Posted: May 8th, 2018
Category: Franchise Experts
Many entrepreneurs new to starting a small business know there are a few legal procedures they must accomplish before they can open up shop. Some of the primary ones include incorporating or forming an LLC to protect their assets, obtaining employer identification numbers (EINs) if they plan on hiring employees, and filing annual reports to stay in compliance with the state.
Another key area? Filing for a Doing Business As name, or DBA. For both entrepreneurs and franchise owners, having a DBA may be necessary in order to do business. Here’s how it works.
Often referred to as a “fictitious name,” registering for a Doing Business As name allows you to conduct business, such as marketing or advertising, or accept money under a name that is different from your existing business name. It also works as a fraud prevention measure in order to discourage anyone from registering the name of your business for their own self.
Keep in mind, however, that a DBA is not the same as a trademark. While both provide a bit of protection for the name of your business, a DBA identifies your business whereas a trademark gives you exclusive rights to use the chosen name and make it your property.
DBAs are not off-limits for any type of entrepreneur, but they tend to most commonly be used by sole proprietors. Let’s imagine, for a moment, an entrepreneur named Tom Johnson. Tom is a sole proprietor who runs his own business. If Tom decided to open up a sandwich shop called “Subs ‘N Chips” and did not want to operate the business under his personal name “Tom Johnson,” he would need to register for a DBA. This would ensure that he could do business under this name and be able to accept and sign checks made out to and on behalf of “Subs ‘N Chips.”
For businesses incorporated as an LLC or Corporation (which many franchises tend to be), filing for a DBA allows these entities the ability to do business under another name without having to form a new organization. Ultimately, this helps save money, time, and energy that can be focused on the business instead.
Once you’ve registered for a DBA, you’ll be able to enjoy extra small business benefits. One of the biggest benefits is the ability to open up a business bank account. Most banks require a certified copy of your DBA in order to open the account since entrepreneurs aren’t allowed to use their personal accounts under their business name. You may also publicly market and advertise your company and create a business identity that allows you to present your business in a professional light.
Since DBAs are fictitious names, most states require registering them with a local government agency. You’ll need to conduct a name search first to make sure the name isn’t already being used by another company. After you can verify your name is unique, check with the county or state in which your business is based to make sure you are required to register a DBA name. You may also consider filing your documentation in the jurisdiction in which you are based or where your LLC (if your company is incorporated as one) was formed.
If you are required to register a DBA, file early using the appropriate forms and pay the processing fee. Registration can take anywhere between one to four weeks to process, so be patient. Once you have registered, keep in mind that your DBA name now has an expiration date. Remember to renew the name as needed so that you can keep doing business and do not lose the rights to it!