• Personal liability protection
• Taxed at corporate and individual level
• Formal meetings and record-keeping required

LLC’s:

• Same liability protection as a corporation
• No corporate tax, profits passed directly to owners
• Fewer corporate formalities required

DBA’s:

• Not a formal business structure
• Required to legally conduct business under a trade name
• Minimal maintenance required

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Local Business License
Just about any business, large or small, must first get a license at the local level to conduct business. Whether it is a country or city license, these licenses are quite easy to obtain and usually do not cost a lot to pay the fees.

State Business License
A state business license is required for specific industries. Big or small, some businesses require licensing at the local and/or state level. Many of these state-regulated businesses have more rules, laws and guidelines that must be followed. Commonly owners of these businesses must be properly trained via some type of schooling. Some of these businesses include doctors, hairstylists, massage therapists, realtors etc… Some of these businesses such as bars and restaurants must also meet certain cleanliness standards and state codes.

Federal Business License
If the business is one that is heavily controlled and regulated a federal license is required to conduct business. Some of these industries include investment advisors, firearm sales, interstate trucking etc… The easiest way to obtain a federal business license is through an attorney that specializes in federal business regulation.

Sales Tax License
Almost all states require a sales tax license for any retail business. This license allows the business owner to collect sales tax from any item sold. The sales tax must be saved and paid to the state.

Keep in mind that some business might require more than one license to conduct business.

Permits are required for some small businesses. Their purpose is to control the structure, safety and look of the neighborhood according to the local and state laws called ordinances. When a business is in compliance with all the laws or ordinances a permit is issued to conduct business.

Sellers Permit
This type of permit is required to purchase goods for sale to the public. Usually these goods can be purchased wholesale with the sellers permit and sold to customers at retail prices. Check with the local State Franchise Tax Board to get this permit.

Building Permit
If a building that is going to be used to conduct business requires extensive remodeling before the business can move a building permit will be needed to complete the structural changes. Check local building codes to be sure the new construction complies with any structural ordinances.

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Sellers Permit
Any business, whether it is a corporation or a sole proprietor must file for a sales tax permit. This permit allows the business to sell items to the public at retail prices and charge a sales tax. The sales tax must be carefully recorded on each item sold. Usually quarter, the business is required to pay the sales tax to the state. If the sole proprietorship/DBA business fails to be pay the sales tax, or fails to file for a sellers permit and is caught, the owner will be required to pay all past due sales tax immediately to go to jail.

State Licenses
A DBA that is required to follow certain regulations based on the purpose of the business must register the business with the state. For example, an auto mechanic, manicurist, and lawyer are all required to register their businesses with the state. If a state-regulated business is caught without a state license serious fines can result.

Federal Licenses
Similar to state licenses, a federal license is required for those DBAs that are federally regulated. For example, cross-country trucking companies and firearm retailers are federally regulated. By law these business must apply for a federal license to conduct business. Failure to do so can mean hefty fines and possible jail time. And, as a DBA, the business owner bears sole responsibility for filing for this license or paying the consequences.

Other permits a DBA might be responsible for include a builder’s permit if the business owner plans on altering the place of business. If caught without this builder’s permit the city can shut down the construction and charge a fine for failure to get a permit. Another permit that is especially important to restaurants is a health permit. The health permit states the business is in compliance with all state health codes and is open to periodic inspection. Without the health permit the business can be shut down and the owner severely fined.

For the business owner who is not sure what permits are required there are a few agencies that can be contacted. The local SBA (small business administration) will know what licenses and permits are required. In addition the chamber of commerce can also provide a list of licenses and permits that are needed as well a business attorney.

Lower Start Up Costs
Corporations and LLCs usually involve the services of a lawyer to set up the business. In addition accountants are required to prepare and submit taxes. Both of these services can be costly. A DBA does not require the use of a lawyer to start the business, nor an accountant to maintain the books and submit the business tax returns.

