If you're thinking about using a DBA ("doing business as") formation for your business, make sure you understand your exposure to liability issues.
Why and How to Get a DBA
"A DBA is a trade name or alias for a business," says Tyler O'Reilly at Harris Beach PLLC in Rochester, N.Y. "It allows the business to operate and hold itself out to the public under a name that differs from its legal name. Registration of DBA names is required so that members of the public can determine who they are transacting business with."
Shamila Ahmed, an attorney with Romano Law PLLC in New York City, says it is simple to file for a DBA. "In most states, you obtain a DBA by submitting a filing to the state's secretary of state, or whichever department governs that state's corporations and other entities," she says.
The form will ask for your legal name and contact information and the name you wish to do business under. Submission usually requires a small filing fee. You may have to renew your DBA every few years.
An additional step may be required in your state, according to Keren de Zwart, an attorney at Not Your Father's Lawyer in Irvine, Calif.
"In most jurisdictions, you are required to publish it in a newspaper of general circulation," she says. "Typically, the governing body where you register will provide a list of acceptable publications, but it's up to you to get it done."
Choosing Your DBA Name
You probably already have a name in mind for your business' DBA, but you may encounter some roadblocks.
"In certain states, the filing office will not check if a proposed DBA conflicts with legal or assumed names of other businesses, so it is possible that multiple companies can register, hold, and conduct business under the same name," O'Reilly says.
It's up to you to check to be sure no one else is using the name. Another consideration is existing trademarks, says Nick Guinn, an attorney with Gunn, Lee & Cave P.C. in San Antonio.
"Even if the county or state approves your assumed name certificate, that is not verification that your assumed name is not infringing on someone else's trademark rights," Guinn says. If you use a name someone has trademarked, you could face a lawsuit, so it's wise to search the U.S. Patent and Trademark Office and your state trademark office for conflicts.
Who Needs a DBA?
De Zwart says you need a DBA if you are a "person or entity operating under a name other than the business's legal name." If your business names uses your existing legal name, but also tacks on a description, you don't have to get a DBA.
"For example, if you are a sole proprietor, Jane Smith, operating as Jane Smith Marketing, you most likely do not need to file for a fictitious business name," she says. "If you are a sole proprietor, Jane Smith, operating as Sunshine Marketing, then you would need to file for a DBA. Similarly, if you have an entity, for example, Horizon Marketing LLC, but you operate as Sunshine Marketing, you would need to file a DBA for Sunshine Marketing."
A DBA can also be a way to brand your company. "Think of companies such as Verizon Wireless (actual legal name: Cellco Partnership)," O'Reilley says. "The DBA gives companies the ability to conduct business under a name that is pithier and arguably more effective. It also allows businesses to drop the clunky legal suffixes from their official names. McDonald's, for instance, is a trade name of McDonald's Corporation."
A DBA allows you to rebrand your company to specific market segments or use different names in different geographical areas.
Not everyone who is in business needs a DBA. If you form an LLC or corporation and will use its name, you don't need a DBA since you've already registered your business name. Note that some business entities are prohibited from using a DBA.
"Some types of licensed professionals, such as chiropractors, cannot use a DBA if formed as a professional corporation," says Dan X. Nguyen from the Law Office of Daniel X. Nguyen in Garden Grove, Calif. "The licensing board wants to be transparent to the public, so they want to make it easy to identify the licensed person."
While a DBA may be necessary or a good idea for your company, don't expect it to offer any legal protections. The DBA is just a required filing, not the formation of a business entity.
"Your personal assets will not be protected from lawsuits like they are with other business structures like an LLC or corporation," says Andrew J. Contiguglia of the Contiguglia Law Firm P.C. in Denver. "If you're operating a business that has significant exposure to disgruntled customers or vendors, then a DBA is not right for you. Generally, smaller sole proprietor businesses with little risk can operate freely as a DBA and not face legal conflicts from customers."
Obtaining a DBA is a necessary step if you'll be doing business under another name, but it is not a business entity that provides you with any protections.