An LLC (Limited Liability Company) and a DBA (Doing Business As) are two different business designations.
In this article we explain the key differences and whether you should use one or the other, or both.
What is An LLC?
An LLC, or Limited Liability Company, is a type of business entity that shields its owners’ personal assets and, depending on circumstances, offers the owners some tax advantages.
An LLC provides the same liability protection as corporations without necessarily requiring board meetings, corporate record-keeping, or other paperwork and events.
A business of any size can be an LLC, further adding to their flexibility. An LLC is a popular and flexible business legal structure, especially for small companies and startups.
An LLC can be taxed as a sole proprietorship, an S corporation or a partnership.
An LLC can have unlimited members, unlike an S-corp, which is limited to 100 shareholders.
What is a DBA?
A DBA, or Doing Business As, is a way to allow a business or sole proprietorship to trade under an alternate name that differs from its official legal name (the name that was used when the company was formed).
In some states a DBA is known as a trade name or a fictitious business name.
For example, let’s say you have an LLC called Sally’s Falafel LLC that you use for your falafel store, Sally’s Falafel, but you want to rebrand your offering to kebabs? Well, you can use a DBA to trade as Sally’s Kebabs without having to set up a new LLC in the name of Sally’s Kebabs.
he DBA allows you to maintain a separate identity for key business tasks such as writing and receiving checks, signing contracts, and running your business, without establishing a new legal structure.
Filing for a DBA gives small business owners and startups freedom to choose their business name without having the costs and complexity of registering multiple LLCs or corporations.
DBA vs LLC: Which Business Structure Is Right for Me?
These are really separate questions.
Let’s deal with the LLC first. You should use an LLC to operate your business if you want to protect your personal assets in the event that you are sued successful and the LLC files for bankruptcy. Unlike a DBA, an LLC is a separate legal entity to its owners.
While there are tax benefits too, it is the personal liability protection that using an LLC offers that is the main consideration for many businesses.
Alternatives to using an LLC are operating as a sole proprietorship – it’s simpler and cheaper and that’s what many freelancers and similar workers opt to do.
So once you’ve chosen whether you will use an LLC or a sole proprietorship to establish your business, you can consider whether you need a DBA or not.
This really comes down to branding – if you want to trade under a name that differs from your official business name (in the case of the LLC) or from your actual name (in the case of a sole proprietor) then you need a DBA.
There is a much lower cost for doing business as a DBA vs LLC. A DBA has only two fees: a registration fee and a renewal fee, which is generally necessary every five years, depending on the state.
DBA vs LLC: Legal Advice
Sometimes as a business owner deciding on what legal business entity is best for you is difficult. LLC vs DBA? Or do you actually need either? An attorney or law firm can provide expert guidance if your situation is a little unusual or doesn’t fit easily in the typical scenarios.
This DBA vs LLC recap may also help:
- An LLC provides limited liability protection for the business owner’s personal assets as it is a separate legal entity to the owners
- An LLC can provide some tax advantages in certain situations along with the personal liability protection
An LLC costs a few hundred dollars to set up and some cost to maintain (see our guide to the costs here)
- A DBA allows you to brand your business by adopting a different name to your name as a sole proprietorship or the business name of the LLC
- A DBA is relatively straightforward and cheap to obtain and maintain
- A DBA doesn’t provide any legal liability protection and is not a separate legal entity to its owner