An LLC, or limited liability company, is a legal entity that has its own rights and obligations separate from its owners; conversely, a DBA is not a legal entity, and whoever uses a DBA assumes all of the obligations of the business. An LLC and DBA can be used in conjunction with one another, but care must be taken to use them properly so as to avoid personal liability where none was intended.
Each state has its own laws regarding the formation and proper maintenance of an LLC, including naming requirements. Once an appropriate document is filed with and accepted by the state, the name specified in the document for the LLC is the legal name for the new business entity. This name must be used on all subsequent legal documents involving the LLC, such as tax filings and applications for business licenses or loans. The LLC is also entitled to conduct its business of providing products and services in its own name (see Resources).
A DBA, which stands for "doing business as," is not a legal business name. It is a fictitious or assumed name that is used by a business to identify its products or services. In order to use a DBA, the business owner must register the name according to the state law where the business is located -- regardless of whether the business owner is an individual or business entity, such as an LLC. If an LLC registers a DBA, it has the right to conduct business using the DBA and its own legal name (see Resources).
Read More: How Long Is a DBA Registration Good for?
Maintaining LLCs and DBAs
After formation of an LLC or the registration of a DBA, further action must be taken over time to ensure proper maintenance and lawful use for both the LLC and DBA. For example, most states require a periodic filing to maintain an LLC in good standing, such as the filing of an Annual List in Nevada or a Biennial Report in Iowa. Failure to make the required filing can result in the LLC incurring monetary penalties and forfeiting its right to engage in business. A DBA registration is only valid for a specified period of time, and must be renewed as required by state law. If the DBA is not renewed, the right to use its name will expire and the name may be registered by another business.
One of the primary reasons for forming an LLC is to shield your personal assets from the obligations and liabilities of the business. If you intend to use a DBA in conjunction with your LLC, it is important that you do not confuse when and how to use your business's legal name -- LLC name -- and assumed name -- DBA name. Because the DBA never provides personal liability protection, you may find yourself personally liable for business debts if documents such as contracts or leases are signed in a manner that confuses whether you or the LLC is using the DBA. This is an area where legal advice may be necessary to avoid such problems.
- New York Department of State: Forming a Limited Liability Company in New York
- Los Angeles County Registrar-Recorder: Fictitious Business Name
- Nevada Secretary of State: Annual List of Managers or Managing Members
- Iowa Secretary of State: Biennial Report
- Nevada Legislature: NRS 86.274 -- Defaulting companies: Duties of Secretary of State; forfeiture; distribution of assets.
- LLC Law Monitor: Sometimes an LLC's Signature on a Contract Can Result in...