Unfortunately, scammers are targeting all sorts of people these days, and business owners are no exception. One area of particular vulnerability we've seen is so-called "DBA renewal companies," which might send you a notice that your business name is about to expire. Here's everything you need to know to avoid getting caught in this trap!
What Is a DBA?
A DBA is also known as a "Doing Business As" or "fictitious business name." It's a way for business owners to (literally) "do business as" a certain business name while still using a separate legal name for their LLC or other corporate entity. Filing a DBA and renewing it on an annual or biannual basis is a separate process in addition to setting up an LLC or other business entity. It is often done at the local or county level, although some states also require business owners to set up a DBA with state-level regulators.
How Does a DBA Renewal Scam Work?
Unfortunately, we're seeing a few unscrupulous companies claiming to offer DBA renewal services that might not actually be legitimate or trustworthy.
A common scam goes like this: You, the business owner, receive a letter in the mail on official-looking letterhead. It contains an alarming message warning you that your LLC or DBA status is about to expire, and offering to renew it for you. These letters typically demand immediate payment of $100-$150 or more.
Some scam letters might contain threatening language, implying that your business could become vulnerable to fines or extra legal fees. Many of these letters look “official,” as if they are coming from a government agency. The business owners receiving these letters might understandably feel worried about their tone and content. Wanting to keep their business name in good standing, they might feel pressured to just put a check in the mail and assume that their problem is solved.
But unfortunately, some of these “companies” soliciting business owners by mail are not actually delivering on their promises. Either they are not really renewing the companies’ business names, or they are charging excessive fees for any services actually provided.
What Should I Do If I Receive a Suspicious DBA Renewal Letter?
If you receive a suspicious-looking DBA renewal letter, you need to be careful, read the fine print and trust your intuition. If you are wondering whether or not a letter comes from the government, that should be a red flag: Typically, state regulatory agencies do not send “warning” letters demanding payment.
Also, a legitimate DBA renewal company will not try to pass themselves off as a government agency or use threatening language to try to coerce you into sending money. Even if the letter were from the government or a legitimate DBA renewal company, $150 is too much money to pay. The fees for a DBA renewal or LLC renewal are usually LESS than $100. For comparison, Incfile lets you start an entirely new company for $0 (plus the state fee from your local state’s regulatory authorities) and you'll get a free Registered Agent for one year.
DBA Renewal Scam Examples
According to the Oregon Secretary of State’s office, one company has been soliciting business owners in that state with the promise of filing documents to renew an assumed business name for $100. Multiple people have complained to the Oregon authorities that this company is operating in a way that is “confusing, deceptive or a scam.”
Even if these DBA renewal companies are not technically violating any laws, they are still operating in a way that might cause people to spend money they shouldn't have to. The truth is, in Oregon and many other jurisdictions, you don’t have to pay for a DBA renewal service. You can usually file the paperwork yourself online in just a few minutes. No $100 fee required!
Another news article from California described how business owners in that state were receiving official-looking notices encouraging them to renew their fictitious business names. These letters appeared to be an official government correspondence telling business owners to send an immediate payment of $150. The San Mateo County, CA recorder responsible for registering fictitious business names in that jurisdiction said it was understandable people would be confused after receiving this notice, and the company was trying to make a quick profit.
Those “official-looking” notices were coming from a private company claiming to offer DBA renewal services, not California or San Mateo County government. The county recorder also said that 10 businesses in one month had reportedly paid the company, only to discover that their renewal forms were never actually filed.
What's the Right Way to Renew My DBA?
Renewing a DBA should not cost $100+ and can often be done by yourself in a matter of minutes — or as a simple add-on to using a legitimate business filings service. For example, a trustworthy business like Incfile would never try to trick people into thinking they were receiving government correspondence.
Instead, Incfile makes it clear that they are a third-party company formation and registered agent service, which helps business owners deal with filings in a reliable manner for a reasonable fee. Real business filing services will be transparent and credible in the way they communicate and do business.
If you get a solicitation message from a DBA renewal company warning you that your business status is about to expire, think twice and do your research before you send them any money. If your DBA is actually up for renewal, you should receive a legitimate notice. Check the contact information to be sure of the source. In many cases, you can renew online with your state or local government without any extra fees at all.
Are you ready to work with a legitimate, credible business filing company to start your business? Would you like professional help to file your necessary business paperwork in a prompt, responsible fashion at a fair fee? Start your business with Incfile today!
Ben Gran is a freelance writer from Des Moines, Iowa. Ben has written for Fortune 500 companies, the Governor of Iowa (who now serves as U.S. Secretary of Agriculture), the U.S. Secretary of the Navy, and many corporate clients. He writes about entrepreneurship, technology, food and other areas of great personal interest.