DBA vs. LLC: What’s the Difference in them? » Postallow

Do you need a DBA or LLC? Although that question may sound like an alphabetic puzzle, it is one of the most important questions that many young business owners ask DBA vs LLC.

Fortunately, the answer to that question does not confuse you once you have some basic knowledge; about what those acronyms mean and how they can affect the business. And that’s exactly what I’m going to discuss in this blog post.

The first thing I want to share is that DBA (doing business as); LLC (limited credit company) is not exactly a comparison of apples and apples. dba vs. llc

Description of LLC

LLC (Limited Liability Company) is a state-occupied legal commodity. Its official name is any name authorized in its composition documents (Articles of Association). The legal name of the LLC should not include the name of its owners (members). The name can be anything the owners want, as long as the name is not:

Forbidden government

It is already being used by another business organization within the registration environment Already used for business anywhere in the U.S. with a trademark claim registered in the name Description of DBA The DBA stands for “Doing Business Like This.” False name registration (also known as “trade name” or “imaginary name”); allows a single patent (or partnership) to carry on their business under the false name of their owners.

DBA Example 1:

Suppose a man named Josie Newman wants to open a gift shop. Josie will need to file a DBA to request permission to run a business under that false name.

Similarly, a legal entity (LLC or organization) may file a DBA if the owners wish to conduct business under an unlawful name in the formation of the LLC or government-approved merger documents.

DBA Example 2:

In this regard, let us assume that Josie Newman has submitted Articles of Organization to the government to establish an LLC called “Extraordinary Finds Gift Emporium; ” When a country approves its LLC, it may automatically use that business name in business transactions. No DBA is required… unless he decides to separate using a different name to expand his products or services. For example, if she wants to market her interior design consulting services under the term “Extraordinary Home Decorating,” her LLC can file a DBA to find it OK to do so.

Countries require that DBAs be registered so that the public and consumers know who owns and operates any business that uses a false name. Such disclosure is a way to help protect customers from reputable businessmen who have a reputation for doing bad business. Business owners should not use the word “LLC” or “Inc.” after a false name because DBA is not a legitimate business name.

Comparing DBA with LLC

Paper Design

Completing the DBA is a simple process, which requires completing and submitting a form to the Secretary of State or other business agency to request permission to use the desired fake name. Typically, districts require relatively small costs (some have renewal requirements), and there are no ongoing business processes related to the DBA name.

Creating a limited liability company requires completing and submitting an Organization (or Organizational Certificate) to the government and paying the registration fee. There are many other completions, fees, reports, and requirements to be met, varying from province to province and in accordance with the LLC Business Agreement. Possibilities include:

To appoint a registered agent
Obtaining business licenses and permits
Applying for EIN (State Tax ID Number)
Submission of Annual Reports
Paying LLC franchise tax
Holding Annual Meeting and recording minutes

DBA vs LLC Business Name Protection

When someone registers for a DBA, they usually do not give him special rights to use that name. Some companies may also be able to use the name in government.

Establishing an LLC provides additional protection for business names because the state will not allow the creation of another company (or DBA) with the same name. However, if the business name is used by a company that provides products or services that are very different from the LLC that seeks to use the name, the state may allow both companies to use the name.

Business owners can apply for a government trademark with the United States Patent and Trademark Office (USPTO) for greater protection of the brand name. A registered trademark provides protection against other companies (anywhere in the U.S.) that offer similar products and services in using the trademark.

DBA vs LLC Legal Responsibility of the Business Owner

LLC is an independent legal entity owned by its owners. This means that in most cases, LLC members are not liable for a debt or legal business matters.

The DBA does not exclude business owners from being legally separated from corporate debt. Simply put, it is not a private business without a single owner, partner, or business using it. Therefore, if a business is sued or in financial trouble, business owners have a personal obligation. That could put their home and other belongings in jeopardy, saving for retirement, bank accounts, and other assets at risk.

DBA vs LLC Taxes

Land ownership and co-operation under the DBA has only one income tax option: it is taxable as a passing business, and all DBA income and losses go into the personal income tax refunds. All business benefits are subject to income tax and employment taxes (Medicare and Social Security).

LLCs that meet IRS eligibility requirements have the option to choose S Corporation tax administration. Therefore, instead of all business profits being subject to Social Security and Medicare taxes, only the owners’ salaries and the salaries with those taxes are levied on them. For some entrepreneurs, this may reduce their overall tax burden.

To review everything I have shared above, below to look at the potential benefits and disadvantages of DBA vs. LLC.

Benefits of DBA

Papers are simple, straightforward, inexpensive and process
There are no business compliance requirements

Benefits of LLC

It provides some legal protection to prevent the name from being used by other businesses in the government
Provides credit protection to business owners (because LLC is a legal entity)
It may offer tax benefits (because the LLC may opt for the S Corp option if it meets IRS eligibility requirements)

DBA Cons

It does not grant copyright in the name of the business
There is no credit protection for the business owner over corporate liabilities and claims against the company (because DBA is not a private business)

LLC Cons

It requires a lot of paperwork, cost, and time to set up
It comes with ongoing business compliance requirements

Conclusion

That is a question that should be discussed with a lawyer, accountant, and tax adviser! There are legal and financial implications when choosing a business plan. Therefore, entrepreneurs should look for licensed professionals who can assess their specific situation and direct them to what will produce the best results.

Note that CorpNet is also available as a resource! We can assist you with searching for business names and trademark searches to determine if the name you wish to use is available. Also, after receiving professional guidance from your attorney and your tax advisor, we can manage all your important applications to make your DBA or LLC operational. So, more blogs will be coming in the Business section. Data are from Corpnet.