The rules for conducting business under an assumed name (or "doing business as" or DBA) are quite distinct from the rules governing the formation of a limited liability company, or LLC.
Formation of an LLC
A limited liability company is a type of business entity formed under state law. The primary purpose of forming an LLC is to limit the personal liability of the owners (called "members") from the debts of the business. An LLC also allows you choices in how the business and its owner(s) are taxed.
The primary document to form an LLC is called the articles of organization, which sets forth the basic organization of the LLC. Although it may not be legally required, it is advisable to have an LLC operating agreement (especially with a multi-member LLC), which is more detailed than the articles of organization.
Forming an LLC typically requires that certain documents be filed with the state government. This is most often with the Secretary of State, or the corporation or business registration division of a branch of the state government. You will need to file some type of registration form, which will include basic information such as the name and primary business address of the LLC, the identity of the owner or owners, and where legal papers may be served on the LLC. You may also need to provide a copy of the LLC articles of organization. Typically, some type of annual report must also be filed with the state.
Once the LLC is registered, you may conduct business in the name of the LLC as it is registered. For example, if the LLC is registered as "Adventure Travel LLC," you can conduct business only as "Adventure Travel LLC," which is the company's legal name. However, in most states, you cannot conduct business as "Adventure Bus Tours." That would require a DBA registration.
DBA registration is something completely separate and different from the formation and registration of an LLC (or any other type of business entity).
In most states, if an individual or business entity wants to conduct business under a name other than their legal name, registration of that other name as a DBA is required. The initials "DBA" or "dba" stand for "doing business as." When a name that is not the legal name of the person or entity is used for business purposes, that name is called an "assumed name," "fictitious name," "fictitious business name," or "trade name," depending on the state.
The purpose of registering a fictitious name is so that the general public and your customers can check with the pertinent agency to find the identity of the business owners. It is designed to prevent business owners from hiding their true identity from customers, creditors, and those who may have any type of legal claim against the business.
No DBA registration is required for a person or business entity to conduct business in their legal name:
- An individual person may conduct business under his or her own name. This is a person's legal name.
- A partnership may conduct business under the official partnership name, which is the partnership's legal name.
- A corporation or an LLC may conduct business under the official registered name of the corporation or LLC, which are the legal names of these business entities.
Going back to the example above, "Adventure Travel LLC" could register “Adventure Bus Tours" as an assumed name. It could then conduct business as "Adventure Travel LLC dba Adventure Bus Tours."
Depending on the state, registration of a fictitious name will be either with a state agency (often the Secretary of State) or with a city or county agency (typically the clerk's office). It usually requires completion of a fairly simple form, and the payment of a small fee.
Purpose and Effect
LLC. An LLC offers limitation of liability for the members. The members are not personally liable for the debts of the LLC. An LLC has choices in how it, and its members, will be taxed on LLC profits.
DBA. Using an assumed name is generally done to achieve a marketing advantage. Compared with the legal name of the individual or entity, the assumed name may be easier for the public to remember, evoke a local connection, or better describe the goods or services offered. However, registering an assumed name:
- Does not create a separate business entity;
- Does not afford any protection from liability; the person, partnership, LLC, or corporation using the assumed name has the same liability as before the DBA registration; and
- Does not subject the business to any separate taxation under the assumed name, and does not affect the manner in which the LLC and its members are taxed.
Forming an LLC and registering a DBA is not an "either or" matter. They serve different purposes, and yet can go hand in hand. Determining whether to form an LLC is a matter of evaluating your intended business structure, taxation, and limitation of the personal liability of the business owners. Using and registering a DBA is largely a question of marketing strategy.
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.