DBA in LLC: What You Need to Know

The term "DBA," or "Doing Business As," refers to a trade name under which a company operates, different from its legally registered name. This practice is common among entrepreneurs who run multiple business ventures but wish to maintain a single Limited Liability Company (LLC) for administrative ease and simplicity.

DBAs allow businesses to rebrand or diversify their operations without forming separate entities. In this blog, we’ll explore the advantages and drawbacks of registering a DBA within an LLC, and how you can go about adding a DBA to your own company.

Comparing separate LLCs and DBAs: what’s best for your business?

An LLC is one of the most popular legal structures for businesses in the United States. By design, LLCs offer flexibility and a certain level of asset protection. While you can legally own more than one LLC in any state, is it the best choice for you? Let’s explore some factors to consider.

Benefits of creating separate LLCs for different business ventures

One of the primary reasons an entrepreneur might consider forming multiple LLCs is asset protection. Each LLC operates independently, with its finances and liabilities clearly separated from the others. If one venture fails or faces legal trouble, the others remain unaffected. For instance, if you launch a new product that carries a degree of risk, keeping it in a separate LLC shields your existing stable businesses from any potential fallout.

Another benefit is the flexibility in taxation. One of the attractive features of an LLC is that it can choose to be taxed as a sole proprietorship, partnership, or even as an S Corp or C Corp. If you run multiple businesses under separate LLCs, you have the opportunity to optimize tax treatments based on each venture’s unique situation. However, note that if you're a non-resident of the U.S., the S Corp option is generally not available to you.

Lastly, establishing multiple LLCs enables you to attract investors to specific projects. When each LLC is focused on a single business, it can be easier to gain targeted investment or even eventually sell a specific LLC.

Challenges of running multiple LLCs

Despite the benefits, maintaining several LLCs can present its own set of challenges. Managing internal conflicts of interest is a key concern. For instance, if your different businesses share some overlapping objectives, it can be difficult to promote one without impacting another. In some states, even the perception of self-dealing or unfair competition between two LLCs owned by the same person may lead to disputes.

From an operational standpoint, administrative complexities increase when you own multiple LLCs. Each LLC needs its own bank account, annual report filings, and tax returns. This can significantly increase the time and effort spent on managing the overall operations.

Lastly, costs can add up quickly. Registration fees for each LLC, legal costs, and the ongoing fees associated with maintaining separate entities all mean a larger financial outlay. Filing fees, annual dues, and banking fees multiply in proportion to the number of LLCs owned.

When a DBA is a Better Option

Given the challenges of managing multiple LLCs, many business owners opt to add a DBA to their existing LLC instead. Here are some advantages of taking this approach:

1. Brand diversification without complexity
   A DBA allows you to develop unique branding for different products, services, or market segments. You can effectively market different offerings under separate names while still managing a single LLC. For example, you might register “Happy Treasures” as a DBA under your legally established “Gift Store LLC.” This allows for distinct logos, slogans, and marketing strategies, helping you target different audiences more effectively.
2. Privacy and anonymity
   If your LLC’s legal name includes your personal name, using a DBA can offer a layer of privacy. Instead of making your personal details public through business activities, a DBA shields your name, reducing unwanted solicitations and maintaining your anonymity.
3. Enhanced naming flexibility
   If your legal business name is generic, a DBA can make it more marketable. Imagine an LLC named “Online Retail Solutions LLC.” A DBA like “Elegant Home Essentials” could make the business more relatable to consumers.

However, it’s important to remember that running a business under a name that’s not registered as a DBA can lead to legal complications. Many states have specific regulations requiring businesses to properly register any assumed names, and failing to do so can result in fines and other legal action.

Potential drawbacks of using a DBA

While DBAs have their perks, there are also potential downsides:

1. No exclusive rights to the name
   Registering a DBA does not grant you exclusive rights to the name in the way that a trademark does. This means that another company could legally register and operate under a similar or even identical name.
   

Pro tip: if your business relies heavily on branding, consider registering a trademark instead. While more costly, trademarks provide legal protection against unauthorized use of your business name and brand identity.

2. Ongoing administrative requirements
   Different states have varying requirements for DBA registration and maintenance. In some jurisdictions, you might need to renew your DBA every 1-3 years or register it in every county or municipality where you operate.
3. Limited liability protection
   While an LLC inherently provides a layer of liability protection between the business and its owners, a DBA does not extend this protection. If your business faces legal issues, the DBA offers no additional safeguards for your personal assets.

To make the most of a DBA, ensure that you establish a clear distinction between personal and business finances, consider trademark registration for name protection, and strictly follow your state’s DBA regulations.

How to Register a DBA in an LLC

The specific procedure for registering a DBA depends on the state in which your business operates. While some states require you to register your DBA at the state level, others need you to file it at the county or city level.

Here are the typical steps involved in registering a DBA:

1. Check the availability of the name.
   Before filing your DBA, ensure the name is not already in use within your state. This preliminary check can be done through the state’s business registry. For example, in Texas, you can contact the Secretary of State's office for a name search.
2. Submit the application.
   Once you have verified the availability of the DBA, submit your application to the relevant state or local authority. You'll need to provide information such as the legal name of your LLC, the federal Employer Identification Number (EIN), and the desired trade name.
3. Publish the name (if required).
   Some states require you to publish a notice of your new DBA in a local newspaper as a part of the registration process. Make sure to confirm whether this step is required in your jurisdiction.

After completing these steps, you’ll receive your DBA certificate, and you're ready to operate under the new name.

Key considerations before adding a DBA to your LLC

Here’s what you need to consider:

1. A DBA name cannot contain certain words like "Corp" or "Inc."
2. Some states require proof of the LLC’s credibility before allowing the addition of a DBA.
3. There’s no limit on how many DBAs you can register under one LLC.
4. A filing fee is typically required, varying by state.

Since requirements and procedures vary significantly across jurisdictions, it’s crucial to consult with legal professionals to ensure full compliance.

Final thoughts

For business owners with an LLC, adding a DBA can be a smart move for brand diversification, enhanced marketability, and maintaining privacy. While there are some drawbacks to consider, understanding the regulations and careful planning can allow you to maximize the benefits.

If you're unsure whether registering a DBA or forming a new LLC is the right decision for your business, reach out to the experts at SellerSail. Our team will help analyze your business needs and guide you through the optimal structure for your growth.