Taxes
There is no separate business tax filing. Instead the business owner files business income through the personal tax form 1040 using schedule C. In addition the DBA pays taxes on the business income along with the personal income.

Less Paperwork
While all business owners need to comply with the paperwork required by their state, there are a lot fewer forms to file than a corporation of LLC.

Control
The business owner, as a DBA, has complete control over the business. There is no board of directors to answer too and no committees to make decisions on behalf of the business. Whether the business fails or succeeds is completely dependent on the individual business owner.

Profits
With a DBA, the business owner is the only individual to reap the rewards. If a DBA is successful there are no dividends to pay to stockholders or other corporate officers. The business owner earns 100% of the income.

Keeping the Secrets
The DBA business owner does not have to share trade secrets with anyone. This means there is less likelihood that the business secrets will be stolen to begin a competing business.

Customer Relations
The owner of a DBA is typically at the frontline of the business regularly interacting with the customers. As a result the business owner does not have to rely on any other employees to keep up the “good name” of the business.

Account Practices
A DBA allows for easy handling of business funds. The owner can set up a simple DBA bank account, and will a simple accounting software program maintain all the books.

Employment
A DBA encourages an individual to go into business for him/herself with little start up effort In addition a successful DBA can lead to a growing business, forcing the business owner to hire employees. Hence a DBA promotes employment opportunities

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Fictitious Name
The name chosen for the business, which will be presented to the public is considered the fictitious name for the sole proprietor. This is the business name that is used in advertising campaigns, on business cards and on business bank accounts. This name is registered with the county under the category of fictitious names.

DBA or doing business as…
When the fictitious name is registered with the county the business owner has now officially announced the intention to operate the business under the fictitious name. The business owner is now doing business as the chosen fictitious name. And for sole proprietorships (those who declare business earning through Schedule Con the personal tax returns) the DBA and fictitious name are technically the same thing.

What’s the Difference?
The biggest difference between the DBA and a fictitious name comes into play with corporations. A corporation name is actually registered with the states and files business tax returns separately from personal tax returns. There are situations where a business owner will choose to open several different companies under the umbrella of the main business name but want each company to have their own name. In this case the corporation owner will file fictitious names that sit under that main corporation. Therefore, instead of John Doe DBA Branches and Bushes Landscaping the corporation, All Inclusive Landscaping Inc, has a fictitious name for its company that landscapes for private residences; All Homes Landscaping, and a fictitious name for its company that landscapes for businesses; All Business Landscaping and a company that grows the plants; We Grow Plants. In this way the corporation can keep the finances separate for each separate business, yet report it under one business tax return.

Therefore, a business owner who plans on growing and adding to the initial company would be wise to choose an original yet generic name. The name should explain what the business does and be memorable to customers. At the same time the name should be vague enough to allow for separate businesses to form under it. The example above, All Inclusive Landscaping describes exactly what the business is. The DBAs under the main business made up of fictitious names, also clearly explain what they do; landscaping for homes and businesses as well as plant cultivation.

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Forming a Corporation or LLC
To form a corporation articles of incorporation must be filed with the state. To file an LLC articles of organization are registered with the state. There are advantages to forming a Corporation or LLC. The owner has some protection for their personal assets. There are some tax advantages to forming one of these business entities. There is a higher likelihood of recognition and trust from customers and employees. Finally it is much easier to raise capital from investors as a Corporation or LLC.

Comparing the DBA, Corporation and LLC there are some similarities and differences.

Liability
A DBA or sole proprietor has unlimited liability and takes sole reponsibility for all aspects of the business. For Corporations shareholders are not required to pay off company debts. In the LLC members assume no liability for any debts incurred by the LLC.

Business Operations
The sole prop/DBA does not have to form any management hierarchy per law. Corporations must have a board of directors, release an annual report and hold annual meetings. The LLC also has some mandatory requirements but they are not as restrictive as a corporation.

