Difference Between an Individual & a DBA

By Cindy Hill

An individual may operate an unincorporated business as a sole proprietor either under her own name or an assumed trade name, which is called a DBA or "doing business as" name. Business partnerships and corporations may also choose to conduct business under a fictitious DBA name to distinguish their business from others or build the basis for a better marketing platform.

Sole Proprietorship

An individual who conducts an unincorporated business is a sole proprietor. If a sole proprietor wishes to operate a business under any name other than his own legal name, he may adopt a DBA name. Most states require a DBA to be registered with a state or county agency. The DBA allows the individual to develop a business name and brand not based on his own name; however, the DBA is not a separate entity. It is merely the alter ego, or alias, for the individual sole proprietor.

Liability

A DBA doesn't protect the individual sole proprietor from liability. The sole proprietor remains the legally responsible party for all actions of the business, from purchase contracts and employee tax withholding obligations to liability for faulty products sold by the business. The DBA is just a name the individual uses to market his business. A sole proprietorship may obtain an Employer Identification Number, or EIN, which identifies the business for tax and employment document filing purposes. This EIN does not change the fact that the unincorporated individual sole proprietor is not a separate entity from his DBA.

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LLC

An individual who forms a single-member limited liability company, or LLC, and does not elect to be taxed as a corporation is also considered a sole proprietorship for tax purposes. A sole proprietor LLC may be considered a separate entity from the individual, providing the owner with some measure of protection from liability. However, some courts don't consider the single-member LLC as an entity separate from its sole proprietor owner and hold that owner liable for claims and lawsuits against the business. An individual who owns a single-member LLC may do business in the legal name of the LLC, or have the LLC register its own DBA for branding purposes.

Consumer Confusion

A legal requirement to conduct business in each state is that every business must operate under a name not currently in use by, or confusingly similar to, another business operating in the state. This prevents public confusion over who is legally responsible for business activity. If any individual, partnership or corporation seeks to do business in a new state and discovers its name is similar to another business already operating in that state, the individual, partnership or corporation may register a different DBA name to conduct its business in that state to avoid confusing consumers or infringing on an existing business's trademark.

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Do You Need a DBA for Sole Proprietorship?

References

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Sole Proprietorship & Investment Accounts

The sole proprietorship is a very common form of small business, and beyond running their underlying business, sole proprietors are free to make investments and hold assets in investment accounts. These accounts can be used to augment savings for the business, to speculate on specific investment opportunities or to offset financial risks encountered in the sole proprietorship's business operations.

What is a DBA Name?

A DBA, or "doing business as" name, is a fictitious name under which an individual or other business entity -- partnership or corporation -- conducts its business. While some individuals successfully market their personal name as a brand name, most people select a DBA which allows consumers to more easily recognize the product or service they are selling, and to avoid confusion with other businesses. Businesses must comply with the laws of each state in which they do businesses regarding DBA registration.

Rules of DBA Vs. LLC

A limited liability company, or LLC, is created by state law and has a separate legal existence from its owners. A doing-business-as entity, or DBA, on the other hand, is a person, corporation, partnership or LLC transacting business under an assumed name. Although an LLC may do business under an assumed name, the rules for forming an LLC are completely different from doing business under an assumed name.

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