I’ve received this question many times: What is the difference between filing a “Doing Business As” (DBA) and filing for an LLC besides the fact that the DBA is cheaper?
Long story short: Everything, but let’s start by examining what these two things are.
You may have heard DBAs referred to as a “Doing Business As” name, assumed name, or fictitious name. These are all the same thing. The DBA is a recognition by your local Register of Deeds office that your company is operating under a specific name. There are very few restrictions on what can be included in your DBA filing. In North Carolina, a DBA costs $26 in filing fee to obtain, and you typically get the certification on the same day.
Having a DBA means is that you are legally authorized to operate your business under that name because you’ve officially put the public on notice of who you are. Any person can search the Register of Deeds to discover who is operating under that DBA. Some of these searches are even available online in North Carolina.
A Limited Liability Company (LLC) is a separate type of company that provides liability protection for the owners. You can create an LLC by filing Articles of Organization through the North Carolina Department of the Secretary of State Corporations Division for the filing fee of $125.
Having an LLC also allows you to operate under the exact name in which you filed, which must include the “LLC”, “Limited” or similar word or phrase to put the public on notice that you’re operating as a limited liability company. In order to maintain the liability protection, there are limited formalities that must be followed. Anyone can search the online Corporations Search on the Secretary of State’s website to determine who setup and who owns an LLC.
As said earlier, the differences include everything between these two legal concepts. Whereas an LLC is a separate legal company with its own tax identification number, a DBA is merely a name that a company can go by. In fact, LLCs can, and frequently do, have multiple DBAs for different product lines or for any reason they choose.
Here is an example. An LLC is a person whereas the DBA is an alias for that person. A person can have multiple aliases or nicknames if he or she wants. That same person can also change aliases at any point. This person, however, cannot change the actual physical presence of that person (at least not under current medical science). Despite making changes to him or herself, the person is still that person.
A major difference between these two legal concepts is the liability protection. A lot of entrepreneurs will simply obtain a DBA and think that is good enough to begin operating a company. This is ill-advised for the average startup. For about $100 more, that same company could have liability protection that shields their personal assets from business failures.
Additionally, when you obtain a DBA under your personal name, that DBA is not automatically transferable. If you do decide to form your company under an LLC or corporation, you will have to file additional paperwork to transfer the DBA. Alternatively, you can cancel the DBA and file a new one under the newly formed company.
Should you choose to move forward with forming a separate legal entity, your next step should be figuring out which one. An LLC may or may not be the best choice for you. For help deciding, check out our blog on Choice of Entity. We’ve also created a blog helping walk you through the steps of setting up your LLC.
For more information or to schedule a consultation regarding your business, please feel free to contact us at email@example.com or by calling 919-912-9640.