Do You Need a Registered Agent for a DBA?
Sometimes when people start a business, they don’t go through the process of forming an LLC or otherwise setting up an official legal entity for their business. Instead, they just choose to do business under a business name that is different from their individual name — this is known as a DBA (Doing Business As) name.
You might be wondering if it is necessary to hire a Registered Agent for a DBA. The simple answer is no, but the full answer is more complicated — and it gets to the heart of how you really want to be doing business to protect your personal assets and ensure financial security for your business and your personal life.
What Is a Registered Agent?
A Registered Agent is a responsible third party that serves as an authorized point of contact to receive certain official notifications and documents on behalf of a corporation or LLC. As a business owner, your Registered Agent might not need to contact you very often, but they are there in case of extreme situations. For example, if someone decides to file a lawsuit against your business, they would serve the process notice (also known as “serving papers”) to your Registered Agent.
A Registered Agent is also authorized to receive routine correspondence and official notices from government regulators such as the Secretary of State, including tax forms or notices related to keeping your LLC in compliance with the state laws for incorporating and maintaining a business in good standing.
Incfile offers a Registered Agent service that can serve as an authorized public-facing point of contact and mailing address for your business in any state. A Registered Agent gives you the added benefit of having a business mailing address that is separate from your home, which is available to accept and forward any official documents to you.
Do DBAs Have to Have a Registered Agent?
It all depends on what kind of business you are running. If you are a sole proprietor and you register for a DBA (also known as a trade name, fictitious name or assumed name), you will not need a Registered Agent. As a sole proprietor with a DBA, you’ve simply registered for a business name. Your business is not a legal entity in the eyes of the state.
Registered Agents can only serve for legal business entities — LLCs or corporations that separate the business structure from the business owner as a person. Registered Agents are required of LLCs and corporations and must be designated when filing the paperwork to form your business. If you already have an LLC and you file for a DBA, you do not need a separate Registered Agent for your DBA. You simply use the Registered Agent already assigned to your LLC (unless you’re filing a Foriegn LLC in another state — more about that below).
Although it can be useful to register a DBA because it gives your sole proprietorship an “official” business name, simply using a DBA (with no LLC or corporation set up) is not enough protection for your personal assets or your business identity.
If you really want to protect your personal assets while gaining the tax advantages and other legal legitimacy of being “officially” in business, you need to form an LLC or set up a corporation. This creates your business as a legal entity that gives it a real existence and identity of its own, which is separate from your personal identity and assets.
Can I Use a DBA for My LLC or Corporation?
There are a couple reasons you may want to get a DBA for your LLC or corporation. If you want to incorporate in multiple states, and you want your business name to reflect the location, a DBA can be the answer (e.g., Florida Cupcakes & Pies, Cincinnati Cupcakes & Pies, etc.). You will need to file a Foreign Qualification first in order to operate in a state that’s different from your state of formation. If this is the case, you will need a separate Registered Agent for each state you want to do business in, whether you file a DBA name there or not.
Another reason for a DBA is if the products and services you offer through your business have changed.
For example, let’s say you have a lawn mowing business called Bob’s Lawn Care, LLC. You decide to start offering gutter cleaning services, and instead of setting up a new LLC, you just want to establish a new line of business that is part of the same company. You can set up a DBA to do business as “Bob’s Gutter Cleaning” as well as “Bob’s Lawn Care.” Same LLC, two different business names.
In this case, the Registered Agent you assigned to your original LLC would still be in service, even though you are now doing business with two separate business names.
Using a Registered Agent for My LLC
If you are planning to form an LLC, rather than just doing business with a DBA, you will need to assign a Registered Agent when you file your Articles of Organization or Articles of Incorporation with the Secretary of State. Although we’ve already established that a Registered Agent will process legal documents and filing notices from the state, it is important to point out that a Registered Agent is not a mailing service for an LLC. It also does not provide any additional liability protections.
Although you can act as your own Registered Agent, there are reasons why this is not a good idea. For one, it’s bad enough for your small business to get “served” with lawsuits and subpoenas. It’s even worse when this is done in front of customers or while meeting with clients. Another reason why having a third-party Registered Agent is beneficial for an LLC is their commitment to be present during business hours (8 a.m. to 5 p.m.) and receive legal documents on your behalf. This is especially important since, as a small business owner, odds are that you may not be in the same physical location throughout the business day.
Using a Registered Agent for My Series LLC
Much like their function when it comes to LLCs, a Registered Agent fills the same role in a Series LLC. The main difference here is that a Series LLC is a unique business entity that is only available in around a dozen states and allows for the formation of “mini” subsidiary LLCs under a parent umbrella LLC. Although a Series LLC is still a limited liability company, this benefit is mostly used in real estate companies as a tool to organize and protect their individual properties or “mini” LLCs. When it comes to the role of a Registered Agent for a Series LLC, the same agent represents the Series LLC umbrella as well as all the subsidiary “mini” LLCs.
Using a Registered Agent for My S Corp or C Corp
C Corps, or corporations, are the oldest form of business entity. Much like an LLC, a C Corp offers liability protection in case anything goes wrong with the business. Another benefit that a C Corp can offer is that it can raise capital through its shareholders, which is why many big companies opt for this type of business entity. But when it comes to setting up a C Corp, a Registered Agent is still required. And if you are considering acting as your own Registered Agent for a C Corp, think again. This may not be an efficient way of doing business, especially considering the scope and size of the businesses that prefer the C Corp designation.
Unlike C Corps, S Corps are often the preferred business entity for many sole proprietors and small business owners. They are different from the C Corps desired by large businesses and have an added benefit that they do not incur double taxation (corporate and personal income taxes). Instead, just like an LLC, the S Corp is considered a pass-through entity for tax purposes. S Corps also allow you as the business primary to pay yourself a salary. As an owner drawing a salary, you can avoid incurring a hefty tax bill. Setting up an S Corp also requires a Registered Agent.
Filing for an LLC Instead of Using a DBA for Your Business
Now that we’ve established that an LLC requires a Registered Agent, let’s take a look at the benefits of forming an LLC rather than simply using a DBA name:
- An LLC provides liability protection. Operating with just a DBA does not offer liability protection since there is no distinction between the business owner and the business.
- A DBA does not form a business entity. Rather, it allows you to use a fictitious name for your business that differs from your actual name. An LLC, on the other hand, adds legitimacy, helps build credibility and above all, is recognized by the state and affords certain protections under its formation.
- DBAs also do not provide any tax benefits, whereas LLC owners can choose to be taxed as an S Corp to potentially reduce their tax bill.
Instead of creating a DBA name for your sole proprietorship, forming an LLC with your desired business name is the best way to protect your personal assets and maximize your business opportunities under the law.
If you’re ready to form an LLC or find out more about DBAs, talk to Incfile today. Our incorporation experts can help you evaluate your options with state-specific advice.