Can I Form an LLC After a DBA?

By Cindy DeRuyter, J.D.

Can I Form an LLC After a DBA?

By Cindy DeRuyter, J.D.

You can create an LLC to replace your sole proprietorship and DBA, but you must follow your state's specific requirements and procedures. Many entrepreneurs decide to start their small businesses as sole proprietorships, using "doing business as" (DBA) names to distinguish their business enterprises from their legal names. After being in business for a while, an owner might want to convert their business from a sole proprietorship to a limited liability company (LLC).

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Using a DBA Name for Your Sole Proprietorship

When you start a new business, you decide which type of business entity to create based on your specific circumstances, including your business goals, objectives, products, services, finances, any plans to hire employees, and tax considerations.

Sole proprietorships offer a relatively inexpensive and simple way for business owners to launch their products or services. However, a sole proprietorship cannot use a name other than the business owner's legal name without getting approval to use a DBA nameā€”also referred to in some states as an assumed name or a fictitious business name. A DBA name allows a sole proprietor to use a name that provides a better description of their products or services to potential customers.

Converting a DBA to an LLC

LLCs are also relatively inexpensive and simple for business owners to create. Where a sole proprietorship can only have one owner, an LLC can have one, two, or multiple owners (called "members" of an LLC). If you began your business by yourself but want to bring on someone else who will have an ownership stake in the company, you need to convert your business to an LLC, a partnership, or a corporation.

LLCs are a popular choice because they offer members protection from personal liability for the company's debts and financial obligations. Another feature of the LLC structure that appeals to many sole proprietors looking for a different entity structure is tax treatment. LLCs have, by default, pass-through taxation. This means that the company doesn't pay taxes itself. Instead, profits and losses pass through to the members of the LLC, who then file and pay taxes on business income with individual income tax returns.

Steps and Considerations

To convert your sole proprietorship with a DBA to an LLC, you must become familiar with your state's requirements. Each state has its own laws, forms, and fees for business entity registrations.

In many states, you must complete a transfer or conversion form and submit it to the Secretary of State or other business authority. You might have to provide a statement from the sole proprietorship/DBA officially granting permission to the LLC to use the same name.

Finally, you might also need to obtain an employer identification number (EIN) for your new LLC. Although LLCs are pass-through entities, you need an EIN to establish or change your business bank account and to file state or local tax returns for the company.

Transitioning from a sole proprietorship to an LLC could be the next step up for your business. But be aware that converting your DBA to an LLC might not shield you from liability for business obligations incurred before you converted to the LLC structure. It's also important to make sure you understand your state's requirements prior to beginning this process.

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.