Most modern entrepreneurs couldn’t be more different than the one-trick ponies of the past. Instead of being singularly focused on a service or product line, today’s small business owner is more likely to dabble in a variety of opportunities. In fact, it’s often a badge of honor to have multiple income streams to one’s name.
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While the additional revenue is certainly admirable, how easy can it be to manage all those different businesses on paper? Specifically, what is the implication for having more than one business to your name, but all under different registered names? DBAs (also known as “doing business as”, fictitious, or trade names) can be created quite easily, so why wouldn’t you give each of your business properties their own official title?
Let’s look at the pros and cons of separating out your business offerings with individual DBAs.
Do You Need a DBA?
First, it’s not always necessary to register for a DBA. While it’s a rather straightforward process to register your business with the Secretary of State, this step may or may not include getting a DBA. In fact, if you’re a single business owner (also known as a “sole proprietor”), you may choose to conduct business under your own name and not use a DBA at all. This is often the case for writers, crafters, Etsy store owners or others who offer many assorted products or services, but choose to identify as their own name. Many people forgo the DBA and do just fine. (Note: Some municipalities require a DBA for specific business categories, regardless of the structure or name. Check with your local authorities, if you aren’t certain.)
If you do decide a DBA is needed – when using a fictitious name, for example – you can consider getting one as a sole proprietor quite easily. It’s also necessary to get one for a corporation, such as an LLC. Most people choose the same DBA name as they have on their articles of incorporation. This makes it simple to keep accounts payable and accounts receivable, tax forms, and regulatory documents (like city operating permits) all consistent with one business name.
Can I Have Multiple DBAs?
In a word, yes. You can choose to have a DBA for each portion of your business, and might want to if they are completely different in nature. If you ran a cupcake business and then decided to pick up dog-walking on the weekends, you’d likely want to have different names for each service. Not only would it create less confusion as to who your customers should make payment to, but most people feel better not imagining animal handlers in the same business as food preparers.
Aside from the marketing perks, there are a few limited logistical benefits to having more than one name. If your bank requires you to have your deposited checks made out to the same business name as your DBA, you will need an account for each of your businesses. Setting up those accounts often requires a matching DBA for each.
Curious as to how many DBAs one person can have?
While the requirements vary from state to state, there is no limit to the number of DBAs you can get for your business. In fact, some locations (such as Los Angeles County in California) make it cheaper to acquire each DBA after the first one. This alone assumes that many businesses will have more than one.
When Multiple DBAs are a Bad Idea
If it’s so easy to get a fictitious name for a business, why wouldn’t someone want to have more? For one, a DBA is just a name. It’s not an indication of a separate business for tax or liability purposes. If you have one LLC with ten businesses names, each of those names is held to the same legal requirements as the others. So, if your LLC gets in trouble, your cupcake business will be as vulnerable as your dog-walking business.
Another reason to reconsider many names is the IRS. While you can have separate personal books for each of your DBAs, you’ll likely file one set of tax forms. Any losses that you suffer on one DBA will be counted against the profits of another. You could lose out on potential deductions, breaks, or benefits that a true separate LLC might enjoy. The tax department sees just one business when it comes time to pay what’s owed.
While there is a wide range in what each state or county charges for a DBA, they usually need to be renewed every 3 – 10 years. Costs that can be anywhere from $10 – $100 per name, which can really add up! You must carefully consider if the price to register and renew will provide an excellent value to your business plan. Many businesses just starting out don’t have that kind of money throw around on something that may or may not actually benefit your business.
The Value of a DBA
If you have a carefully stated business plan that includes separating out your income streams in name only, having more than one DBA may be crucial. Remember, however, that a name alone doesn’t offer the same protection as a different legal entity – this benefit is limited to corporations and partnerships. If you are hoping to use a DBA to keep funds apart for tax purposes or to limit liability, you’ll be disappointed to learn that you’ll have no legal leg to stand on.
One final caveat to the collector of DBAs is this: In many states a fictitious or trade name isn’t worth anything from a trademark or copyright perspective, either. A state may have several DBAs that are similar, and many don’t require you establish that you are the original creator of the title. Name confusion can make it difficult to establish a brand identity. Therefore, it’s wise to never rely solely on registered DBA names to solve copyright or trademark problems for your business.
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