Is it Risky to Start My Small Ecommerce Business Without Filing a DBA?

Is it Risky to Start My Small Ecommerce Business Without Filing a DBA?

Does your ecommerce store need to register for a DBA? That will depend. Do you want to run your business under your legal name or do you want to create an “alias” that would work to your advantage when it comes to targeting to the right market and branding your product or service? If the option is the latter, then you’ll want to operate your ecommerce business under a name other than your official business name. To do this, you will need to register your business as a DBA, which is short for Doing Business As. Also known as a fictitious business name, assumed name or trade name, having a DBA will allow you to operate your business under this name at a state level, assuming that the name you chose is available.

Filing for a DBA is an ideal option for small business owners and solopreneurs who want to do business under a name other than their legal business name, which oftentimes is your actual name (ex: John Smith). It will also help your business stand out from the competition and connect your product or service with your target audience.

If you already have established your business as a Limited Liability Corporation (LLC), you can still create a DBA. This is especially helpful if you are planning on branching out and extending the scope of the products and services of your company.

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What Does a DBA Do?

Having a DBA will help you operate your business using a name other than your legal name or the name of your LLC. It will also allow your business to stand out and connect with your market.

A DBA can also establish your company’s branding. And whether your business is brick-and-mortar or online, your customers will be invoiced by those businesses and not receive a confusing invoice with the owner’s name — let’s use the example of John Smith again — as the legal business name or that of an LLC.

Registering your business as a DBA may also protect your fictitious name within the county or state where you filed your application. Some states don't allow multiple businesses to have the same DBA name, meaning you'll be the only physical Cosmic Comics store or Lava Burgers restaurant in your county or state. (That’s assuming you wanted to do business using those two very cool names). But keep in mind that a DBA name can be taken by someone forming a legal business entity, such as an LLC or S Corp.

Do I Need a DBA for My Ecommerce Store?

But what if you’re not a brick-and-mortar enterprise? What if you run your business solely online and have clients and customers in all 50 states? Do you still need to register as a DBA for ecommerce and can you do business without a DBA? As stated earlier, that all depends. Are you happy with the name that you are currently operating under? Does John Smith as your business name work for you? If so, then you won't need a DBA. But if you do want to work under a business name that's not your personal name, then you'll need a DBA.

A DBA can help facilitate a business that wants to make a presence online and not just be represented by the owner's legal name (John Smith). This would also be ideal if the business owner is planning on expanding their product line and wants to be known to buyers under a certain name, as opposed to a legal business name (again, John Smith). So if you're an ecommerce business and already have your fictitious name of Cosmic Comics under your legal name (John Smith), you can create extensions of your business and set up another DBA for Cosmic Mugs. This branding will attract the potential clientele you are looking for, which in this case will be people that want to buy super-sized drinking mugs as opposed to comic books. But keep in mind, even though you are the only company operating under your DBA within your state, that does not keep some other ecommerce business from claiming that same name in another state or in your own state with a legal business entity.

Starting an Ecommerce Business with a DBA

Once you have your DBA, you can open up a business account using your fictitious name. Payments can then be received or made through your business. You can also use your fictitious name on your letterhead, invoices, contracts, marketing material and any other company stationery to help reinforce the link between your trade name and your legal name. Even if you already formed an LLC, you can still do business as a DBA. Additional benefits and disadvantages of having a DBA include:

Pros:

  • It can protect your privacy by shielding your real identity and help avoid using your real name.
  • You can have multiple DBAs that fall under the same company.
  • A DBA name may add legitimacy to your business.
  • A DBA can help identify your company with the business, as well as providing product and service branding.

Cons:

  • A DBA is not a formal business structure.
  • A DBA is not a separate business entity but rather an extension of your company.
  • It doesn’t protect your name and brand. (For that level of protection, you should consider applying for a trademark.)
  • If you are a solopreneur and do not have an LLC or insurance coverage for your small business, you can be personally liable if your business is sued.

Taking the Next Step

Registering your ecommerce business as a DBA can help your online business stand out and set it apart from the thousands of other similar sites. But if it’s real protection that you’re looking for, the best route would be to form an LLC. Having your business formed as an LLC will help shield your personal finances from any liability related to your business. Learn more about DBAs and forming a business entity such as an LLC through our blogs and learning center.

Incfile | DBA

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