Doing Business As (DBA)
- How It Works
- Name Rights
A DBA is not a type of entity or form for operating a business. It refers to a fictitious business name that one uses to describe the business that is being conducted. It is sometimes used as if it was synonymous with a sole proprietorship and unlimited liability. For example, some incorporation services or so-called asset protection companies will refer to the risk of operating as a DBA.
In fact, any type of entity (including limited liability entities) may, and often do, file a DBA to register one or more trade names in which the entity engages in business. Here’s a common example. Paul Webb starts a business repairing computers and names his business “Elite Computer Repair.” Since this is not Paul’s legal name, he must file a DBA registering the name “Elite Computer Repair” as his fictitious business name. This is the classic use of a DBA for a sole proprietor.
As Paul’s business grows, he decides he wants to incorporate. However, he discovers that his state already lists an active corporation with the name “Elite Computer Repair, Inc.” There cannot be two corporations in the same state with identical, or substantially identical, names. Paul has built a reputation and following in his business name and doesn’t want to abandon it.
The solution is to form a corporation using a different name and then register the DBA “Elite Computer Repair” as the DBA of the new corporation. Let’s say the corporation name he establishes is “Paul’s Computer Services, Inc.” He files a DBA registering the name “Elite Computer Repair” as the DBA of Paul’s Computer Services, Inc. The DBA name can’t use the “Inc.” or any other corporation ending because it’s not a corporation. But Paul may continue operating as Elite Computer Repair as he has always done and is not required to use his corporation name at all with his customers or in any advertising, but may do so if he wishes.
Contrary to the impression created by some, Paul’s use of the DBA in this instance still provides Paul with the limited liability protection of his corporation. The only caveat to maintain this protection is that Paul must be sure that any contracts that are signed for the business are done as a representative of his corporation (e.g., Paul’s Computer Services, Inc., by Paul Jones, President) and not in his name personally.
How It Works
A DBA is processed at the state or county level and in some cases at both levels. For an unincorporated business, it is generally a process handled at the county level.
A DBA form is prepared listing the DBA or fictitious business name and the name and address the registrant. The registrant might be an individual, corporation, partnership, husband and wife or other entity. A DBA form goes by different names. It may be called a Fictitious Business Name Statement or Assumed Name Statement.
The DBA form is filed with the county where the business is located and then published in a newspaper. If the DBA is registered to an entity that has been formed at the state level, a DBA may also be required to be filed at the state level.
There is no limit to the number of DBAs an individual or entity may have.
The business owner takes the filed DBA form to the bank and may now open a business bank account in the DBA name so that checks made payable to the DBA may be deposited into the business account.
Let’s go back to Paul Webb and his computer repair business discussed in the Overview section. You may have wondered at the time whether another person had the right to form a corporation in Paul’s state with the name “Elite Computer Repair, Inc.” when Paul was doing business as Elite Computer Repair. Conversely, one could ask whether Pau had the right to file a DBA for the name Elite Computer Repair (without the “Inc.”) when there was a corporation using the same name.
Both are valid questions and require a complex answer involving name rights and determining who has the ultimate right to use a name. An exhaustive discussion is beyond the scope of this topic, but here are the key points that will always be considered for both businesses:
- Do they provide the same services
- Do they operate in the same geographic area or serve customers (or potential customers) in the same geographic area? In short, are they competitors or likely to be competitors?
- Who first established the name rights to “Elite Computer Services?”
- What efforts were undertaken to promote the name (advertising, etc.)
Has the name been continuously used by the business?
- How were the name rights established?
The determination of superior name rights must consider and weigh all these factors. Being the first to use a name is important, but it is not determinative. However, it is important to understand that there are many different methods to establish rights to use a name and all are equally valid. In addition to filing a DBA, forming a corporation or LLC will establish name rights, registering a trademark or service mark, registering a domain name for an Internet site, or simply operating under a business name for a continuous period of time so that customers associate the name with your particular business. This is known as acquiring a secondary meaning.