When beginning a business, it is important to figure out what entity type is right for your business. Forming an LLC, creates a separate legal entity and carries on a business from that point on, rather than you as an individual. Registering a DBA, however, you will be carrying on a business under a fictitious name. In this article, I will go into further depth about each business entity type and their advantages.
What Is DBA?
DBA is simply the abbreviation for “doing business as.” DBA can also be known as “fictitious names,” “trade name,” or “assumed names.” When a business operates under another name other than its legal one, DBA registration is needed. Many business owners choose another name other than there given personal name to establish recognition and to identify goods sold or services provided.
Unless you run a LLC or corporation, you will not be able to receive money or hold a business bank account under a business name until you have a DBA statement. The purpose of the DBA statement is to inform the public of the owner’s personal name or the name under which they are operating a business.
Many business owners choose another name other than there given personal name to establish recognition and to identify goods sold or services provided
What Is LLC?
LLC is the abbreviation for “limited liability company.” LLC is a separate and distinct legal entity with the ability to get a tax identification number, open a bank account and do business, all under its own name. LLCs can be operated by more than one person who are known as LLC “members.” Forming an LLC can protect a business and its assets.
What Are the Advantages of DBA?
DBA is a simple process with low costs compared to corporations or LLC. There is no requirement for record keeping or other formalities. A DBA allows a business owner to own multiple businesses without having to create separate legal entities for each business. A brand or service set up as a DBA, creates advertising potential whenever the names is mentioned. Home-based business benefit greatly using a DBA. A business owner may want to convert over to a corporation or LLC when their business is running profitably.
A brand or service set up as a DBA, creates advertising potential whenever the names is mentioned. Home-based business benefit greatly using a DBA.
What Are the Advantages of LLC?
One great benefit of LLC, is the special tax benefit. In a DBA, any money a business owner makes passes through to their individual tax return and is taxed accordingly. With an LLC, members can avoid this double taxation and be taxed only once for each LLC member’s individual income tax return.
Since an LLC is viewed as a separate legal entity from its owners or members, an LLC owner is not held accountable for LLC’s debts or legal abilities. The LCC’s owner and their personal assets such as a home, or a bank account are usually not at risk under LCC’s legal obligations. Making this formal commitment to a business opens the door to establishing more credibility with customers, vendors, employees, and partners.
What Is the Best Choice?
The best choice is dependant on your business needs. The rules for DBA and LLC are different where some rules may benefit some businesses more than others. LLC owners have protection and a special tax break where business owners who use an assumed name have more liability and get double taxed. In the same note, a business that is home-based may benefit more from a DBA because it offers more advertising potential and is less costly to maintain.
If you find yourself in need of a DBA or a LLC, Platinum Paralegals can help. Get excellent legal advice for a fraction of the cost of an attorney’s fee. Platinum Paralegals will call you back faster than an attorney who spends most their time in a courtroom. If you are seeking general advice about business entity types, get in touch with us via phone or web form today!