What’s in a name? If you’re starting a new business, it turns out the answer is “a lot.” Whenever you start a company, you always face the critical decision about what to name it. Whether you have a Limited Liability Company (LLC) or some other kind of business, you’ve probably already begun asking yourself whether you need a fictitious business name, a doing business as name (more commonly known as a DBA) or an assumed business name.
In the business world, such terminology can quickly become overwhelming, causing confusion more than anything else. But it’s not nearly as complicated as it seems. Let’s delve into the different kinds of names you may be considering and how they play into your operation.
Fictitious Business Name: Breaking It Down
A fictitious business name, a DBA and an assumed business name are all labels that are routinely bandied about when it comes to what you should be calling your company. The big secret? They are all essentially the same, with no real difference between them. Which term is preferred varies widely depending on your state, your industry or even your professional circle. So now that we’ve established that a fictitious business name, a DBA and an assumed business name can be easily interchanged, let’s expand on what they mean.
Generally speaking, a fictitious/DBA/assumed business name is the one you use for operation, not necessarily the legal name you use on paper. Therefore, to be considered a DBA name, it must differ from your company’s registered legal name. The specific requirements for DBA names will depend on what state you are based in. While some states have no particular rules regarding DBAs, others will require them and/or have certain limitations to what a DBA name can include. For example, words such as “corporation” or “incorporation” may not appear unless they accurately reflect your registration status with the secretary of state.
To file a DBA name, most states simply require companies to pay a visit to the county offices, fill out the necessary form and settle the registration fee (ranging from $10 to $100) with the county clerk. Some states may have additional requirements, and banks will often need proof of the DBA name before you can open a business account. However, for the most part, corporations will satisfy their state requirements with their incorporation documents — unless they really feel compelled to create a new name as well.
How Having a DBA Name Can Affect Your Business
You might still be wondering if a DBA name is really necessary or even useful for you. If your company does not operate in a state where DBAs are required by law, you may discover some instances in which having one can benefit or hurt you. Here are a few points to consider:
When You Need a DBA
- If you run a sole proprietorship or partnership: Sometimes, you might opt for a DBA name just for practical reasons. After all, using a company name that isn’t your personal name can make a tremendous difference as far as marketing yourself. Building a business is so much smoother when you have the right approach; just be sure to satisfy all your legal requirements as well.
- If you run a corporation or LLC: In this case, your company’s structure and legal requirements are pretty well nailed down. But if you want to create a catchy, impactful name that communicates your mission better than your company’s legal name, this a clean way to adopt a more official-sounding name that you can use to win customers.
Some Risk Factors to Having a DBA
- No naming rights: Just because you claim a DBA, this does not prevent other businesses from registering a legal business entity and essentially using your DBA name. We’ve alluded to it above, but considering how common a problem it is, we’ll stress it again: Be sure to file an LLC or incorporate your business with the DBA name if you really want to have rights to it.
- No legal protection: Too often, companies seem to assume that filing a DBA provides the same limited liability, tax benefits and other legal protections afforded to LLCs and other corporations. This is actually not the case. A DBA only extends to your public use and entails no safeguards whatsoever — especially beyond your local area. If you want to file one for your company to use, by all means do it, but don’t fall into a false sense of security.
Name of the Game
Now that we’ve cleared up the (non-existent) differences between a fictitious name, a DBA and an assumed business name, hopefully you're one step closer to optimizing your business operation. At Incfile, we’re always striving to help you create a solid foundation for your business — one upon which you can build many years of top-notch service and profitability.
From the very first steps in starting your company, your business needs the proper guidance and direction to achieve its full potential, and that’s what we aim to provide. We offer the know-how to streamline the establishment of your company as well as a deep pool of resources that can help you on your way. Don’t hesitate to reach out for assistance with any questions you may have. To learn more about how our services can help, just visit our website to get started today.