Advantages & Disadvantages of Filing for a Fictitious Business Name

By Stephanie Kurose, J.D.

Advantages & Disadvantages of Filing for a Fictitious Business Name

By Stephanie Kurose, J.D.

Businesses are required to register their legal name with every state in which they conduct business. However, many business entities also choose to file for a fictitious business name—also known as a "doing business as" (DBA), trade name, or assumed name—for a number of different reasons, including brand awareness and marketing or advertising strategy. While there are many reasons a business owner may want to file for a fictitious business name, there are also some disadvantages to consider before doing so.

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Advantages

Some of the main advantages of filing for a fictitious business name are privacy protection, increased flexibility, and enhanced value. Certain advantages may benefit different types of business structures more than others.

Increased Privacy

For businesses like a sole proprietorship or a partnership, filing for a fictitious business name has particular value in terms of increased privacy. For these types of business structures, most states require the owners to register their personal name as the legal name of their business. Filing for a fictitious business name allows these business owners to choose a professional name that more accurately reflects what their business actually does, while also adding an additional layer of privacy by limiting the use of their personal name in everyday business transactions.

Increased Flexibility

Filing for a fictitious business name gives all types of business entities—corporations, limited liability companies, partnerships, etc.—increased flexibility to expand into new business markets. For example, if a corporation wants to expand its operations in a new state, it must register its business in the new state. However, if the corporation's name is already in use, it cannot operate under that same name in that state. By filing for a fictitious business name that is not already in use, the corporation can expand into the new state by using the new name to conduct business.

Brand Awareness

There is no limit to how many fictitious business names one company can register. Oftentimes, businesses may have different divisions that offer vastly different types of goods or services. By filing for a fictitious business name, the company can distinguish each of these divisions by choosing a name that more accurately reflects the good or service offered.

Disadvantages

While there are many benefits of fictitious business names, there are also some disadvantages. The owner of a fictitious business name does not have exclusive rights to the name unless they register for a trademark. In the absence of such trademark, other companies can legally use the same fictitious name, which might cause confusion among the public.

In addition, many states require a business to maintain its fictitious business name by renewing the registration every few years. A number of states require registration in every city or county in which the company conduct business. Thus, the company needs to keep track of all active registrations and maintain them in order to legally conduct business in each of those locations.

When a company is considering filing for a fictitious business name, it should keep these advantages and disadvantages in mind. What might be beneficial for one business may not be right for another.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.