Should You File a DBA for Your Business?

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There are a number of ways that you can organize your business. Most jurisdictions have offered ways to register a business very easily. However, it isn’t always ideal to take the easiest approach, even though it may be available to you.

filing DBA for business
Shutterstock Licensed Photo – By Atstock Productions

You need to consider the costs and benefits of setting up a DBA. The best place to start is by looking at the history of business registration options and the reasons different brands selected various registration plans.

A Quick Primer on Business Filing Options

As early as 1597, people like Sir Francis Bacon were saying, “knowledge itself is power.” Immigrants and other first-time business owners would probably agree with him when facing startup business challenges. Many do not have sufficient capital or a low credit score or they don’t understand the ins and outs of legal requirements relating to taxes, laws, and other regulations. For example, one of their concerns is whether to register their business as a DBA which means “Doing Business As”, a corporation, LLC, or a sole proprietorship. What are the reasons to choose one over the other and how do you go about registering your business name?

What is the Best Filing Option for You?

If you like being your own boss without consulting with other partners to make decisions, a sole proprietorship gives you that freedom. Sole proprietors report business expenses and income on their personal tax returns. If they earn a profit, they don’t share proceeds with others. Plus, sole proprietors don’t need to separate business assets from personal ones. Later on if necessary, you can switch to a corporation to protect assets, create shareholders, or transfer ownership. On the other hand, a corporation or a limited liability corporation ties up money to pay an attorney or an online service to create necessary legal documents. You may need to purchase accounting software or employ an accountant to keep financial statements up to date. A huge benefit of a corporation is that you can set up several DBAs under one entity to cut down on costs. Based on your business model, you’ll see immediately whether to set up your business as a sole proprietorship or corporation. That’s what the fictional Latino business owner did below to maximize business benefits and adhere to his state’s legal requirements.

Reasons Juan Diego Opted for a DBA

  • Juan Diego owns a small building in his community he could use as a retail space for a business. His dream is to offer fresh produce, canned and dried goods, and other kitchen supplies to shoppers. At first, he thinks about setting up his business as Juan Diego Groceries, Inc. but the name seems uninviting and setup costs prohibitive. Instead, he chooses “Food 4U”, as his DBA and operates as a sole proprietor. He feels the DBA will create a favorable branding to market his products.
  • No one in his family is interested in helping him run the business. Actually, he’s glad about that because he prefers making decisions on his own. It’s important to Juan Diego that he isn’t required to share profits so he can reinvest every dollar earned into the business.
  • Because he lives in a city rather than a county, he contacts the local city governmental office. They advise him what permits or licenses are required to register his DBA as well as fees. By registering his DBA, Juan Diego complies with the law and develops a good relationship with local authorities.

Is a DBA Right for Your Business?

You may be in the same situation as Joan Diego mentioned above. Your business is currently an idea that you want to turn into a reality. Maybe you’ve heard about DBAs but aren’t quite sure what they are or how they work. This article by Camino Financial, What is DBA? Do You Need One? details when you should register a DBA, reasons for doing so, and potential dangers you may not have thought about when using one. Perhaps Sir Frances Bacon knew what he was talking about. It’s better to delve in and research what you don’t know rather than move ahead uninformed.