A limited liability company is a legal structure that blends some of the elements of a corporation with those of a partnership. State law controls the formation of LLCs, including naming issues. States require businesses to operate under distinct names within state lines as a way of creating clarity in the marketplace for consumers, creditors and others. Depending on your circumstances, you may or may not need a DBA.
LLC Legal Names
If two or more independent companies operate under names that are similar to one another, there is a chance that members of the public will become confused and believe that the companies are related. State laws work to reduce instances of confusion by requiring new LLCs to choose names that are distinct from names of existing companies. When the state approves a name for the LLC to use, it requires the LLC to use that name in all areas of business. If the LLC wishes to use another name, however, most states will allow the business to adopt a DBA name.
With respect to LLCs, a DBA allows LLCs to conduct business under a name that differs from the name under which they registered their company initially. State law defines the terms and scope of DBAs. Each state sets its own eligibility rules. The majority of states require businesses to register their DBA name before using it in commerce by completing certain forms. The specific steps and motivations to register a DBA vary widely across the states, but primarily the states are interested in making sure that the government and interested parties are able to connect a company’s legal name with its DBA name.
If an LLC conducts business in states other than the state in which it is based, it is said to be a "foreign" LLC. Those other states will subject the company to state laws regarding foreign businesses, including name requirements. Typically, LLCs operate under the legal name set forth in the organization documents of their home state. In the event that another company is using the same or similar name in the new state, however, the LLC must use a DBA when conducting business there.
DBAs are a useful option to employ as part of an LLC’s overall marketing strategy. For example, if your LLC offers a diverse line of products or services, then you may want to segment your market in order to convey a clear and consistent message to consumers. Creating a separate name to sell a product or a group of products allows a company to take advantage of all of its resources without letting one product distract consumers from the attributes of another product. LLCs must weigh the cost of registering their DBAs in all the appropriate places against the income they hope to generate by using other names.