Advantages of Filing for a DBA

by Joe Stone

Filing for a DBA is the easiest type of business registration. The acronym "DBA" is short for "doing business as" and is generally used when referring to any type of fictitious name, assumed name or trade name for your business. Filing for a DBA is most advantageous when you are just starting your business, but as you become established you should consider the advantages offered by other forms of business registration.

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State DBA Laws

DBA filing requirements are determined by the state law where your business is located. Three states — New Mexico, Mississippi and Kansas — do not have any DBA filing requirements. In Arizona and Alabama, DBA filing is optional. In all other states, you must file if you are using a DBA to conduct business. To file a DBA, you typically must use the DBA form approved in your state and file it with the appropriate government office, such as the secretary of state or county clerk. In most states, you also must publish your DBA in a newspaper of general circulation in the county where your business is located.

Advantages of Filing for DBA

The biggest advantage in using a DBA is the minimal cost required to protect your business name. For example, in California the typical filing fee for a DBA is as low as $26, while the fees to incorporate under a business name are as much as $900. Also, filing a DBA rather than incorporating means that you do not have to adhere to ongoing corporate formalities, such as holding annual meetings and preparing corporate minutes, and incur the legal and accounting fees associated with them.

Name Protection

A DBA filing is evidence of your right to use your business name should someone attempt to use the name after you have established it in your community. You can use the court to prevent someone else from improperly using the same name to take potential customers away from your business. Filing is also important to protect your right to use the court if you are located in a state where DBA filing is mandatory. For example, in Nevada, you will be barred from filing a lawsuit under your DBA if you have not filed it as required by law.

Disadvantages in Using a DBA

The ease and minimal cost associated with filing a DBA as an alternative to incorporating is offset by the disadvantage of being personally liable for the debts of your business. This means that business creditors can sue you personally and enforce a judgment against your personal assets, such as your home. Another disadvantage is paying self-employment tax for Social Security and Medicare, which is similar to the withholding from a wage-earner's paycheck. In most cases, your self-employment tax will be higher than you would have paid receiving the same earnings as an employee.

Best Use of a DBA

If you are just starting your business, using a DBA is a good way to minimize your initial costs while protecting your business name. However, as your business becomes established and begins to grow, you need to evaluate how to best protect your personal assets by forming a separate legal entity for your business, such as a corporation or limited liability company. You will also have more tax options with a separate entity which can reduce your overall tax liability. Your DBA can still be used by transferring it to your newly formed corporation or LLC.