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Many of my clients have had the great business debate in the beginning stages of starting a business or taking a business to the next level. Should I file for a DBA or LLC when starting a small business? Many people will give you advice with the reasoning that they utilized to justify starting their own but below are the FACTS! Read on and see what is best for you and your business needs.
An LLC must conduct a name availability check with the secretary or department of state where the LLC is formed prior to completing the company’s formation documents. This ensures that another entity is not using a business name that is too similar to the LLC’s name. A sole proprietor or partnership has to check the name registry with the city or county clerk’s office where the company is located to confirm name availability. An LLC must include the phrase “limited liability company” or the abbreviation “LLC” in the legal name of the business. Partnerships and sole proprietorships that file a DBA cannot use words like “corporation” or “limited liability company” in the name of the business.
The cost to file a DBA varies based on the city or county clerk where the business operates. A business that files a DBA may expect to pay anywhere from $10 to $100, according to the Entrepreneur website. The costs to file formation documents for an LLC vary from state to state. For example, it costs $500 to file articles of organization in Illinois and $125 to file articles of organization in Ohio, as of 2010. An LLC does not file formation documents with the city or county where the LLC is located. Articles of organization are filed with the secretary or department of state located where the LLC operates.
Partnerships and sole proprietorships that file a DBA have unlimited liability for company debts and obligations. In this scenario, business owners may lose their homes, cars and other personal assets if the company’s assets are not enough to cover the company’s debts. LLCs provide members with personal asset protection against the company’s debts and other business-related obligations. This means that LLC members are not risking their homes and other personal assets when operating the business.
LLCs are not required to file a DBA and can operate with the name listed in the company’s articles of organization. However, an LLC that chooses to use a business name other than the legal name listed in its articles of organization must file a DBA with the secretary or department of state where the LLC is formed. An exception to DBA filing occurs in states like Alabama. Businesses that operate in Alabama are not required to register a DBA. Certain states like Florida require all businesses to file a DBA with the department or secretary of state.
A DBA filing may expire after a certain amount of time, which varies based on the state or county where the DBA filing occurs. If a DBA expires, the business must renew the company’s DBA certificate with the same government agency where the original filing took place. Unlike a DBA, the legal name of an LLC lasts until the business is dissolved. There are no renewal forms or fees to pay when it comes to an LLC business name.