A lot of acronyms can come out of the woodwork when an entrepreneur decides to start a new business.
A new business owner might hear things about LLCs (limited liability companies), EINs (Employer Identification Numbers), and DBAs (“doing business as” names).
But what’s the difference between an LLC and a DBA?
The quick answer is that a DBA is a business tool, and an LLC is an entire business structure.
The longer answer is that LLCs and DBAs can both serve a business owner in differing and complementary ways.
In the following article, our Austin business law attorneys outline basic differences between LLCs and DBAs and why a new business owner might want either or both.
If you have questions, please contact us today.
The DBA: The Business Tool
Basically, every business needs a name.
Even if a business doesn’t have to register with the state, it still needs a name to market itself, to receive payment, and to open accounts.
If a business is a sole proprietorship (unregistered and owned by only one person) or a general partnership, its default name is normally the legal name of its owner(s).
Relying on a personal legal name to identify a business can be dangerous territory because that personal information goes on the business’s official and public materials.
For more privacy, sole proprietors and general partners can choose to register DBAs for their businesses.
A business might also want a DBA to distinguish and market different services it provides. Texas calls a DBA an Assumed Name.
To register a DBA for a business, the owner(s) must file an Assumed Name Certificate with the Secretary of State.
They must also pay an associated filing fee. DBAs typically last for ten years, and a business owner must identify each county in which they intend to use their DBA.
A business owner must file to renew their DBA within six months of its expiration date.
Also, a business can have multiple DBAs, as long as it files an Assumed Name Certificate for each one.
The LLC: The Business Structure
An LLC is a business structure or entity that the state recognizes as existing separately from its owners.
Starting and running an LLC requires filing multiple pieces of paperwork with the government and following specific business operations rules.
In general, starting and maintaining an LLC takes more effort than registering a DBA.
Many might ask why a business owner would start an LLC if it involves more formalities and paperwork than having just a DBA.
Starting an LLC is often preferable because it can come with more substantial benefits than a DBA alone.
An LLC is one of many business structures an entrepreneur can register with the state. It’s best for a business owner to consult a skilled attorney about whether an LLC is the right choice.
Benefits of Starting an LLC
A significant difference between a DBA and an LLC is that the LLC business structure can protect its owners from personal, financial, and legal issues.
If a sole proprietorship or partnership with a DBA lands on hard times legally or financially, the owners might have to pay for a business judgment or debt out of their personal assets.
This is not normally the case for owners of an LLC.
Texas calls LLC owners members. In general, LLC members cannot be held personally responsible for the debts, obligations, or liabilities of their LLC.
As an added bonus, members of an LLC can enjoy these personal protections often associated with running a corporation without being subject to corporate double taxation.
Basic Requirements of Starting and Running an LLC
Starting an LLC in Texas requires filing a Certificate of Formation with the Secretary of State and paying the appropriate filing fee.
To properly file a Certificate of Formation, an LLC needs to have specific business features in place, such as a Registered Office and a Registered Agent for accepting service of process.
LLCs must also file Annual Reports on or before May 15 of each year to remain legally compliant.
Doing Both: Having an LLC and a DBA
While there’s generally a lot of difference between a DBA and an LLC, a business owner can have both.
An LLC needs to register for a DBA if it uses a different name from the official name on its Certificate of Formation.
As stated above, an LLC might want to apply for a DBA to distinguish and market different services it provides.
For example, an LLC that offers construction services might offer services specifically for residential buildings and services specifically for commercial buildings.
To market its services to its diverse clientele, the LLC could register different DBAs for its residential and commercial branches.
There are many ways to name and structure a business. The help of an experienced business attorney is often crucial to making the right business decisions and achieving commercial success.
Our Attorneys Can Make Fulfilling Your Complex Business Needs Easy
When someone starts a new business, there are usually a lot of complicated questions to answer. At Massingill, we can make complex business issues simple.
Our team of knowledgeable business law attorneys in Austin, Texas, guides our clients through the critical details of running a successful business.
With our help on the details, business owners can have more time to focus on the big picture. We also appreciate that issues constantly pop up throughout the duration of running a business.
This is why we offer our clients our on-demand Concierge General Counsel. We can help you protect yourself and find success in the business world.
Give us a call at 512-410-0343 or contact us online for a free consultation.