DBA vs. LLC

DBA and LLC are two common acronyms in the business world, but what do they mean – and what’s the difference? If you’re looking to start a business, it’s important to understand these terms and how they might help you as an entrepreneur. 

This guide explains the terms DBA and LLC, how they differ and why you might prefer one or the other as a business owner.

What is a DBA?

DBA is an acronym for “doing business as” and refers to an alternative business name you file at the local or state level. A DBA, also known as a fictitious or trade name, allows a business to operate under a name other than its official legal name. 

For instance, if you run “Jane’s T-shirts” and want to start selling shoes, you might file for a DBA called “Jane’s Shoes.” Creating a DBA does not impact taxes and is not a legal entity or structure like a corporation. 

However, if you operate your business as a sole proprietorship or a partnership, you must operate under your name unless you register a DBA. It’s standard in most states to file a DBA with your county or municipality where the business operates, but in some states, it’s filed at the state level. 

What is an LLC?

LLC stands for “limited liability company” and is a popular business structure due to its many benefits. An LLC provides personal liability protection, for example, so that your assets are not at risk if your business is sued or cannot pay its debts. 

Also, an LLC is a “pass-through entity,” meaning that the LLC itself is not taxed. Instead, income passes through the company to the LLC owners or members, who report it on their tax returns. LLCs also offer flexibility in management, as there are few requirements regarding organizational structure. 

What’s the Difference Between a DBA and an LLC?

A DBA is a registered name for a business that’s not the owner or legally registered name. When operating under a DBA, there’s no legal difference between a sole proprietorship or a partnership and its owner or owners. In these cases, a business owner is liable for all business debts. 

Liability protection is one of the main reasons people choose to form an LLC. Under an LLC, a business owner’s personal property is separate from the business, protecting the owner from potential financial losses to the business. 

A DBA offers no tax or legal benefits as it’s not an official business entity. However, with an LLC, you can be taxed as a corporation, which may provide significant advantages, depending on your business goals. 

In terms of filing requirements, in most states, LLCs must file annual reports and pay an associated fee. With a DBA, you usually have to pay a one-time fee to register. 

Why Should I Choose a DBA?

Remember that a DBA is not a formal legal entity, which means that technically you wouldn’t choose to form a DBA over an LLC. And actually, you wouldn’t necessarily need to choose – you could form your business as an LLC and register a DBA for that business. 

A DBA will help you differentiate your brands while keeping all your products under one official business entity if you’re preparing to offer a new line of products. 

But you should know that, unlike an LLC name, a DBA may not give your business exclusive rights to that name. In addition, some states allow multiple businesses to file and use the same DBA name, so be sure to check the laws in your state. 

Though DBAs do not offer liability protection like LLCs, there are still some good reasons to file a DBA. For one thing, if you come up with a DBA that’s more attractive than your official business name, it might help you generate more business.