofit is plain to see from the name.
In addition to confirming that your DBA name accurately and professionally describes your nonprofit’s goal, you’ll want to make it clear to potential donors and volunteers that your operation is indeed not-for-profit. You don’t have to spell it out with keywords like “fund” or “charity,” but at least consider this option and strategically choose your DBA name to express the philosophy and structure of your operation.
Bear in mind that a DBA is only for marketing purposes, and the name itself does not affect your legal standing or qualification for tax exemption status. You’ll still need to check the availability of your proposed DBA name and choose an alternative if another company has the same or a similar name.
Regardless of which business entity works best for what you’re trying to accomplish, Incfile can help you get your company started the right way. Incorporation and all the associated paperwork can be overwhelming if you try to do it on your own, and you may worry that you missed a critical step that could cause problems later on. We offer a variety of comprehensive packages that will anticipate your new business’ needs and give you a competitive edge even before you launch. Our goal is to shepherd new startups and small businesses like yours, ensuring they get off to the best possible start. If you’re ready to get serious about your business — whether its a nonprofit or an LLC — visit our website and let’s get started!