Management
The sole proprietor/DBA has complete control over the whole business and makes all management decisions. Corporations are managed by directors that are chosen by the company’s shareholders. The LLC has an operating agreement that determines who will manage the company.

Taxation
The taxes for a sole proprietor are paid by the business owner as the business income is filed under the business owner’s personal taxes. A Corporation is taxed at the corporate level, only dividends if distributed to the shareholder are taxed. The shareholders are responsible for paying the dividend taxes. The LLC does not pay taxes. Instead the income or the loss is shared by the members and passes through their individual tax returns.

Capital
When a sole proprietor/DBA is trying to raise money for the business it often comes down to loans from friends or possible a small business loan from a bank. A Corporation can sell interest in its company, called stock, to raise funds. An LLC can sell interests in the company if the operating agreement permits the practice.

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Getting a Local License
To begin, make sure all the necessary paperwork is in order such as a fictitious name filing and the TIN/EIN. Other documents may be required depending on the type of business. For example, for an LLC Articles of Organization or an Operating Agreement might be required. It is best to check with your local government for what is needed before applying for the license.

The next step is to fill out all applicable paperwork. Return the paperwork to city hall with the appropriate fee. If possible, pay the fee with a business check so there is a record of the payment for tax purposes. If the business checking account has not be opened be sure to get a receipt of payment for business records.

Keeping the Local License
Once the license has been received check with the local government regarding business regulations. One of the requirements to obtaining and keeping the business license might be yearly renewal and a renewal fee. If this is not done annually the business license could be revoked.

Getting a State License
If the business is under state regulation a state business license will be required. For example, some businesses needing state licenses include a realtor, hairdresser, doctor, auto mechanic or a lawyer. Usually a required training course is a necessity to get this business license. To get a state license fill out and file the appropriate paperwork and pay the state filing fee with a business check if possible. Make sure the business renews its license annually and completes in additional training courses required by the state.

Sales Tax Business License
While business licenses might be optional in some state, a sales tax license is always required. This license allows the business owner to charge sales tax to its customers. The local State Franchise Board will let the business owner know what is required.

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Name Protection
Filing a business name as a DBA with the county does let other business owners know the business name is taken in the county the name is registered. It helps prevent confusion in that typically a business owner looking to file a business name will choose a unique name to stand out from its competitors. It makes no sense to have the same name as another business as this can confuse customers. A client may end up contacting a competitor with the same name in error. Keep in mind a DBA will not prevent another business owner from filing the same name as a corporation or LLC. For example, Branches and Bushes Landscaping can be filed as a DBA. However, another business in the same county could register as Branches and Bushes Landscaping Inc. or Branches and Buses Landscaping LLC. A DBA does not protect the business from a registered corporation using the same name. Typically however, this is not done to avoid confusion.

Law Suit Protection
A business owner with a common name such as Bob Smith, would do well to register as a DBA. This will prevent Bob Smith that owns Branches and Bushes Landscaping from being confused with the Bob Smith that runs a plumbing company. However, the reason the county requires registration of a DBA is to aid in identifying the individual that owns a business. Therefore, someone who is trying to determine who owns Branches and Bushes Landscaping can check the name on county filings to see the individual owner’s name.

How to Protect a DBA Name
For those wishing to protect their business name and prevent another business from adopting the name, the best strategy is to trademark the name. A trademark is a legal entity that prevents another business from using that name. And, should another business try to use the trademarked name, the owner of the trademarked business name can sue to prevent the new business from assuming the name. This process is be costly and is best pursued using a lawyer that specializes in the trademark process.

While a DBA does not afford legal protection or legal rights to a particular business name, it does let other business owners know the particular name is already in use. A smart business owner is not going to adopt a name identical to another business. A poor business reputation belonging to the original business name could carry over to the copycat. Or a lawsuit directed toward a particular name could in error be filed against the duplicate name.

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