LLC and DBA are two acronyms commonly used to indicate important legal aspects about a business. LLC, or limited liability company, refers to a separate legal entity that is distinguishable from its owners. DBA, or doing business as, refers to a pseudonym that an owner uses to conduct business. It is important to understand the difference between the two when planning to use either as part of your business structure.
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A DBA is not the legal name for a business -- it is simply the name that a business owner wants to use to sell products or provide services. A DBA is sometimes referred to as a fictitious name, trade name or assumed name. All states have laws regarding the proper registration and use of a DBA. Some states, such as California, Florida and Connecticut, make registration of a DBA mandatory before it can be used by a business owner.
An LLC is a separate legal entity from the individual member or members who formed the LLC. In contrast to a DBA, the name of the LLC is the legal name for the business and must be used on all government applications and forms, such as a business license or tax filing. Each state has its own laws regarding the formation of an LLC; however, unlike requirements for a DBA, no state requires a business to form an LLC. The decision to form an LLC is voluntarily made by the business owners depending upon whether such a business structure is beneficial for them.
Personal Liability Protection
One of the primary reasons a business owner decides to form an LLC is the protection it provides the business owners’ personal assets. The owners of the LLC -- called members -- will not be personally liable for decisions or actions taken by the LLC. With regard to a DBA, there is no such protection from liability. Because the DBA is not a separate legal entity, all business decisions and action taken using the DBA are the responsibilities of the business owners.
Start-up and Maintenance Costs
Both DBAs and LLCs require start-up costs for filing and ongoing costs to maintain the DBA or LLC in good standing. Although costs vary among states, the costs associated with a DBA will be significantly smaller than an LLC within the same state. For example, as of November 2010, a DBA can be registered in Los Angeles County, California for $26. The filing fee for a California LLC is $70, with an additional $800 payment required for state taxes. The DBA will require a small renewal fee every five years; the LLC will have to pay the $800 tax every year of its existence.