LLC vs DBA – Which is Best For You?

Benefits of DBA

DBA stands for “Doing Business As” and is sometimes called a Sole Proprietorship.

• It is the most straightforward, easiest and least expensive business structure for small companies.
• This type of business structure is best when your business is using a company name instead of your full legal personal name. The DBA allows you to legally do business under your firm’s name.
• A  DBA is not a separate legal entity, like an LLC. Thus, all business liability is passed directly to the business owner as an individual.
• One benefit of DBA is that if you later choose to incorporate your company, you can use the same DBA name.

Benefits of LLC

LLC stands for “limited liability company” and has several more benefits than just a DBA:

• An LLC is a separate legal entity.
• Your LLC name becomes your legal business name, and you can use for all commercial purposes.
• LLCs protect personal assets and liability against lawsuits against your business.
• LLCs make it easier to get business funding for expansion and to sell your business.
• Most business attorneys recommend an LLC. If you plan to hire employees

Key Differences Between DBA vs LLC

Financial

DBA’s cost much less than LLCs to register. To register a DBA. There are only two fees a registration fee and renewal fee that is due every five years. Depending upon your state.

In contrast, an LLC requirement the payment of state taxes on an annual basis. Most states have a flat LLC tax free.

Administration

Many small business owners who are sole proprietors, and who do not want to incorporate their companies choose a DBA business structure, so they do not have to deal with the requirements of an LLC.  Partnerships can also choose to be a DBA.

LLCs require specific bylaws, agreements and other formalities that are not associated with DBAs. LLCs must use their legal name on all government applications forms business licenses and tax filings.

Liability Protection

The most significant concern for most business owners is the lack of liability protection of a DBA.

Protection of business owners personal assets is the primary reason they decide to form an LLC.

An LLC can have many members, all of whom are protected against liability and debts created by the business within the LLC.

How to register a DBA

To file a DBA, you must complete the correct forms for your state and pay a filing fee. Usually, you submit your paperwork to a local or county agency. However, some states require paperwork at the county and state level.

How to form an LLC

Forming an LLC for your new business can be a complicated process.

Here are the necessary steps required to form an LLC, limited liability company.

Find an available name that complies with the LLC naming rules in your state

obtain the correct forms, complete them and file them with your state. This paperwork is often called articles of organization.

Pay the filing fee, which can be up to $800, depending upon your state requirements.

Draft an LLC operating agreement, which details the responsibilities, roles, and rights of each of the LLC members

Some states require you to publish a notice, in particular, certified newspapers of your intent to file an LLC.

Now that you are wise about DBA vs. LLC you are ready to decide which business structure is right for your startup company. Good luck on your business launch.