Entrepreneurs sometimes wonder if they should form a DBA or an LLC when establishing a venture. A limited liability company (LLC) is a corporate structure that allows for limited liability.
A DBA (doing business as) identity is just a legally registered name. DBAs can be used by single proprietorships, alliances, limited liability companies (LLCs), and corporate entities.
A DBA is not a corporate structure. Instead, a DBA is a fictional identity that may be used for promotional reasons by proprietorships, alliances, LLCs, and corporate entities.
A widespread misperception among first-time enterprises is that they are establishing a formal corporate structure with liability coverage by obtaining a DBA.
To avoid such misconceptions, you should always consult with an experienced and skilled attorney. Therefore, schedule a session with an IncDecentral attorney to obtain the information about the most suitable business structure as per your requirements.
Unlike a DBA, an LLC provides legal immunity, which implies that if your LLC is accused, your financial possessions, such as your bank account, vehicle, and house, will generally not be used to negotiate a settlement.
DBA registrations do not grant legal immunity. If you do not establish an LLC or perhaps another organizational structure that does, you would be answerable for your business's financial liabilities.
Protection for Trademarks
Consider trademark protection if you wish to prevent others from exploiting your company name to promote their items and/or services. However, a DBA designation does not provide trademark rights, indicating that your business name can be used by somebody else, even if they live in the same municipality as you.
If you form an LLC, you can forbid anybody in the jurisdiction from using your company name. You may establish your trademark with the United States Trademark and Patent Office to secure it nationally.
Documentation and Maintenance
DBAs and LLCs are straightforward to set up and maintain. You must file applications with the government and submit a processing fee for both. To keep the registrations effective, you must complete renewing documents yearly or biannually. The registration methods and expenses for DBAs and LLCs differ by region, and in most cases, forming an LLC is more expensive than filing a DBA.
After registering a DBA, you can keep operating your organization in the same manner without jeopardizing your licensing. On the other hand, once you incorporate an LLC, you must handle it as a distinct organization or risk losing liability coverage.
These aspects can be a bit tricky for new business owners. Therefore, you are suggested to consult an IncDecentral expert attorney.
DBAs allow sole proprietorships and partnerships to receive and deposit checks written in the business's name to any account connected with the DBA instead of the owner's name.
However, if you establish an LLC and open bank accounts in its identity, you will not need a DBA and will be able to accept cheques written out towards the LLC's name.
Implications for Taxation
Your corporation taxes and reporting procedures will not change if you form a DBA. For example, if you were a sole proprietor before registering the DBA, you might continue to record your revenue and expenses on your tax return.
When you establish an LLC, you will be subject to additional tax concerns, such as paperwork with the IRS and your local tax department and the opportunity to seek corporate tax classification. In addition, LLCs should incur franchise tax in various states.
Verify how LLC Members Are Taxed for further details on tax concerns for LLCs, and consult with your state tax department to discover your local regulations. This includes keeping your assets distinct from your business assets and adhering to corporate procedures like establishing and adhering to an operating agreement.
Can an LLC obtain a DBA?
When you wish to extend your organization, you may choose to acquire a DBA for your LLC. In addition, if you intend to use a name distinct from the one on your LLC incorporation documentation, you should obtain a DBA.
For more information regarding LLC and DBA, visit IncDecentral.com, and our team will assist you in resolving your queries.
Notice: The details provided within it do not constitute legal advice. The knowledge of this article is for general reference purposes only. Your access to or reliance upon this information does not create any relationship involving an attorney or client. You should always head out and consult an attorney for specific legal advice regarding your situation.