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What You Should Know About DBAs

What You Should Know About DBAs

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Since improper use can expose companies to compliance violations and civil lawsuits, business owners should familiarize themselves with the details of DBAs. “Doing Business As” (DBA) is a term used to enable a company to operate under a name that differentiates from its official filing documentation. DBAs give companies the flexibility to create “new” business ventures that attract customers.

The Basics of DBAs

DBAs are also known as fictitious business names, trade names, and assumed business names. DBAs fulfill several roles for businesses. They are often utilized by sole proprietorships that want to market their company using a name other than the given name of the owner. For example, one might do business as“Smith’s Emporium” rather than “John Smith.”

In Illinois, sole proprietorships that use the legal name of the owner and describe the nature of the business, do not need to register a DBA. But, if the business uses only the first name, for example, “John’s Emporium,” or a generic term, for instance, “the Smith Group,” it will need to register a DBA.

LLCs and corporations also use DBAs to operate under a different name. For instance, a corporation that is experimenting with a new business venture which is distinct from its core business or an LLC that is expanding into a new city and wants to use a local-sounding name must use a DBA.

Purpose of Registration

States and municipalities require registration of DBAs for transparency. Corporations are registered with state regulators. Therefore, any interested individual can look up the paperwork and learn the basic details of any corporation. However, sole proprietorships are not registered. Registering a DBA allows the public to know the identity of the owner and other basic information. Many states also require DBAs to publish public announcements in local newspapers for a few weeks. Public registration and announcement help protect the public from unscrupulous business owners.

Benefits of a DBA

Businesses that fail to register DBAs fall out of good standing with their state and municipal authorities. Businesses that fail to register in mandatory registration states or cities could face penalties or worse from regulators.

DBAs also allow sole proprietorships and partnerships that do not want to engage in the expense and complexity of registering a formal legal entity (such as an LLC or corporation), to use creative business names. However, DBAs only allow the use business names, it does not convey limited liability like corporations.

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