If you’re in the process of forming a limited liability corporation (LLC) or have already formed one, the thought of using multiple DBAs might have crossed your mind.
There are certain strategic advantages to using several DBAs as an LLC. However, most LLC owners have little idea how many DBAs his or her business is allowed to use to remain in accordance with the law. In most states you can have as many DBAs as you like, but there are significant drawbacks to this approach. Read on to learn more.
The Basics of DBAs
DBA stands for “doing business as”, and is a name registered for a company to do business under that is not its legal business name. For example, you may have an LLC called “Smith Enterprises” that does business as “Smith’s T-Shirts”.
DBAs are not legal entities and have no impact on tax status. LLCs are formal organizations established in accordance with state laws to safeguard entity owners against legal liability stemming from the company’s operations.
A DBA is a public notice that formally states the company in question is conducting business under a specific name. LLCs are empowered to create one or multiple unique DBAs for various components of operations.
Maximum Number of DBAs for LLCs
The maximum number of DBAs for an LLC varies by state. Take a look at the nuanced language of the state laws on DBA and LLC registration. Each state has its own specific DBA requirements.
Read through your state’s small business administration website for additional details pertaining to potential caps on DBAs for LLCs and other specific requirements.
Multiple DBAs Are Allowed
Though most states have no official cap on the number of DBAs an LLC can register, keep in mind that each DBA must be filed separately. In addition, each filing carries added fees.
Plenty of LLC owners formally registering several DBA names right away, expecting they’ll use each one. But then only use one or two.
Take some time to consider how the DBA name you select will affect the perception of your LLC. It’s in your interest to determine if the name your LLC is doing business under is no longer effective at attracting customers or enhancing your brand image.
Using Multiple DBAs Is Easier than you Might Think
There is a common misconception that creating several distinct DBAs for an LLC is time-consuming and frustrating.
Though the process for establishing DBAs is not exactly quick and easy, it is fairly straightforward. Be patient while registering your DBA names with the state, complete the necessary form and pay the filing fee.
There is no official DBA name limit for an LLC at the federal level. Contact your state government to ensure the same is true at the local level. In fact, some states even permit two businesses to operate under the same DBA.
The state government’s requirement that the LLC submit a DBA application is in place to prevent excessive claiming of DBA monikers. Furthermore, some local governments also require the DBA name to be formally registered. Be sure to heed this seemingly minor bureaucratic requirement as failure to register a DBA could lead to significant fines and other penalties.
Many LLCs Can Benefit from Multiple DBAs
When in doubt, do not hesitate to establish the DBA you have in mind. Experienced entrepreneurs insist it is in a company’s interest to use several DBAs for different value offerings or regional branding.
LLCs might use one DBA in a certain region or market to catalyze the sales of certain products. An added bonus is using several DBAs creates an opportunity for each DBA branch of the LLC to test out marketing campaigns under its own name.
Be Mindful of Each Distinct DBA
If you establish several DBAs for your LLC, it is important that you are hyper-aware of each and how your actions pertain to those individual revenue silos.
The primary challenge with multiple DBAs is often accounting. Each DBA’s expenses and income must be recorded separately from the rest of the LLC’s operations.
Separating the income and expenses of each DBA is particularly important if they do not have a direct relationship to one another beneath the overarching LLC. You can facilitate the organization of your accounting and paperwork by establishing separate bank accounts for each DBA.
Potential Disadvantages to Using Multiple DBAs
Using several DBAs for your LLC offers plenty of advantages, but there is also a downside.
Using several DBAs means increased expenses and legal risk. LLC creditors are empowered to pursue assets held by the LLC including assets owned by DBAs. The same is not true of a regular LLC that shields the owners from legal liability.
Add in the potential for accounting complications as noted above, there is even more reason to carefully consider the use of multiple DBAs with the guidance of an attorney and a tax professional.