Differences Between LLC & DBA

By Joe Stone

LLC and DBA are two acronyms commonly used to indicate important legal aspects about a business. LLC, or limited liability company, refers to a separate legal entity that is distinguishable from its owners. DBA, or doing business as, refers to a pseudonym that an owner uses to conduct business. It is important to understand the difference between the two when planning to use either as part of your business structure.

DBA Basics

A DBA is not the legal name for a business -- it is simply the name that a business owner wants to use to sell products or provide services. A DBA is sometimes referred to as a fictitious name, trade name or assumed name. All states have laws regarding the proper registration and use of a DBA. Some states, such as California, Florida and Connecticut, make registration of a DBA mandatory before it can be used by a business owner.

LLC Basics

An LLC is a separate legal entity from the individual member or members who formed the LLC. In contrast to a DBA, the name of the LLC is the legal name for the business and must be used on all government applications and forms, such as a business license or tax filing. Each state has its own laws regarding the formation of an LLC; however, unlike requirements for a DBA, no state requires a business to form an LLC. The decision to form an LLC is voluntarily made by the business owners depending upon whether such a business structure is beneficial for them.

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Personal Liability Protection

One of the primary reasons a business owner decides to form an LLC is the protection it provides the business owners’ personal assets. The owners of the LLC -- called members -- will not be personally liable for decisions or actions taken by the LLC. With regard to a DBA, there is no such protection from liability. Because the DBA is not a separate legal entity, all business decisions and action taken using the DBA are the responsibilities of the business owners.

Start-up and Maintenance Costs

Both DBAs and LLCs require start-up costs for filing and ongoing costs to maintain the DBA or LLC in good standing. Although costs vary among states, the costs associated with a DBA will be significantly smaller than an LLC within the same state. For example, as of November 2010, a DBA can be registered in Los Angeles County, California for $26. The filing fee for a California LLC is $70, with an additional $800 payment required for state taxes. The DBA will require a small renewal fee every five years; the LLC will have to pay the $800 tax every year of its existence.

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References

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How to Register a DBA Name So No One Else Can Use It

Companies and individuals can operate under fictitious, or assumed, names called DBAs. DBA stands for "doing business as" -- and state laws regarding DBAs vary. It is a misdemeanor crime in Missouri and Michigan to conduct business using an unregistered DBA. Other states, such as Tennessee, do not always require you to register assumed names.

What Does DBA Mean in Business?

In the business world, DBA - which stands for "doing business as" - is a vitally important acronym to know. It signifies that an individual or company is doing business under a fictitious name. One common example would be a chain store franchise, operated under a commercial name familiar to everyone but actually run by an individual or firm owning the local franchise. State laws govern the creation and use of DBA fictitious names.

Can a DBA Company Own an LLC?

You can own an LLC if you are a sole proprietor or partnership using a DBA, or "doing business as." A DBA is not an official company structure, but an identity -- usually called a "fictitious name" or "trade name" -- for business and/or recognition purposes. Your state will recognize your DBA identity, but the legal structure will typically be a single owner business or a partnership. Since states make the rules for DBA recognition, check with your jurisdiction to learn the legal way to own the LLC.

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