When it comes to running a business, it is always important to know about the tax system and filing that can apply to your business. For example, some states offer flexible taxes for businesses that are LLC, but what happens if your business has a DBA?
Here we have a look at this question about whether you have to file taxes for a DBA and what exactly a DBA is.
What is a DBA?
DBA stands for ‘doing business as’ and is a registered fictitious name on behalf of a business that wants to expand their trade or services. It is not the legal name for your entity, nor do you need to create a new legal entity in order to register a DBA. To narrow it down, it basically is a nickname or an alternative name for your business.
For example, a business name may be ‘Johns’ Crew vests’ but the business may want to expand their trade to selling shoes, so the DBA could be ‘Shoes express’. Both names are under the same business, it is just that the DBA allows you to expand your business under a fictitious name that you’re doing ‘business as’.
A DBA can be applied to businesses who have an LLC, LLP, sole proprietorship or partnership and has to be applied through the state that you are registered in. Each state has their own rules and regulations and in general registration fees can range anywhere between $10 to $100.
What are the benefits of a DBA?
If you are a sole proprietor and you don’t want your surname to be made public, you are allowed to have the privacy that you deserve by creating a fictitious name as your DBA. Businesses that are categorized in partnerships or sole proprietorships and are at a low risk and profit, especially benefit from registering a DBA.
Payments are also made directly under your DBA name for your business, which means that all your finances can be made under the same bank account, or you can create a seperate one too.
By having a DBA, you are expanding your branding with the opportunity to gain a domain online using your DBA. It also leaves a second good impression on your clients, plus you have the chance to create a DBA that may be catchier or easier for clients to remember.
Does a DBA have to file taxes?
Since a DBA is not a separate legal entity, but only an expansion of your brand and business, you do not need to separately file your taxes. Everything that is conducted under your DBA name is conducted through your business, which means that your DBA is already part of the legal entity that you are paying taxes for.
What can’t a DBA do?
A DBA cannot protect your personal or professional assets, since it doesn’t work like an LLC. Nor does it create a business structure for your business. If you are a business owner that is seeking protection for your assets and an organisational structure, then you will have to look into getting an LLC and whether it is suitable for your business or not.
Getting a DBA is indeed beneficial for your business, since you do not need to pay for additional taxes and you have the opportunity to expand your brand through both online and physical platforms. It also gives sole proprietor’s the chance to work under a different name that doesn’t have to relate to their real name, so that they can get the privacy needed.
What’s also great about having a DBA is that the only paperwork that is required for the process, is the registration. There is no additional paperwork needed since you can use the same bank account and you will be taxed under your legal entity.
Getting a DBA is a clever and economical approach for businesses who want to expand fast.