A DBA is simply a company conducting business under a name other than the legal one under which it was organized and registered with the state. For example, Joe and Bob Smith register the "Smith Partnership" with their state. They then file a request for the fictitious name, "Smith Brothers Antiques." If approved, the official title of the company is "Smith Partnership DBA Smith Brothers Antiques." Similarly, Joe Smith, sole proprietorship, could request the DBA, "Smith Antique Restoration," This allows Mr. Smith to open bank accounts, use business checks, sign contracts and make legal agreements in the DBA name.
LLCs and DBAs
Since LLCs can own other LLCs, an LLC using a DBA can also own another LLC. For example, "Joe and Bob Smith, LLC, DBA Smith Brothers Antiques" can also own "ABC Antiques, LLC." The DBA classification does not eliminate the legal business from owning another LLC, which is sometimes beneficial when revenues come from different products, markets and/or industries.
Purpose of DBAs
Using a DBA gives you the ability to establish a trade name that becomes more familiar to the marketplace. Like LLCs, the ability to use DBAs is regulated by your state, not federal law. Always learn about your state laws and consider your DBA choices carefully. For example, even though a fictitious name, you cannot use "Joe Smith Company DBA Microsoft." However, "Joe Smith Company" will probably mean little to your potential customers. However, adopting the name "Joe Smith Company DBA Smith Antiques" targets your company purpose. The name, "Smith Antiques," is much more likely to become a household name if you are successful.
Reasons for DBAs Owning LLCs
There is at least one overwhelming reason for a DBA to own an LLC: limited liability. The personal asset protection offered by LLCs, similar to the personal limited liability offered by corporations, can be a huge advantage. Unincorporated companies, whether operating with a DBA or not, cannot protect the personal assets of their owners. However, even the smallest company can afford to create an LLC, much simpler to organize and manage than a corporation, and enjoy the same limited liability as Fortune 500 organizations.