If you’re just starting your business, then congrats! You’ve joined a new, economically booming club: There are some 11.6 million firms owned by women in the U.S., employing nearly 9 million people, and generating $1.7 trillion in sales as of 2017. But you may have lots of questions about what terms like “doing business as (DBA)” mean…or even what legal structure to choose for your baby.
Below is some guidance. As always, it’s wise to speak with an accountant or lawyer.
What does “DBA” mean?
If you had to define “DBA” to a fellow entrepreneur, would you be able to do it? The good news is that there isn’t a wrong way to answer this question. The acronym, obviously, stands for “doing business as,” and once filed, is the official registration of your business name. You’ll need to register for a DBA if your startup decides to conduct business or accept money under a name that isn’t already your own. (For example, if Jane Smith wanted to start Jane’s Tax Services, she’d file for a DBA.)
Plenty of benefits come with filing for a DBA in the state or county in which you do business. Once you have it, you can open a bank account and collect checks and payments under your business name. (Many banks do require a certified copy of your DBA before you can open this kind of account, so you may find yourself filing early on for a DBA.) You can also start advertising and marketing your business publicly. Moreover, a DBA allows you to present your business in a professional light to customers and vendors because it provides your company with an official business identity.
What’s the best legal structure to pick for “doing business?”
When starting up, you’ll need to pick a legal structure for your small business. In no particular order, here’s a look at five popular entities that entrepreneurs commonly choose.
- Sole proprietorship. If you want to be your own boss and run a business from home without a physical storefront, a sole proprietorship allows you to be in complete control. This entity does not offer the separation or protection of personal and professional assets, which could prove to become an issue later on as your business grows and more aspects hold you liable.
- Limited Liability Company. An LLC keeps your personal and professional assets separated and protected in the event of unforeseen circumstances — which is ideal for businesses in the restaurant or hospitality industries, for example. You may choose either an S corporation or C corporation as your tax entity. If you decide to incorporate as an LLC, remember that you’ll need to file additional entity-specific documents including your Employer Identification Number (EIN), DBA, and business insurance.
- Corporation. If you’ve got big plans for your business, like taking the company public, your best bet is to incorporate as a corporation. You will still receive the personal asset protection that an LLC provides, along with a structure that makes it possible to accept money from investors.
- Partnership. This entity is ideal for anyone who wants to go into business with a family member, friend, or business partner, like running a restaurant or agency together. A partnership allows the partners to share profits and losses and make decisions together within the business structure. However, remember that you will be held liable for the decisions made, as well as those actions made by your business partner.
- B Corporation. This is a for-profit entity that allows businesses to do good while earning a profit. In order to become a B Corporation, your business must go through a certification process to meet the entity’s standards of social and environmental performance, accountability, and transparency. From ice cream and solar systems, businesses in every industry can incorporate as a B Corp as long as they are committed towards doing social good.
Much like defining “doing business as,” there’s no right or wrong entity to choose for your business. If your business grows to the point where the entity you originally incorporated as proves to no longer be a fit, you can always incorporate as another structure.
Deborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @mycorporation.